Employment
Key contact
Rena Magdani
Partner & National Head of Employment, Pensions & Immigration
Key anticipated events
April
- First 2026 wave of Employment Rights Act reforms are anticipated
- Second 2026 wave of employment Tribunal reforms are anticipated
- 1 January 2027: Reforms to Unfair Dismissal law
April
2026
October
2026
2027
Legislation
Employment Rights Act
The Employment Rights Act marks a transformative moment in UK employment law. Its phased implementation from 2025 through 2027 introduces sweeping changes that will affect recruitment, workforce management, and compliance strategies. As an employer, understanding these developments is critical to maintaining legal compliance and safeguarding your business against increased litigation risk.
The Government has published a Roadmap for Implementation with an indicative timeline for the proposed reforms. There were some delays in the passage of the bill through the House of Commons and House of Lords, with Royal Assent only being granted on 18 December 2025, so it is possible that these timelines might change.
Reforms to take effect, or planned to take effect, in April 2026
The protective award for a failure to comply with collective consultation obligations will be doubled from 90 to 180 days’ pay per affected employee.
As with current maternity leave rights, there will be no qualifying period for an employee to serve before becoming entitled to paternity or parental leave.
Reports of sexual harassment in the workplace will automatically be a protected disclosure.
The current concept of three waiting days will be removed, so entitlement to SSP will be from day one of absence.
SSP currently only applies to those earning above the Lower Earnings Limit. This requirement will be removed, so all workers, including low earners, will be entitled to SSP at the lower of:
- The rate of SSP
- 80% of weekly earnings
Different elements of employment law are currently enforced by different bodies (for example, HMRC enforce National Minimum Wage (NMW), whereas HSE enforce the Working Time Regulations). This will change.
The Fair Work Agency will be a single body tasked with enforcement of employment rights, namely:
- Employment Agency regulations
- Payment of SSP
- National Minimum Wage
- Holiday pay
- Modern Slavery Act
- Employment Tribunal awards
The Fair Work Agency will have powers to:
- Bring Employment Tribunal claims on behalf of workers and employees
- Issue notices of underpayment where statutory amounts (for example SSP, NMW) have not been paid by an employer. These will require the payment to be made within 28 days together with a penalty of up to 200% of the sum due (up to a maximum of £20,000 per employee). These can relate to any sums due in the previous six years
- Provide legal advice and representation to those bringing claims
- Recover the costs of enforcement
The Act amends the existing statutory recognition process by:
- Deleting the current requirement for unions to have the support of at least 40% of the workforce in the proposed bargaining unit in a trade union recognition ballot. Under the Act, unions would only need a simple majority of those voting to win
- Deleting the requirement for a union to demonstrate on application to the Central Arbitration Committee (CAC) for statutory recognition that they are likely to win a recognition ballot. In future, unions would only need to show the CAC that they have 10% membership of the proposed bargaining unit for their application for recognition to be accepted by the CAC
- Providing a power to enable Ministers to issue affirmative secondary regulations to vary the 10% membership requirement on application in future, within parameters of 2% to 10% set out in the Act
Reforms to take effect, or planned to take effect, in October 2026
The Government had announced that it would strengthen protections against the abuse of terminating and re-engaging employment contracts in order to implement changes to terms and conditions. This will be implemented by:
- Deeming an employee to be automatically unfairly dismissed if the reason for dismissal is:
- because the employee refused to agree to a variation to their contract of employment in relation to pay, pension, hours or holiday; or
- to enable the employer to employ another person to carry out the same or substantially the same duties under a varied contract of employment
unless:
-
-
- the reason for the variation was to eliminate, prevent or significantly reduce financial difficulties which were likely in the immediate future to endanger the operation of the business as a going concern; and
- in all the circumstances, the employer could not reasonably have avoided the need for the variation
-
Provisions were introduced recently for the first time in this area by the Employment (Allocation of Tips) Act 2023. The Employment Rights Act adds to those provisions by requiring (rather than recommending as is currently the case) employers to:
- Consult about their tips policy
- Review their tips policy at least once every three years
At the same time as issuing a Section 1 statement of terms and conditions at the outset of employment, employers will have to give workers a written statement advising that they have the right to join a trade union. The precise nature of the statement will be prescribed by Regulations.
This will enable unions to enter into access agreements with employers by presenting an access request to which an employer may agree or may issue a response notice, triggering a negotiation period. If there is no agreement, then the issue can be referred to the CAC. Access will mean both physical entry and general communication with workers. The purposes of access could be:
- to meet, support, represent, recruit or organise workers
- to facilitate collective bargaining
A duty was imposed on all employers in October 2024 to take reasonable steps to prevent sexual harassment of their employees in the workplace. This duty will be extended to taking all reasonable steps.
Employers failing to comply with their duty could be subject to an uplift on any Tribunal award for sexual harassment of up to 25%.
By 2027, Regulations will clarify what constitutes ‘all reasonable steps’. This will cover issues such as:
- risk assessments
- plans and policies
- reporting mechanisms
- complaint mechanisms
A previous iteration of liability for third party harassment in the workplace existed in the Equality Act 2010 but was not in force. The new law will make an employer liable where an employee is subject to harassment in the course of their employment on grounds of the relevant protected characteristics if the employer failed to take all reasonable steps to prevent the harassment.
This could have a particular impact on employers with a large proportion of customer-facing employees.
There will be new rights to facilities for trade union representatives, and a right to complain if there is a failure to provide facilities such as accommodation for meetings, confidential spaces and access to communication methods.
The rights to time off and facilities currently provided to trade union officials will be extended to trade union equality representatives.
The majority of employment tribunal complaints must currently be brought (raised with ACAS through the EC process) within three months of the act complained of. This time limit will be extended to six months. With the extension of the ACAS Early Conciliation period to 12 weeks in December 2025, this means that an employer might not receive a claim until nearly a year after an employee leaves a business, and the wait for a hearing could mean that claims are heard a long time after the events complained of.
There will be protection against being subject to any detriment, where it has the sole or main purpose of preventing or deterring a worker from taking protected industrial action or penalising the worker for doing so. Compensation will be whatever is 'just and equitable', taking into account any expenses incurred by the claimant and losses of any benefit.
Reforms to take effect, or planned to take effect, from 1 January 2027
Earlier protection from unfair dismissal
This proposed reform changed dramatically in November 2025. Until then, it was billed as ‘Day One’ protection. This has now changed to:
- All employees will be protected from unfair dismissal after 6 months’ service
- The removal of the cap on unfair dismissal compensatory awards (currently capped at the lower of a years pay or £118,223)
This will mean that more employees will be protected from unfair dismissal and that there will be greater financial exposure for employers, particularly where:
- Dismissed employees suffer career long-loss
- Dismissed employees lose valuable defined benefit pension rights
Pre-Day One unfair dismissal rights: where an individual is dismissed on one of the automatically unfair grounds (for example whistleblowing), they may claim unfair dismissal even where such termination is before they have started work.
Reforms to take effect, or planned to take effect, sometime in 2027
Employers with more than 250 employees already have to publish their Gender Pay Gap but have no legal obligation to do anything about it. The reforms will also require these employers to publish Equality Action Plans including what they are doing to address any gender pay gap and to support those going through menopause.
Regulations will likely include provisions about:
- the content of action plans
- their form and manner
- when and how frequently they are to be published
- requirements for senior approval of plans
Employees who are pregnant, on maternity leave, or who have recently returned from maternity leave currently have some limited protection from redundancy (in the form of a right to a suitable available vacancy). The reforms in the Act will extend protection against dismissal to dismissal for any reason. Consultation will be undertaken as to the precise form of the protections.
Whilst trade union members have some protections against blacklisting, the Government consider these to be outdated and reforms will:
- extend to lists that were not prepared for discriminatory purposes but are used to that effect
- provide protection against forms of digital blacklisting by the use of predictive technology
- extend liability to those other than employers and agencies (for example third parties compiling lists)
These are currently not regulated in the same way as employment agencies and employment business and that will change.
PAYE liability will move from the umbrella company to the employment agency (or to the end-user if there is no employment agency involved).
The current obligation to collectively consult is triggered where there are 20 or more redundancies proposed at one establishment within a period of 90 days. There was a proposal to remove the ‘establishment’ threshold, but this has now been discounted. Instead, there will now be two types of threshold:
- the threshold of redundancies at one establishment (to stay at 20 for a 30-day consultation and 100 for a 45-day consultation)
- a threshold of redundancies across an employer’s establishments, this number has not yet been announced
Flexible working will be ‘the default’. This appears in the Act as the following reforms to the current Flexible Working system:
- Requests can only be refused for reasons falling within the relevant statutory grounds and if it is reasonable to do so
- The employer must give their reasons for refusal and explain why they consider it reasonable to refuse the application
The law currently provides up to two weeks of bereavement leave and pay for parents on the death of a child. The Act introduces up to one week’s bereavement leave for all, with regulations to be introduced to clarify the circumstances in which individuals can take bereavement leave (for example the relationship to the deceased).
There will also be one week’s unpaid leave in the event of:
- the ending of any pregnancy after less than 24 weeks (other than a live birth); or
- the failure of an embryo to become implanted following a transfer (an unsuccessful IVF transfer)
The Government will not ban zero hours contracts, but propose significant reforms as follows:
- 'Qualifying workers’ will have a right to be offered a guaranteed hours contract reflecting the hours they regularly work over a 12-week reference period
- This right will apply to ‘low hours’ workers as well as ‘zero hours’ workers (in order to avoid employers circumventing the rules by engaging people on contracts that offer guaranteed hours, but low hours). The concept of ‘low hours’ is not yet defined and will be the subject of consultation. The Act also clarifies that employers will not be able to circumvent the rules by offering guaranteed hours contracts for limited-terms (save where it is reasonable to do so)
- The Government has said that it will ensure that workers who are on full-time contracts and occasionally pick up overtime will not be affected by these reforms
- The Government has confirmed that the same protections will apply to agency workers
- In addition to the right to guaranteed hours, zero hours and other variable hours workers will have rights to:
- reasonable notice of a shift
- reasonable notice of a cancellation or change to a shift
- payment for a shift that is cancelled, moved or curtailed at short notice
What is ‘reasonable notice’ has not yet been confirmed.
In July 2025, the Government announced that it would add to the Employment Rights Act a provision ‘banning’ NDAs, although it doesn’t quite amount to an outright ban. The reforms will void any provision in an agreement insofar as it seeks to prevent the worker from making an allegation of, or disclosure of information relating to, harassment or discrimination or the employer’s response to harassment or discrimination. There is reference in the proposal to 'excepted agreements', but no indication of what these will be. The impression given by the Government’s announcement is that the traditional settlement agreement entered into with a departing employee will not be able to prevent a worker speaking about allegations of harassment or discrimination.
It remains to be seen whether there will be any watering down of these provisions or a wide category of ‘excepted agreements’, but if not, then these reforms could have a significant impact on the way in which employers approach discrimination complaints and reaching settlements with employees.
Actions for businesses to consider
Whilst the detail of the regulations implementing some elements of the Act are yet to be confirmed, actions that businesses may want to consider at this stage are:
- Strengthen recruitment processes: with a 6 month qualification period for unfair dismissal rights on the way, ensure your recruitment processes are finding the best candidates
- Train managers: equip managers to monitor new hires and manage performance effectively
- Future-proof employment contracts: consider adding variation clauses to employment contracts before the new law takes effect
- Ensure compliance with statutory payments: avoid penalties levied by the Fair Work Agency for non-compliance
- Include cooperation clauses in Settlement Agreements: to ensure that you have the support of your witnesses in any future litigation
- Foster industrial relations: promote open communications and engage with staff forums to address issues proactively
Further details
For further details you can visit:
- the Government’s roadmap for implementation of the Employment Rights Act here
- the Government’s Employment Rights Act factsheets here
Case law
Supreme Court decides that references to ‘woman’, ‘man’ and ‘sex’ in the Equality Act 2010 refer to biological sex
In For Women Scotland Ltd v The Scottish Ministers [2025] UKSC 16, the Supreme Court held that the references to ‘woman’, ‘man’ and ‘sex’ in the Equality Act 2010 refer to biological sex.
Summary of the decision
The case concerned laws in Scotland requiring positive action to be taken in relation to the appointment of women to non-executive posts on the boards of certain Scottish public authorities, including an objective that at least 50% of non-executive members are women.
Guidance issued suggested that for these purposes ‘women’ would include transgender women who had a Gender Recognition Certificate.
For Women Scotland are a Scottish women’s rights group who sought judicial review of the legislation on the basis that ‘women’ should mean biological women and should not include transgender women with a Gender Recognition Certificate.
The Supreme Court agreed and held that the guidance provided was incorrect. The definition of ‘women’ in the Equality Act 2010 relates only to biological women.
Implications for businesses
The decision was very controversial and generated a lot of commentary at the time because of the potential ramifications for organisations delivering single-sex services or with toilet and changing facilities because of the previous view taken that ‘women’ included those who had Gender Recognition Certificates or who identified as women.
For employers, the focus of commentary was on the provision of toilet and changing facilities as the impact of the decision appeared to be that, for example, a trans woman should not be able to use the women’s toilet or changing facilities. Equally, the Court’s decision did not impact on the right of individuals to bring claims of discrimination on grounds of gender reassignment, therefore placing organisations in a very difficult position.
The EHRC published an interim statement shortly following the Supreme Court decision and said that it would update its Code of Practice on discrimination in goods and services, public functions and associations. It published a consultation on this and has sent a draft Code of Practice to the House of Commons for approval, but approval has not, at the time of writing, been granted.
Once the Code of Practice on goods and services has been updated, the EHRC is expected to update the Code of Practice for employers, but this may take some time. Until then, we have a period of uncertainty as to the position that employers should adopt to best mitigate their risk of claims (from either side of the gender identity issue). One difficulty for employers is balancing their health and safety obligation to provide separate toilet facilities for men and women with the potential risk of litigation if they provide only single-sex facilities.
Actions for businesses to consider
Employers should audit their toilet and changing facilities and seek advice on what steps should be taken to minimise risk pending the arrival of updated Codes of Practice.
Further details
You can access a copy of the full judgment here: For Women Scotland Ltd (Appellant) v The Scottish Ministers (Respondent)
Key contact
Rena Magdani
Partner & National Head of Employment, Pensions & Immigration
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