The Employment Rights Act 2025 – Where are we, and where are we going?

In December 2025 the UK Parliament passed the Employment Rights Act 2025 – perhaps the most comprehensive reform of workers’ rights in 30 years. It was brought about by the Labour Government’s “Make Work Pay” programme and significantly extends protections for employees while imposing new obligations on employers. This legislation significantly overhauls employment law and will be phased in through 2026 and 2027.

The Act addresses sick pay, parental leave, trade union access and zero-hours contracts. While its stated aim is to increase job security and fairness for workers, its implications for employers (particularly those in sectors such as healthcare, hospitality, and retail) are profound.

Statutory Sick Pay (SSP)

The change: From April 2026, SSP is now available from the first day of illness and applies to all workers, even those below the previous lower earnings limited.

The result for employers: Increased payroll costs, requires tighter absence monitoring, and will require amendments to payroll systems.

Unfair dismissal

The change: The big change is a reduction in the required length of service from 2-years to 6-months to bring a claim for unfair dismissal. The cap on compensatory awards is also being removed.

The result for employers: Higher risk of large damages awards following trial as well as a higher proportion of staff being able to bring unfair dismissal claims in the first place.

Zero-hours

The change: This is perhaps the most profound change of the new Act as it will see a change in rights for those on zero-hour and low-hour contracts. These changes include the right to be offered guaranteed hours, reasonable notice of shift patterns, and payment for cancelled shifts in an attempt to curb insecure work practices.

The result for employers: These types of contracts have dominated the ‘gig-economy’ providing flexibility for both employer and employee. Costs associated with hiring these types of workers will increase, and in some cases, significantly. This will likely impact the retail, healthcare, logistics and hospitality industries the most.

Parental Leave

The change: From April 2026, ordinary parental and paternity leave become day-one rights with no requirement for weeks or months of service to qualify.

The result for employers: Employment agreements will need to be updated and tracking systems will need to be revised to ensure compliance.

Fire and Rehire

The change: From 2027 the practice of dismissing and rehiring employees on less favourable terms will be treated by tribunals as ‘automatically unfair dismissal’ in most cases.

The result for employers: An increased risk of adverse tribunal awards against employers who engage in this behaviour.

Redundancy consultation

The change: From 2027, the redundancy regime will change where there is a failure to consult adequately; doubling the protective awards.

The result for employers: There is an increased risk for employers who will now find themselves in for double awards where they have failed to consult adequately.

Flexible working

The change: The Act strengthens flexible working rights, requiring employers to provide reasoned responses when refusing requests.

The result for employers: Many employers have adopted flexible working effectively which has had the result of increased productivity and outcomes. However, for those employers who have not, they will now be required to provide adequate reasons for a refusal.

Tribunal time limits

The change: The time limit for bringing a tribunal claim will increase from 3-months to 6-months.

The result for employers: An increased risk of more claims being brought. The frequency of claims being explored by employees after that 3-month cut off is surprisingly high so the change will likely mean a general increase in the number of claims being brought.

What this means for healthcare and other gig-workers

While the above does not consider all of the changes brought about by the Act, it focuses on the main changes that will likely have an impact on most employers. As noted, several industries will be more heavily impacted than others, particularly those will gig-workers.

Healthcare providers, including the NHS, will likely feel the biggest change as the effects of the changes are compounded by their regulated activities.

SSP from day one and broader parental leave rights will increase labour costs and planning complexity. With sickness absence already a frequent challenge in healthcare settings due to exposure-related illnesses and shift work, employers will need robust absence management and payroll operations in place.

Zero-hours contract reforms and guaranteed hours provisions will affect many care workers and support staff currently engaged in flexible scheduling. This requires a re-alignment of rostering practices and possibly renegotiation of contracts to balance flexibility with security.

Reducing the unfair dismissal qualifying period to six months signals that even relatively new healthcare hires can bring claims much earlier. This adds urgency to probationary review processes, along with performance documentation and procedural rigor to mitigate legal risk.

Healthcare employers, particularly smaller clinics and care homes, may find the expanded litigation window and uncapped compensatory awards a new source of financial exposure which will not only have a direct claim cost, but likely an increase in legal event insurance coverage premiums.

The Act also paves the way for sector-wide negotiating bodies in adult social care, which may in future set pay and conditions across the sector. This element could have profound effects on wages and conditions in a sector plagued by low pay and high turnover.

The further strengthening of the duty to prevent harassment by third parties, such as patients or visitors, is going to require healthcare employers to introduce risk assessments, training and reporting systems tailored to the realities of clinical environments.

Conclusion

The Employment Rights Act 2025 brings the biggest change to the employment landscape in 30 years. It aligns with broader professional and ethical commitments to worker wellbeing addressed in the Labour party manifesto, but raises costs and compliance demands. In the gig economy, it promises greater security for workers traditionally excluded from mainstream employment protections, but it also challenges business models built on flexible labour which in many cases have been supported by workers.

Kyle Lecuona

Barrister

London

The above article does not constitute legal advice. Every dispute is unique and expert advice should be sought in respect of your specific circumstances.