Upcoming employment law reforms: what employers need to know

The Employment Rights Act 2025 strengthens employees’ rights across several areas and will reshape how employers hire, manage and dismiss staff. Some reforms, including to Statutory Sick Pay (SSP), family leave, collective redundancy, and holiday pay are already in force.

Employers should now be planning for further reforms expected over the next 18 months. To help with this, the expert Employment Law team at Lodders highlights the key changes already in force and sets out the timeline for those anticipated later this year and during 2027.

Changes already in force

Several changes came into force in April 2026. These are summarised below:

Statutory Sick Pay (SSP)

SSP is now payable from the first day of absence, with the previous three-day waiting period removed. The lower earnings limit has also been removed, and workers earning below that limit are entitled to 80% of their average weekly earnings.

Day-one rights for family leave

Paternity leave and unpaid parental leave are now available from the first day of employment. Employees are no longer unable to take paternity leave after taking shared parental leave.

Bereaved partners

Bereaved partners may now take up to 52 weeks of unpaid paternity leave if their child’s mother or primary adopter passes away.

Sexual harassment 

Disclosures of sexual harassment now count as qualifying disclosures under whistleblowing law. Individuals who make these disclosures are protected from detriment and unfair dismissal as whistleblowers.

Collective redundancy

The maximum employment tribunal protective award for failing to comply with collective consultation obligations has increased from 90 days of pay to 180 days of uncapped pay per affected employee. These obligations arise where employers propose to dismiss 20 or more employees as redundant within a period of 90 days or less.

Holiday pay and working time records

Employers must now keep adequate records of each worker’s annual leave entitlement and the annual leave they have taken.

New Fair Work Agency (FWA)

A new enforcement body, the Fair Work Agency, has been established, with the power to take various action, including:

• Investigating suspected breaches of employment law
• Issuing penalties
• Taking legal action on behalf of employees

Key reforms still to come

Employers should be planning now for further employment law reforms expected over the next 18 months. Many of these changes are confirmed but not yet in force; others remain subject to consultation. 

Tips and tipping policies

Expected from October 2026, this change means employers will be required to consult with workers (or their representatives) before introducing or revising tipping policies. Employers will also be required to review tipping policies periodically.

Tribunal claims

Tribunal time limits for most claims are set to increase from three to six months. This is expected to come into force from October 2026.

Unfair dismissal

The qualifying period for unfair dismissal claims is expected to decrease from two years to six months from January 2027.

The statutory compensation cap is also expected to be removed (currently it is capped at the lower of £118,223 or 52 weeks’ gross pay), exposing employers to the risk of far greater financial liabilities arising from tribunal litigation.

Fire and rehire

New restrictions on dismissals connected with contractual changes are expected to come into force from January 2027. Certain dismissals linked to contractual changes (such as pay, pensions and holiday entitlement) may become automatically unfair unless the employer can demonstrate a defence linked to genuine financial difficulty. The relevant thresholds are likely to be high, and employers should not assume that they can easily be satisfied. These proposals are still under consultation and may change before implementation.

Zero hours

Employers may be required to offer qualifying workers contracts reflecting their usual working hours based on a reference period (expected to be 12 weeks).

Workers are also expected to gain the right to reasonable notice of shifts and to compensation if shifts are cancelled, shortened, or changed at short notice. These proposals are still under consultation but are expected from 2027.

Gender pay gap and menopause action plans

From spring 2027, large employers (with 250 or more staff) are expected to be required to publish gender pay gap action plans and menopause action plans. Employers can voluntarily publish these action plans now.

Key actions for employers

Employers should act promptly to ensure compliance and minimise the risk of disputes, operational disruption, compensation awards and financial penalties. We recommend employers take the following measures:

• Review and update all relevant company policies including paternity, parental leave, sick pay, and whistleblowing policies;
• Provide clear guidance to employees on their new rights and entitlements;
• Train HR teams and managers to ensure they understand the new laws and can ensure compliance;
• Review internal procedures to improve consistency, reduce misunderstandings and support legal compliance;
• Begin planning now for reforms due to come into force later in 2026 and 2027

Employment law experts

Lodders’ experienced Employment Law team can provide tailored advice on how these changes may affect your business and assist with updating your policies and practices.

Our wider Business Services group also provides pragmatic legal advice on all areas of corporate and commercial law.

For expert help and guidance, contact us today.