A long and winding road – UK’s Employment Rights Act finally passes

The government first introduced its package of employee rights to Parliament in October 2024, and the Employment Rights Bill completed its parliamentary stages just before Christmas. Once it receives Royal Assent, it will come into force in stages over the coming months. This article highlights some of the Act's key provisions.

Unfair dismissal – shorter qualifying period and unlimited compensation

The original proposals would have made unfair dismissal a day one right. This was controversial and, after much debate, the government instead agreed to reduce the qualifying period for unfair dismissal claims from two years to six months. However, the quid pro quo for that concession was removing the existing limits on unfair dismissal compensation.

Although employers will be relieved that they can continue to use probationary periods, making unfair dismissal compensation unlimited will make it harder and more expensive to settle claims, particularly for highly paid employees.

Family friendly rights – a range of extended and new rights

In April 2026, paternity leave and unpaid parental leave will become day one rights. However, as there are no changes to the position on pay, there are no direct financial costs for employers.

Further changes will take effect in 2027, when all employees will be able to take unpaid bereavement leave on the death of a relative. Employers will be allowed to refuse flexible working requests only if it is reasonable to do so. It will be automatically unfair to dismiss employees who are pregnant, or who are on or who have recently returned to work from maternity leave, except in specified (as yet undefined) circumstances. It is possible that the same restrictions on dismissals will apply to parents on other types of extended family leave.

Discrimination and harassment – reasonable steps and third-party harassment

The core change, taking effect in October 2026, will expand the existing employer obligation to take reasonable steps to prevent sexual harassment in the workplace to a duty to take all reasonable steps. Protection against harassment by a third party, such as a customer or supplier, will be reintroduced at the same time.

In 2027, changes to gender pay gap reporting requirements for employers with 250 or more employees make equality action plans mandatory. These must cover measures to address gender pay gaps and the support offered to employees during menopause.

Collective redundancies and fire and rehire dismissals

From April 2026, employers that fail to comply with collective redundancy consultation obligations face penalties of up to 180 days' pay per employee, an increase from the current 90-day limit. The following year, consultation obligations may apply to redundancies taking place at more than one location. At the moment, consultation duties only apply to dismissals at “one establishment.”

Using “fire and re-hire” to change employees' contractual terms also becomes much harder in 2027. Such dismissals will be automatically unfair unless the financial viability of a business is at stake.

Trade union rights – simplified recognition requirements and new access rights

The Act extends trade union rights. In April 2026, the membership thresholds for making a statutory recognition request will reduce, making it easier for unions to apply for recognition.

From October 2026, employers must tell employees that they can join a union and explain the employee protections that apply to trade union membership and activities. Trade unions will have a right to access workplaces, either physically or virtually, to recruit and represent members.

Zero-hour contracts

Although the Act does not ban zero-hour contracts, it will significantly restrict their use. Employers must offer zero or low hour workers a guaranteed hours contract after an initial reference period, and after every subsequent reference period. This also applies to agency workers. This part of the Act is extremely complicated, and the detail is not yet available, but it will have a major impact on employers who rely on a contingent workforce.

Next steps

The Act is complex, and this article only covers the provisions that are most relevant to private sector employers. In many areas the Act provides a framework for new employee protections but not the detail of how they will work in practice.

We will keep clients informed about further consultation exercises setting out that detail. Engaging with those consultations is the best way for clients to influence the government's approach to employee rights.

Authored by Jo Broadbent, Katharine Savage, and Stefan Martin.