The Employment Rights Act 2025, in five minutes
What has already changed, what lands next month, what is coming in 2027, and what it means when you are the one running the business.
Behind every Founder, a Chiron.
CIPD Level 5, Croner-i backed
One Act. Three waves.
It became law in December 2025 and arrives in stages. The cheap changes came first. The expensive ones are still ahead.
Now
Sick pay, family leave and record keeping. Mostly payroll and paperwork, and already live in your business.
October 2026
Harassment duties and a longer window to claim. Changes what you need in place before anything goes wrong.
January 2027
Unfair dismissal after six months instead of two years, and no cap on what a tribunal can award.
You have about four months before the biggest change of your working life as an employer.
What has already changed
- Sick pay from day one. No three day wait, and no minimum earnings. Part timers and casual staff now qualify.
- Paternity and unpaid parental leave from day one. No qualifying service. A new starter can give notice in week one.
- Holiday records kept for six years. Entitlement and holiday pay, written down, per person.
- A new enforcement body, the Fair Work Agency. One organisation chasing holiday pay, sick pay and the rest. It can come to you.
None of this is dramatic, but it is all easy to prove. Small errors turn a grumble into a claim with paperwork attached.
What is about to come in
- Staff get six months to claim, not three. Doubled from 1 October. With conciliation on top, you might first hear about something a year after it happened.
- You must take all reasonable steps to prevent sexual harassment. The bar moves from reasonable to all reasonable. You have to show what you did before anything happened.
- You become liable for harassment by customers and clients. Not just your own staff. If you had no plan and no reporting route, it is on you.
- Tipping and union rules tighten. Consult staff on tips and review the policy every three years. Tell staff they can join a union.
A one page risk assessment, thirty minutes of training with a register, and a named person to report to. That is the evidence you will be asked for.
The big one: unfair dismissal at six months
- Two years becomes six months, on 1 January 2027. The safety net you have always had on a new hire is mostly gone.
- The compensation cap is removed. The ceiling that limited your worst case disappears on the same day.
- Later in 2027. Guaranteed hours for zero hours staff, pay for cancelled shifts, bereavement leave, and written reasons for refusing flexible working.
"My handbook is non-contractual, so it is fine"
Two different things. Your handbook is your promise about how you will behave. The Act is the floor you are not allowed to go below.
The law says what you must do. Your handbook is how you prove you did it. An out of date one is worse than none at all.
Five things worth doing now
All of that is a couple of afternoons. It is a lot cheaper than the alternative from January.
This is not about being scared of your own staff
It is about making the decision you were going to make anyway, in a way you can still defend a year later.
craig@chironhumancapital.co.uk · 07711 734 389
Behind every Founder, a Chiron.
So what was the cap?
An unfair dismissal award has two parts. Only one of them is losing its ceiling.
£22,530
Worked out like redundancy pay, from age and service. A week's pay is capped at £751. This cap stays.
£123,543
Or 52 weeks' gross pay, whichever is lower. It was £118,223 until April this year.
No limit
The ceiling goes on 1 January 2027. The award still reflects actual loss, but nothing caps it.
- Most awards land nowhere near the cap. It bites on higher earners and long periods of loss, so it is a senior hire problem more than a shop floor one.
- Discrimination and whistleblowing were never capped. January just brings ordinary unfair dismissal into line with them.
Sick pay: what you must do, what you choose
SSP
£123.25 a week, or 80% of average weekly earnings if that is lower. Paid per qualifying day, up to 28 weeks.
Company sick pay
Full pay for a period, then half pay, or nothing extra at all. Entirely up to you, as long as it is not below SSP.
- SSP starts on day one now. The three waiting days are gone, and so is the old four day rule. A single day off can trigger it.
- Everyone qualifies. The minimum earnings threshold is gone, so part timers and casual staff are in.
- You do not pay both. Company sick pay normally absorbs the SSP, so long as the total is never less than SSP.
- Check your wording. Any contract or handbook still saying "day four", "waiting days" or referring to a lower earnings limit is now out of date.