GUEST COLUMN:
Paul Shuttleworth
Head of Employment
CJCH Solicitors
For many employers, the Employment Rights Act 2025 will not arrive as a single moment. It is already here, it is still unfolding, and its most significant consequences are yet to be felt.
The staggered timetable can create a false sense of distance as a change due in January 2027 may appear to sit safely on next year’s agenda. In practice, decisions being made now on recruitment, probation, contracts, sickness absence, flexible working and the use of casual labour may determine how well prepared an employer is when the next phase comes into force.
The Employment Rights Bill became the Employment Rights Act 2025 on 18 December 2025. It introduces additions and amendments to existing legislation, including the Employment Rights Act 1996, with changes taking effect across 2026 and 2027.
From 6 April 2026, statutory sick pay became payable from the first day of illness rather than the fourth day, and the lower earnings limit was removed. Previously, workers had to earn a minimum amount to qualify. These are practical changes affecting payroll, absence management and cost planning.
The next phase is likely to require deeper preparation. In October 2026, time limits for bringing claims to an employment tribunal are due to increase to six months for all claims. At present, the time limit for most claims is three months, or technically three months less one day for unfair dismissal claims. Extending that period will create a longer window of uncertainty for employers following dismissals, resignations or workplace disputes.
The most significant changes arrive on 1 January 2027. At present, an employee generally needs two years’ continuous service before they can bring an ordinary unfair dismissal claim. From 1 January 2027, that qualifying period will fall to six months. Protection from unfair dismissal had originally been expected to become a day-one right, but the UK Government changed that before the Bill became law.
Its practical effect, however, is already with us. Anyone taken on in the coming months may reach 1 January 2027 with six months’ service and therefore have unfair dismissal protection under the new rules. For this reason, employers should not wait until the end of the year to review their position.
Contracts of employment need to be looked at now, particularly where they include six-month probationary periods. Probation processes, onboarding procedures and line manager training should also be reviewed. If an employer currently waits until the end of a six-month probation period before properly assessing suitability, that approach may no longer give the business enough room to act before unfair dismissal protection applies. Shorter review points, clearer documentation and earlier management intervention are likely to become much more important.
The Act will also remove the limit on the compensatory award for unfair dismissal from 1 January 2027. For employers dealing with senior exits, that could change the commercial calculation significantly. At present, the compensatory award is effectively capped at a year’s salary, which often shapes settlement discussions. Once that cap is removed, claims involving higher-paid employees may include arguments around pension loss, bonus entitlement, shares or longer-term loss. Such arguments will not automatically succeed, but they may alter the risk assessment and the approach to settlement.
Dismissal and rehire will also become automatically unfair in most cases from 1 January 2027, with an updated code of practice expected in 2027.
Other 2027 changes are still subject, in most cases, to UK Government consultations and final implementation detail. Workers on zero-hours and low-hours contracts will gain the right to guaranteed working hours if they want them. There will also be rights to reasonable notice of shifts and payment where shifts are cancelled, moved or cut short. For employers relying on casual or bank staff, those proposals need early consideration.
Flexible working rules will also change. If an employer refuses a flexible working request for a genuine business reason, it will have to state the reason from a list of eight acceptable reasons and explain why it believes the refusal is reasonable. Many employers already treat that as good practice, but it will become a legal requirement.
For SMEs and founder-led businesses, the volume of change can feel difficult to manage alongside the day-to-day pressures of running an organisation. The sensible starting point is a structured review of contracts, handbooks, policies, probation arrangements, sickness procedures, onboarding and the way managers are trained to handle workplace issues.
Good advice at this stage is not about creating paperwork for its own sake. It is about identifying where the risk sits, making proportionate changes before deadlines arrive, and ensuring that the people expected to apply those processes understand what has changed.
Paul Shuttleworth discusses the Employment Rights Act 2025 in the Legal Insights podcast. Listen here:
