The Employment Rights Act 2025 proposes to make big changes when it comes into force in 2027! See our previous article here.
As we anticipated, the UK government has pushed a major Bill through Parliament that has brought changes to employment rights, this seemed to have passed through parliament quicker than we anticipated. Employers and employees must stay informed of some of the changes that have occurred, to prevent any unwanted claims.
This article updates you on the progress of the Bill as it becomes an Act.
Qualifying period for unfair dismissal under the Employment Rights Act 2025
Currently, an employee needs at least two years’ qualifying service in order to possess the legal right to claim unfair dismissal: this is now limited to just six months.
Originally, the (Labour) government wanted to introduce “day one” unfair dismissal rights, meaning that employees would have the right to not be unfairly dismissed from their very first day of employment. This would be a huge deal for employers and employees.
However, the House of Lords insisted on a six-month period. This is a colossal shift from the current two-year period, making it one of the most contentious proposals.
The Employment Rights Act 2025 is set to become law on 1 January 2027. So, employees hired from 1 July 2026 will gain unfair dismissal protection after six months of service.
There was controversy because the Labour party (in particular former deputy prime minister Angela Rayner who announced this proposal) didn’t stick to their manifesto promise of introducing “day one” rights. The problem was that the manifesto promise didn’t have enough support from the House of Lords or business groups (such as Trade Unions).
Remember, just as “two years” meant 103 weeks (not 104), “six months” means 25 weeks (not 26) because caselaw says that the statutory one week’s notice period gets deducted. This is often overlooked, even sometimes by employment lawyers.
We wait to see whether this will lead to a lot more claims in the tribunals (and therefore timetable delays). Tribunals are already strained, so an increase of claims will worsen existing backlogs.
Discussion of other changes in the Employment Rights Act 2025
- For employees; it means that employers cannot change contracts overnight, fire and rehire is now banned unless there is proof of financial necessity (and this will be virtually impossible to show).
- There will be paid carers leave and bereavement leave for parents.
- Employers will need to consult with workers when
developing and revising their tipping policies, increasing transparency, and accountability in how tips are handled. - Employers will also have a duty to prevent harassment in the workplace by third parties (such as customers), if they know it’s happening.
- According to the official ACAS website, if an employee’s shift is changed or cancelled at the last minute or cut short then they will have the right to compensation. This will have the greatest impact on employers working in retail and hospitality.
Changes to compensation
The new Act also brings changes to unfair dismissal compensation. Instead of being limited to 52 weeks and or £118,000 (whichever is lower), under the new Act, there is no limit at all. This brings unfair dismissal into line with whistleblowing and discrimination in this respect.
This may lead to more tribunal claims, harder settlement negotiations and much tougher decisions from employers facing claims. It is one of the biggest shifts in unfair dismissal law we’ve ever seen.
Conclusion
To conclude, the changes to the unfair dismissal qualifying period under the Employment Rights Act 2025 will have a significant impact on both employers and employees. The most important change is the that employees will have unfair dismissal rights from the start of week 26. This is a huge change to employment law. The changes come into force in 2027.
Image used under CC courtesy of Dimitri Baranovskiy