Employment Rights Act 2025: What UK Employers Need to Do Before 2027

What is the Employment Rights Act 2025?

The Employment Rights Act 2025 is the biggest overhaul of UK employment law in a generation. It became law on 18 December 2025 and rolls out in stages through 2026 and 2027, changing unfair dismissal rights, statutory sick pay, fire and rehire practices, and a string of leave entitlements. Some changes are already in force. The biggest ones land on 1 January 2027, and if you run a small business, that date matters more than any other on your compliance calendar.

This isn't a "watch this space" piece. It's the dates, the specifics, and what to actually do before each one hits.

What's already changed, right now

Statutory Sick Pay is already different. Since 6 April 2026, SSP is payable from the first day of sickness absence, the old three-day waiting period is gone. The Lower Earnings Limit has also been scrapped, so employees earning below the old £125-a-week threshold now qualify for SSP where they didn't before. SSP is now calculated at either the flat rate (£123.25 a week from April 2026) or 80% of average weekly earnings, whichever is lower. If your payroll process still assumes a three-day wait or an earnings cut-off, it's already out of date.

Tribunal time limits are about to move. From 1 October 2026, the time limit for most employment tribunal claims extends from three months to six months. That means grievances and disputes you thought were closed can come back for twice as long, which makes clean documentation at the time of the event, not months later, more important than it's ever been.

What changes on 1 January 2027, the big one

Unfair dismissal becomes a six-month right, not a two-year one. The government originally planned "day one" unfair dismissal rights, then pulled back. What's actually landing on 1 January 2027 is a reduction in the qualifying period from two years to six months. If someone's worked for you for six months, they can bring an unfair dismissal claim, full stop. That's 18 months earlier than the current rule allows.

The compensation cap disappears. Right now, unfair dismissal compensation is capped (currently around £115,000 or a year's salary, whichever is lower). From 1 January 2027, that cap is removed entirely for unfair dismissal claims. There's no ceiling on what an employment tribunal can award.

Put those two together and the maths on getting a dismissal wrong changes completely. A dismissal that goes wrong six months into someone's employment, with no compensation ceiling, is a materially bigger risk than the same mistake made under today's rules.

Fire and rehire is being shut down for core contract terms. From 1 January 2027, dismissing someone because they won't accept a change to their pay, hours, pension, shift pattern, or time-off entitlement, and then re-engaging them (or someone else) on the new terms, is automatically unfair. There's no qualifying period for this protection; it applies from an employee's first day. The only exception is genuine financial distress that threatens the business's survival, and even then the employer has to show the change was necessary and there was no reasonable alternative.

This matters even if you've never used the phrase "fire and rehire." If you're planning to restructure shift patterns, cut a bonus scheme, or change pension contributions next year and you're relying on dismissal-and-reoffer to get there, that route is closing.

Changes to less central terms, job title, location, duties, aren't caught by this restriction, but they still have to satisfy ordinary unfair dismissal rules.

What else is coming in 2027

Beyond the headline changes, the Act also brings in mandatory menopause action plans and gender pay gap action plans for larger employers, and a new unpaid statutory bereavement leave entitlement. These land later in 2027 and will get their own briefing closer to the date, for now, the priority is the January 2027 changes above.

What to do before each date

Before 1 October 2026 (tribunal time limit change):

• Make sure every dismissal, grievance outcome, and disciplinary decision is documented in writing at the time, not reconstructed later.
• Check your record retention, six months of potential claim window means you need to hold evidence longer than you might currently plan for.

Before 1 January 2027 (unfair dismissal and fire and rehire):

• Review every dismissal process you currently rely on for anyone who might be let go between 6 and 24 months of service, those dismissals now carry the same legal risk as dismissing someone with years of service.
• Audit any planned changes to pay, hours, shift patterns, or pension contributions. If the plan involves dismissing and re-offering on new terms, get advice before you start, not after you've told the team.
• Tighten up your disciplinary and performance management documentation now. Six months of service is not long enough to have built up a paper trail the old way, you need process discipline from day one of every hire.
• If you've got probation periods that assume two years of legal breathing room, they don't work like that anymore. Review probation and early-service dismissal processes specifically.

Ongoing:

• Payroll: confirm your SSP calculations already reflect the April 2026 changes if they haven't been checked since.
• Contracts and handbooks: any clause assuming the old two-year unfair dismissal threshold or the old fire-and-rehire flexibility needs updating before January 2027, not after.

The bottom line for small business owners

None of this means you can't manage performance, restructure, or make hard calls about headcount. It means the margin for getting the process wrong has shrunk, both in how quickly an employee can bring a claim, and in what it can cost you if you lose. The businesses that come out of this fine are the ones treating every dismissal like it matters from month six onward, not year two.

If you're not sure whether a change you're planning falls foul of the new fire-and-rehire rules, or you want your dismissal process stress-tested against the January 2027 changes before you need it, that's exactly what a same-day HR answer is for.

Talk to us before you act, same-day answer, fixed fee, no retainer.

Related Employment Rights Act updates

• All reasonable steps: what changes for employers on 30 October 2026
• Tribunal time limits double on 1 October 2026
• Is your HR advice legally privileged?

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