The UK government has confirmed the revised terms of its wide-ranging workers’ rights reform programme, now enacted through the Employment Rights Act 2025. Although some of the original proposals have been softened, the legislation still represents the most significant change to UK employment law in many years.
For business owners and employers, the key issue is not whether these changes will affect them, but when and how. The reforms are being introduced in phases across 2026 and 2027, creating both a window to prepare and a period of ongoing uncertainty for those planning recruitment, restructures or cost control.
This article outlines the main changes and explains why early awareness and planning are important.
A major shift in employment rights
The Act brings together reforms covering unfair dismissal, statutory payments, family leave, trade union engagement and sector-level pay setting. The stated aim is to modernise workplace protections while maintaining flexibility for employers.
While the final legislation reflects compromises reached after consultation, the overall direction is clear. Employment rights will apply earlier, cover more people, and in some cases expose employers to higher financial risk.
Reduced qualifying period for unfair dismissal
One of the most important changes concerns unfair dismissal protection.
Previously, most employees needed two years’ service before they could bring an unfair dismissal claim. Early proposals would have made this a day-one right, but this has been revised.
Under the new rules, employees will qualify for unfair dismissal protection after six months’ service. This is still a substantial reduction from the previous position and will have a practical impact on probationary periods and early employment decisions.
In addition, the statutory cap on unfair dismissal compensation is being removed. This means awards will no longer be subject to a fixed maximum, increasing potential exposure where disputes arise.
Day-one rights for family and bereavement leave
Several forms of leave will now be available from the first day of employment.
These include statutory paternity leave, unpaid parental leave and new bereavement leave provisions. Minimum service requirements are being removed to reflect modern family arrangements and expectations.
For employers, this means entitlement arises immediately, which may affect workforce planning, particularly for smaller teams where short-term absences can have a noticeable operational impact.
Changes to statutory sick pay
Statutory Sick Pay is also being reformed.
Eligibility will no longer depend on meeting a minimum earnings threshold. This extends entitlement to lower-paid workers, part-time staff and those with irregular hours who were previously excluded.
Although the rate of Statutory Sick Pay itself is not significantly changed, the widening of eligibility is expected to increase employer costs and administrative demands. Payroll systems and sickness policies will need to be reviewed to ensure compliance.
Trade union rights and industrial relations
The legislation strengthens trade union rights and revises the framework for industrial relations.
Changes include simplified procedures for union recognition and industrial action, increased protections for workers participating in lawful strike action, and the repeal of earlier requirements for minimum service levels during strikes in certain sectors.
Employers will also be required to inform workers of their right to join a trade union and engage more actively with recognised unions where they exist. For some businesses, this represents a material shift in how employee relations are managed.
Consultation on tips and service charges
Employers operating tipping, gratuity or service charge arrangements will face new consultation obligations.
The rules require consultation with recognised trade unions or, where none exist, directly with workers on how tips are distributed. Employers must also publish the outcome of these consultations.
This is particularly relevant to hospitality and service businesses, where transparency around tips has become an increasingly sensitive issue.
Sector-level pay agreements
The Act introduces the framework for Fair Pay Agreements in specific sectors, starting with adult social care.
These arrangements allow sector-level bodies to set minimum pay and employment terms. While initially limited in scope, this marks a potential shift away from pay being determined solely at individual employer level.
Businesses operating in affected sectors will need to monitor developments closely, as future expansion of this model could have cost and compliance implications.
Further reforms still under development
Not all elements of the reform package are finalised. Several measures remain subject to further consultation and secondary legislation.