Employment Rights Act 2025: is your charity prepared?

The Employment Rights Act 2025 (ERA 2025), which received Royal Assent on 18 December 2025, could significantly increase the compliance risks, burden of administration and costs for charities across the UK.

While changes are being implemented in phases across 2026 and 2027, the first wave have already taken effect in April 2026, and further changes are due in October 2026 and January 2027.

The reforms are vast and many, but we have set out the key changes for charities to be aware of below together with the steps that charities can take to prepare.

Unfair Dismissal

Currently employees need two years’ continuous service to qualify for unfair dismissal protection.

However, from 1 January 2027, the qualifying period will reduce to six months’ service. Crucially, this change will apply to existing employees and anyone with six or more months’ service on 1 January will immediately gain unfair dismissal protection.

From this date charities will need to ensure that they have a fair reason and follow a fair process before terminating any employee that has six months’ service or more to avoid a claim for unfair dismissal.

In addition, from 1 January 2027, the cap that applies to the compensatory award following a successful unfair dismissal claim (currently £123,543) will be removed entirely, meaning there will be no upper limit on what a tribunal can award, significantly increasing the financial exposure for charities that get it wrong.

What actions should you take to prepare?

• Update your trustees and senior managers on the implications of the changes in the law. Give training to managers responsible for staff during their probationary periods so they have the skills to complete a robust probationary review process.
• Update template contracts of employment to ensure that probationary periods are appropriate given the reduction in qualifying service for unfair dismissal. Many employers now include probationary periods of three or four months to ensure that there is sufficient opportunity to review performance and terminate before the employee acquires unfair dismissal rights at six months. Payment in lieu of notice clauses should also be included within contracts to facilitate a quick exit if things don’t work out
• Update policies and probation frameworks to include clear probation review points and the process to be followed. This will help manage expectations of staff
• Tighten up your recruitment processes. The cost of poor recruitment decisions will increase significantly so before employment starts, thoroughly assess suitability and mitigate risk
• Take particular care with fixed term contracts – deciding not to renew a contract at the end of a fixed term still amounts to a dismissal and, if an employee has acquired unfair dismissal protection, a fair reason and a fair process will be needed to avoid claims.

Restructuring / redundancy

Dismissal and reengagement (also known as “Fire and rehire”) is the practice of dismissing employees and immediately re-engaging them on different terms and conditions.

At the moment it is a lawful, though controversial, way to change an employee’s contract where an agreement cannot not be reached, provided the employer follows a proper consultation process and complies with the relevant Code of Practice.

However, from 1 January 2027 any dismissal of an employee for refusing to sign revised contractual terms in protected circumstances will be automatically unfair, unless the employer can demonstrate that it was needed to mitigate severe financial difficulty.

We will also see changes in collective consultation processes. Currently, charities proposing to make 20 or more staff redundant at a single establishment, within a 90-day period must follow a formal and prescribed collective consultation process with employee representatives.

In 2027 a new threshold will require employers to consider the number of redundancies proposed across the whole organisation (not just individual sites) when determining if the collective consultation requirements are triggered. Where an employer fails to comply with its requirements to collectively consult, an Employment Tribunal can order that they pay compensation (known as a “protective award”) to each affected employee.

As of 6 April 2026, the maximum award has doubled from 90 to 180 days’ pay per employee, significantly increasing the financial risk of getting this wrong.

How can charities prepare?

• Review any planned restructuring or redundancies and consider whether it is possible to implement them before 1 January 2027, when some of the new protections come into force
• Train trustees and managers on preparing for and conducting effective consultation processes and delivering clear, consistent communications during periods of organisational change and the risks of getting this wrong.

Zero-hours overhaul

Zero hours contracts are currently a legitimate means of engaging casual staff and there is no statutory right to guaranteed hours.

However, from 2027 (the exact date is yet to be confirmed), employers will be required to offer “guaranteed hours” to workers on zero hours and low hours contracts, based on hours worked over a reference period.

Workers on zero or low-hours contracts will also gain rights to reasonable notice of shifts and of any change or cancellation. Employers may be required to make a payment for short-notice cancellations.

The government has recently launched a consultation to seek views on key details including the reference period (with 12, 26 or 52 weeks under consideration), the hours threshold for “low-hours” contracts, the regularity of work required to qualify and compensation for short-notice shift changes or cancellations.

We are currently still awaiting details of several key issues including, for example, the relevant reference period, thresholds that will apply, notice requirements and the level of compensation. These details will be provided in regulations, and there is currently an ongoing consultation seeking views to help shape how these changes will apply in practice.

What steps can charities take now?

• Review existing zero and low-hours arrangements now to understand the operational and financial impact that the new requirements will have for your charity once they come into force
• Keep up to date with the consultation, which closes in August 2026, as this will directly impact strategy and forward-planning.

Anti-harassment

From 6 April 2026, reports of sexual harassment became expressly protected for the purposes of whistleblowing. This means that employeesmakeing such disclosures are protected from dismissal or being treated unfairly for speaking up about harassment.

From October 2026, the duty on employers to prevent sexual harassment is being strengthened. Currently, employers must take “reasonable steps” to prevent harassment.

This will change to “all reasonable steps” which is a significantly higher standard and will require employers to be more proactive.

Employers will also become liable if their employees are harassed by third parties (such as service users, donors, visitors or members of the public) unless they can show they took all reasonable steps to prevent it. The government will publish guidance on what counts as “all reasonable steps”, although this isn’t expected until 2027.

Actions you can take to prepare

• Risk assess – consider risks posed by colleagues, volunteers, service users, beneficiaries, donors, visitors, suppliers, contractors and trustees, and how these can be mitigated
• Provide trustee and staff training to comply with the new requirements and provide regular updates
• Update whistleblowing, anti-harassment and related policies and procedures
• Consider and follow Equality & Human Rights Commission 8 Step guide to prevent sexual harassment
• Review contracts with third parties and suppliers and incorporate provisions to reflect a zero-tolerance stance in respect of sexual harassment.

Employment Tribunal claims

The time limit for bringing most Employment Tribunal claims is currently three months. The ERA will double this time limit to six months for most claim types, including unfair dismissal, discrimination, harassment and unlawful deductions from wages.

Breach of contract claims remain subject to a three-month time limit. We expect this change to come into force no earlier than October 2026.

What preparatory steps should charities be taking?

• Ensure trustees and senior managers properly document their reasons for key employment decisions and retain records carefully. With the extended time limit, claims may arrive many months after the underlying events – good record-keeping will be essential
• Budget for an increased volume and value of Employment Tribunal claims and consider whether any existing insurance cover is adequate.

Future updates

There are many significant changes due to come into force that will impact employment rights over the year ahead. However, with several consultations still ongoing, some of the finer details of the legislation remain to be confirmed. We will continue to provide updates as further guidance is published.