The Employment Rights Act 2025: key changes for employers

The Employment Rights Act 2025 (ERA) received Royal Assent in December 2025 and is now law. It brings the biggest overhaul of employment law in a generation, with changes continuing to come into effect over the coming months.

The changes bring stronger worker protections, tighter rules for employers and a new enforcement body. All businesses should be preparing now.

Some of the key changes include:

• Significant changes to unfair dismissal rights, with employees only needing a minimum of six months’ continuous service to bring a claim to the Employment Tribunal (reduced from the current two years)
• Removal of the statutory cap on the compensatory award for unfair dismissal. Currently, the maximum is the lower of 52 weeks’ pay or £118,223. The removal of this cap will particularly affect unfair dismissal claims brought by high earners
• Changes to statutory sick pay (SSP), with employees entitled to SSP from the first day of sickness (rather than after three ‘waiting days’)
• Automatic unfair dismissal where an employee is dismissed for refusing to agree to changes to certain key terms of their employment contract (subject to a high-threshold exemption)
• An increase in the time limit for employees to bring a claim to the Employment Tribunal, from three months to six months
• Introduction of day-one rights for working parents in relation to paternity and parental leave
• Changes to how zero-hour contracts can be used, to restrict ‘one-sided flexibility’
• A new duty requiring employers to take ‘all reasonable steps’ to prevent sexual harassment.

Actions to take now

• Identify how the ERA will affect your business
• Review and update your contracts, staff handbook and HR policies, particularly around family leave rights, recruitment and dismissal practices, sick pay arrangements and anti-harassment training. The updates required will differ from business to business
• Ensure your HR team and managers are trained and equipped to understand how the changes will affect the day-to-day running and management of your business and employees
• Stay informed. Our Employment Rights Act Hub includes a breakdown of the proposed changes, timelines for implementation and key practical steps for businesses to take now and in the future, along with our commentary as further details and timelines are confirmed.

To support your business as you navigate the new laws, HCR Law also offers:

• Training: we can provide training for your boards, HR team and managers, including our ERA training session
• Surgery: a tailored workshop for your business, including a project plan for staged compliance to help you proactively manage the changes ahead.

The consequences of not getting things right can be significant, with the Employment Tribunal able to award potentially uncapped compensation for several types of claims that may be brought by employees.