The Employment Rights Act 2025: What Employers Need to Know

The Employment Rights Bill received Royal Assent on 18 December 2025, becoming the Employment Rights Act 2025. While some provisions have already come into force, some of the most significant reforms for employers are scheduled for October 2026 and January 2027.

This article focuses on those upcoming changes: what they require, what they mean in practice, and what employers should be doing now to prepare.

Before addressing the changes ahead, it is worth briefly noting what has already come into force. Earlier in 2026, the following took effect:

These changes are now in force. The focus for most employers, however, is on what is still to come. The table below summarises the key upcoming changes and their expected implementation dates.

We have summarised the actions to take ahead of each deadline in a downloadable checklist for employers.

At present, there is no standalone route for employees to bring an Employment Tribunal claim specifically for harassment carried out by a third party, such as a customer, client, or contractor. The provision that had previously existed under section 40 of the Equality Act 2010 was repealed in 2013. In some circumstances, employees have pursued ancillary claims, for example based on an employer’s duty to provide a safe working environment, but there has been no direct statutory mechanism for third party harassment claims since the repeal of the earlier provisions.

From October 2026, employers will have a direct duty not to permit third parties to harass their employees in the course of their employment. Where third party harassment occurs and the employer fails to take all reasonable steps to prevent it, the employer may be liable.

Importantly, this duty will extend across all nine protected characteristics under the Equality Act 2010, not only to sexual harassment.

No statutory guidance has yet been published setting out precisely what steps employers will be expected to take. That guidance is anticipated, but employers should not wait for it before beginning to assess their position. Practical steps to consider now include:

In October 2024, the Worker Protection (Amendment of Equality Act 2010) Act 2023 introduced a preventative duty on employers to take reasonable steps to prevent sexual harassment in the workplace.

The Employment Rights Act 2025 strengthens this obligation. From October 2026, employers will be required to take all reasonable steps to prevent sexual harassment. The shift from “reasonable” to “all reasonable” raises the threshold and reflects a more clearly preventative approach, one focused on workplace culture rather than responding only once incidents have occurred.

No statutory guidance has yet been published under the Act to define what “all reasonable steps” will require. Regulations are expected, but notably may not be in place until 2027, which is after the October 2026 implementation date. Employers should monitor developments closely.

In the meantime, the Equality and Human Rights Commission’s eight-step guidance on preventing sexual harassment at work provides a practical starting point, and ACAS also publishes useful guidance on steps employers can take. What ultimately constitutes sufficient compliance is likely to be shaped by Employment Tribunal decisions as they emerge, and employers should take advice as the position becomes clearer. Notwithstanding this, employers should consider what more they could be doing in the meantime to meet this duty.

While legislation provides the foundation, genuine workplace equality and diversity requires proactive steps. Employers can make a tangible difference by focusing on culture, policies, training and reporting.

The time limit for bringing the majority of Employment Tribunal claims is currently three months less a day from the act or omission giving rise to the claim (e.g. from the date of termination, or the date an instance of discrimination occurred). This is however subject to the ACAS early conciliation period, where the deadline is paused, and continues following receipt by the employee of their early conciliation certificate. 

The Employment Rights Act 2025 will extend this deadline to commence a claim to six months less a day for all claim types.

This change is stated to come into effect no earlier than October 2026, and the implementation date may move beyond that.

Doubling the limitation period has material implications for how employers manage employment disputes and their record-keeping:

This is a good prompt to review document retention policies and ensure HR records are being kept consistently and in sufficient detail.

Two significant changes to unfair dismissal law are scheduled for January 2027.

Currently, employees must have at least two years’ continuous service before they can bring an ordinary unfair dismissal claim. From January 2027, that threshold will be reduced to six months.

Many will be aware that during the passage of the Employment Rights Bill, protection from unfair dismissal was initially proposed as a right from the first day of employment. The government changed this position before the Bill became law, settling instead on a six-month qualifying period.

This change has a retrospective effect. Any employee who commences employment on or after 1 July 2026 will be protected from unfair dismissal when the law changes in January 2027, even if they have not yet reached six months’ service at that point. Employers making recruitment decisions now should factor this into their planning.

The compensatory award for unfair dismissal is currently capped at the lower of the employee’s annual salary or £123,543. From January 2027, this cap will be removed entirely. The removal of the compensatory award cap changes the risk profile of unfair dismissal claims significantly. Where a claimant’s financial loss is no longer subject to a statutory ceiling, potential exposure for employers increases considerably, particularly in claims brought by higher earners. This is likely to have a direct impact on how employers approach settlement discussions and risk assessment in disputed dismissal situations.

Many employers currently operate six-month probationary periods. Part of the practical rationale for this arrangement has been that the two-year qualifying period meant that dismissals during probation carried limited unfair dismissal risk. From January 2027, that will no longer be the case.

Employers should review both the length of their probationary periods and the processes they follow during probation. Keeping clear records of performance discussions, conducting regular reviews, and following a fair process throughout will become considerably more important, and more time-sensitive, than has been required previously.

From January 2027, the Employment Rights Act 2025 will make it automatically unfair to dismiss an employee in any of the following circumstances:

The third circumstance captures both “fire and rehire” (dismissing and re-engaging the same individual on new terms) and “fire and replace” (dismissing the employee and hiring someone else to carry out the same or substantially the same role on different terms).

The Act sets out the following categories of restricted variation:

There are limited exceptions for non-local authority employers. A dismissal in the first two circumstances above will not be automatically unfair where the employer can demonstrate:

Comparable conditions apply to the third circumstance, where the relevant question is whether the financial difficulties necessitated the replacement of the employee rather than the restricted variation itself.

Different rules apply where the employer is a local authority.

Where a dismissal relates to a contractual change that does not fall within the restricted variations list, it will not be automatically unfair under these provisions. However, a Tribunal may still find such a dismissal unfair under the ordinary unfair dismissal test. Employers should ensure a fair process is followed in all cases, regardless of whether the variation in question falls within the restricted list.

The phased implementation of the Employment Rights Act 2025 gives employers time to prepare, but that preparation needs to begin now rather than in the weeks before each implementation date.

With the fire and rehire changes taking effect in January 2027, it is important to identify whether existing employment contracts contain terms that may need to be updated, and whether any unilateral variation clauses remain appropriate under the new rules.

Harassment policies, disciplinary and grievance procedures, whistleblowing policies, and probation policies should all be reviewed in light of the changes coming in October 2026 and January 2027.

The reduction in the unfair dismissal qualifying period means that the length of probationary periods and the processes followed during them require careful consideration before January 2027.

Ensuring that managers, HR teams, and business owners understand what is changing, and what it means for day-to-day decisions, is essential. Training on harassment prevention is particularly important ahead of October 2026, and training on fair dismissal procedures ahead of January 2027.

To help you plan your preparations, we have produced a practical checklist covering the key actions to take before October 2026 and January 2027.

Our employment law team regularly advises employers on changes to employment law and their practical implications. If you would like to discuss what these changes mean for your business, please do not hesitate to contact us.