Preparing for the Employment Rights Act: A strategic guide for employers

The forthcoming Employment Rights Act, expected to come into force at the start of 2026 will mark the most radical changes to English employment law in a generation. The Labour Government has promised to reshape work and make it pay. With implementation staggered through 2026 and 2027, employers must act now to prepare for the most comprehensive reform in decades.

Key reforms: What changed?

1) Day-One Employment Rights

The CBI and others have been vocal about the “chilling effect” on the economy of the prospect of employees gaining the right to claim unfair dismissal from day one of employment. There is likely to be a probationary period (Initial Period of Employment (IPE)), of six-nine months, during which a “light touch” dismissal procedure will apply but this will not apply to redundancy so a full redundancy process will need to be followed.

2) Zero-hours contracts and shift rights

This has been diluted from a ban on zero hours contracts to a ban on their “exploitative use”.  From 2027, workers (including agency staff) are expected to gain:

• The right to request a minimum number of hours based on their average hours worked 
• The right to reasonable notice of shifts; and
• Compensation for cancelled or curtailed shifts if they are changed too late.

3) Harassment prevention duties

This follows on from the employer’s current duty to prevent harassment which was introduced in October 2024. Employers will in future be required to take all reasonable steps to prevent:

• Harassment by their own staff; and
• Harassment by clients, contacts and third parties with whom they have contact in performing their role.

Guidance is expected on what steps will be considered reasonable.

4) Fire and rehire restrictions

Following the P&O controversy, the government will make it more difficult, but not impossible, for employers to dismiss staff who won’t accept changes to their terms and then re-engage them. Dismissals for refusing contractual changes to pay, pension, hours and holiday/leave are to become automatically unfair, unless employers can demonstrate genuine financial necessity.

5) Trade union and industrial relations reform

The new legislation will strengthen union rights and simplify recognition processes. Employers must prepare for:

• The likely reduction to 50% of the turnout to call strike action
• The reduced threshold of more than 2% (currently more than 10%) of the bargaining unit for a union to be recognized by the employer (and negotiated with).
  

6) Extended time limits

The period you need to consult with employees about a redundancy is expected to double from 90 – 180 days.  The penalty for a failure to consult will also be doubled, so you will need to allow a longer period for downsizing.

Currently, a claim must usually be started within the Employment Tribunal within three months.  This is expected to double to six months so employees will have a longer period to start claims like unfair dismissal and discrimination claims, which will may allow you more time to resolve issues, but you’ll need to ensure your witnesses are still available.

Practical steps for employers to take now

1) Improve recruitment processes

With day-one unfair dismissal rights, recruitment must be robust, so you should:

• improve your recruitment processes
• ensure the induction and job descriptions set clear expectations
• train your managers in recruitment and performance managers to regularly monitor new hires
• upskill or recruit the right managers to adopt fair dismissal processes.

2) Future-proof employment contracts

Update your template contracts and agree changes to your employees’ contracts to:

• include a statutory probationary period aligned with the IPE,
• allow the business the right to vary terms (e.g. location, duties, hours); and
• ensure employees’ duties to cooperate with the business after employment ends.

It will be easier to agree changes to contracts now before the new law takes effect.

3) Ensure compliance with payments

The new Fair Work Agency is to be set up, however compliance with the minimum payments required by law is already enforced by other government agencies so you need to ensure you comply with:

• National Living Wage/ National Minimum Wage (e.g. £12.21/hour for an adult from April 2025).
• Holiday pay; and
• Statutory Sick Pay (which is going to become payable from day one).

Employers should audit their payroll systems and policies now so that they avoid penalties or being named and shamed, which could impact staff attraction and retention.

4) Include cooperation clauses

To ensure that you have the support of your witnesses in any future litigation requiring former employees to cooperate with investigations or proceedings, even post-employment by adding clauses in:

• Employment contracts and
• Settlement Agreements.

5) Strengthen industrial relations

To reduce the appetite to move towards unionisation, it would be helpful for employers to:

• Foster open communication and
• Engage with staff forums

... so that workers see their issues being addressed without the need to resort to further intervention.

Final thoughts

The Employment Rights Act is a call to action. Employers who prepare early - by updating contracts, training staff on harassment, training managers on performance, and engaging with staff—will not only ensure compliance but also future-proof their business and build a more resilient and inclusive workplace.