The Employment Rights Act 2025 has now been passed, and if you've been reading the headlines, you might think the sky is falling. Phrases like "the biggest shake-up in employment law for decades" don't exactly calm the nerves.
ERA 2025 is significant, but not every business needs to panic. The changes are phased across 2026 and 2027, some are already in force, and what matters most is whether your handbook is ready for each one.
If you want the comprehensive reference on every provision in the Act, our Employment Rights Act 2025 guide covers the full timeline, all five change categories, and the underlying legislation. This post is the shorter, opinionated version: what to prioritise, what to ignore, and what to do this quarter.
The big changes (you definitely need to act)
1. Flexible working (further changes expected in 2027)
Employees already have a day-one right to request flexible working, two requests a year and a two-month decision window. That is April 2024 law and your policy should say so already. ERA 2025 adds a further change, expected in 2027: you will only be able to refuse a request where it is reasonable to do so, and you will have to explain in writing why. Regulations may also set out how you must consult before refusing.
What to update:
- Remove any service-length requirements from your flexible working policy
- Ensure timeframes reflect the two-month response requirement
- Review your internal process for handling and documenting flexible working request decisions, because the written reasons will carry more weight from 2027
This is the change staff notice most, so expect questions.
2. Fire and rehire restrictions (from 1 January 2027)
From 1 January 2027, dismissing an employee for refusing a change to pay, hours, pensions, shift patterns or time off becomes automatically unfair, unless the business can show it was facing financial collapse and had no alternative. Dismissing and replacing them to get the same result is treated the same way. Changes to other terms stay under ordinary unfair dismissal, with the tribunal required to look at whether you consulted staff and any recognised union first.
What to update:
- Review any policies covering restructures or contractual changes
- Check redundancy wording for alignment with consultation expectations
- Consider adding explicit language around fair process and alternatives
If you've ever considered this approach, you should tread very carefully.
3. Zero-hours contract changes (expected 2027)
ERA 2025 puts a duty on employers to offer guaranteed hours to zero-hours and low-hours workers, reflecting the hours they actually worked over a reference period. It also adds a right to reasonable notice of shifts and to payment when a shift is cancelled or cut short at short notice. The government consulted on the detail over the summer of 2026 and the regulations are still to come.
What to update:
- If you use zero-hours contracts, you'll likely need a new or revised policy
- Review casual worker documentation
- Ensure managers understand how offers must be made and recorded
This won't affect every business, but where it does, it matters.
Smaller changes (important, but less urgent)
Statutory sick pay (SSP)
Since 6 April 2026, SSP has been payable from the first full day of sickness for absences beginning on or after that date; the three waiting days no longer apply. Transitional rules apply to absences that began before 6 April 2026.
The lower earnings limit has also been removed, so eligible employees can qualify regardless of earnings. SSP is paid at 80% of average weekly earnings or the flat weekly rate, whichever is lower. The government's Statutory Sick Pay changes guidance confirms the current rules.
Action: Update any sickness absence wording that still refers to waiting days or an earnings threshold.
Stronger protections for pregnant workers (expected 2027)
Regulations will restrict dismissing women during pregnancy, maternity leave and for six months after they return, with similar protection for other family leave. The detail is still to come and the change is expected in 2027. If your policies already follow best practice, only minor wording updates may be needed.
Unfair dismissal qualifying period drops to six months (1 January 2027)
From 1 January 2027 the qualifying period for unfair dismissal claims drops from two years to six months of service. It counts service already built up, so anyone with six months' service on that date is covered. This is the change with the biggest practical impact and the least media coverage.
What to update:
- Tighten your performance management process so it can withstand a tribunal at the six-month mark
- Review your probation framework (see our probation periods post on why the six-month review is now too late)
- Make sure managers know that "they're still in their first year" is no longer a get-out
If your performance management is currently informal, this is the one to fix first.
The unfair dismissal compensation cap goes on the same day
The compensatory award is currently capped at the lower of 52 weeks' pay or £123,543, after the April 2026 uprating. For dismissals from 1 January 2027 the cap is removed and awards reflect actual loss.
What this means:
- Exposure on senior or high-salary dismissals goes up sharply
- The economic case for getting dismissal procedure right gets stronger
- Insurance and indemnity arrangements may need reviewing
This is one to flag to your board rather than your handbook, but worth knowing.
A new right to bereavement leave (expected 2027)
ERA 2025 creates a general right to bereavement leave, including for pregnancy loss before 24 weeks. It is in the Act but not yet in force. The government has consulted on who qualifies and how long the leave lasts, and the regulations are expected in 2027.
What to update:
- Add a bereavement leave policy if you do not already have one
- Review your existing compassionate leave wording for alignment
- Make sure managers are trained on the sensitivity of early pregnancy loss specifically
Most handbooks treat bereavement as a discretionary line in the wider leave policy. That will be under-specified once the right lands.
What we recommend
- Fix sickness absence and family leave first. Those changes have been in force since April and affect almost every employer.
- Get dismissal procedures ready for January. The six-month rule is the one that bites.
- Review fire and rehire plans. Legal advice is essential here.
- Check zero-hours arrangements, but only if you use them.
- Don't panic. Work through your handbook systematically.
If you're a Regulyn user, we've already updated our compliance analysis to reflect ERA 2025. Run a fresh check and we'll show you exactly what needs attention, and what doesn't.
Common questions about ERA 2025
When does the Employment Rights Act 2025 take effect?
The Act received Royal Assent on 18 December 2025. The trade union repeals came first, in February 2026. Day-one sick pay and family leave arrived on 6 April 2026, tribunal time limits extend on 1 October 2026, the harassment duties land on 30 October 2026, and the six-month unfair dismissal rule and cap removal follow on 1 January 2027. Guaranteed hours, bereavement leave, flexible working and the rest come later in 2027. The full timeline is in our Employment Rights Act 2025 guide.
Does ERA 2025 apply to small businesses?
Yes, most provisions apply regardless of headcount. Since 6 April 2026, eligible employees can qualify for SSP regardless of earnings and SSP is payable from the first full day for absences beginning on or after that date; transitional rules apply to earlier absences. The flexible working changes apply to all employers, and there is no SME exemption for the unfair dismissal qualifying period change either.
Do I have to rewrite my entire employee handbook?
No. Most handbooks need targeted updates to specific policies (flexible working, sickness absence, parental leave, dismissal procedure) rather than a full rewrite. The fastest way to know which policies are affected is to run a compliance check.
Is the unfair dismissal "day one rights" rule actually happening?
No. The day-one unfair dismissal proposal was dropped during parliamentary debate. The qualifying period drops to six months of service, not to zero. Several news pieces still refer to the original day-one proposal; treat them with caution.