Employment Rights Bill - Where it has Landed

After nearly a year of intense parliamentary deliberation, the Employment Rights Bill has finally cleared its parliamentary stages and is now poised to become the Employment Rights Act 2025, pending Royal Assent. What started as a flagship legislative programme to overhaul UK employment law has ended in significant reform.  But not without compromise, uncertainty and complexity for employers preparing for change.

1. A Journey Through Parliament

From initial proposals through to House of Commons and House of Lords debates, the Bill’s passage has been far from smooth. In recent months the Bill faced repeated “parliamentary ping-pong,” with multiple returns between Houses over key provisions and technical amendments. However, these hurdles were overcome in mid-December, and the Bill passed its final parliamentary hurdle on 16 December 2025.

2. Key Outcomes Employers Need to Know

Day One Unfair Dismissal: A Government U-Turn

One of the most significant shifts during the legislative process was the abandonment of day-one unfair dismissal rights. While initial proposals promised immediate unfair dismissal protection from the first day of employment, compromise with the House of Lords has reduced this to a six-month qualifying period. This change retains some continuity with longstanding employment law practice and reduces administrative disruption, though it strips back one of the more high-profile reforms.

Removal of the Unfair Dismissal Compensation Cap

Perhaps the most potentially impactful change is the removal of the statutory cap on unfair dismissal compensation. Previously capped at whichever was lower between 52 weeks’ pay or a statutory maximum (currently around £118,000), this cap will no longer apply, making the UK unusual among peer economies and potentially increasing dismissal risk, especially for senior roles.

This last-minute amendment, introduced late in the parliamentary process, represents one of the most significant divergences from current practice and will require careful consideration in workforce planning and risk assessment.

Collective Redundancies and Consultation

The Bill also sees revisions to collective redundancy thresholds, reinstating the “at one establishment” test but adding potential alternative threshold criteria to be set in delegated regulations. Protective awards for consultation failures have doubled, raising financial stakes for non-compliance.

Fire and Rehire — Narrower Grounds

The controversial fire and rehire restrictions have been softened relative to earlier drafts. Under the final Act, dismissals used to force changes to key contractual terms (pay, hours, pensions, etc.) will be automatically unfair, although exceptions apply in narrow circumstances like extreme financial distress.

3. Rights That Survived the Journey

Not all proposed reforms were watered down. Employers should prepare for a range of new and enhanced employee rights, including:

• Statutory Sick Pay (SSP) from day one of illness.

• Enhanced paternity and unpaid parental leave rights, with service conditions removed for some.

• Broader guaranteed hours and shift notice obligations, including for agency workers, though many details await regulation.

• Bereavement leave for pregnancy loss, extending protections beyond existing statutory family leave rights.

• Strengthened harassment protections and obligations on preventive steps by employers.

• A new Fair Work Agency with expanded enforcement powers.

4. Trade Union and Collective Rights

The Bill introduces reforms affecting trade union access and representation, from new rights of access to workplaces for organising to reduced thresholds for statutory recognition. There are also changes to strike action mandates and notification periods, though full implementation relies on forthcoming regulations.

5. Next Steps for Employers

The Bill now awaits Royal Assent, after which it will formally become the Employment Rights Act 2025. Most of the substantive changes will not take effect immediately. Instead, they will be phased in through a programme of at least 80 accompanying regulations and more than 25 consultations, with many major reforms scheduled for 2026 and 2027.

This creates an extended readiness window, but also uncertainty over the precise shape of key regimes. In practical terms, employers should:

• Establish cross-functional readiness teams combining HR, legal and operational leads.

• Monitor forthcoming regulations and consultations closely.

• Assess policies and practices such as probation periods, dismissal procedures, shift scheduling and redundancy planning in light of the new framework.

• Engage with sector bodies and advisers to benchmark responses and share risk assessments.

6. Final Thoughts

The Employment Rights Bill represents one of the most far-reaching rewrites of UK employment law in a generation. For HR professionals and business leaders, the challenge now is not only understanding what has changed but preparing for how it will work in practice once regulations are in place.

While much of the headline focus has been on qualifying periods and compensation caps, the wider suite of changes, from enhanced worker protections to new enforcement mechanisms, will shape employer-employee relations for years to come.

The transition period between now and full implementation offers a chance to get ahead, but only for those organisations that start planning today.