A sweeping overhaul of UK employment law is taking effect throughout 2026, with the first changes already implemented this month. The Employment Rights Act 2025, which received Royal Assent in December 2025, is being rolled out in phases, promising the most significant upgrade to workers’ rights in a generation. However, the new legislation is also prompting concern among businesses, with nearly a third anticipating cuts to permanent hiring.
Key Changes from February 2026
The initial phase, beginning in , focuses primarily on trade union measures. The legislation introduces simpler requirements for trade unions, particularly concerning industrial action. This includes streamlined procedures for calling strikes and greater protections for employees participating in such action. These changes are particularly relevant for unionized businesses, requiring them to adapt to the new processes.
Further Reforms on the Horizon
April 2026 will see a more substantial wave of changes impacting a broader range of employers. A key development is the expansion of eligibility for Statutory Sick Pay (SSP). The new rules remove the existing earnings threshold and three-day waiting period, meaning more employees will qualify for SSP from day one of illness. This is expected to increase costs for some employers and require adjustments to payroll and HR procedures.
Also coming in April is day-one entitlement to Paternity Leave and Unpaid Parental Leave for all new employees. Previously, employees had to accrue a certain length of service before becoming eligible. Notice for these leaves can be given from . A new right to Bereaved Partner’s Paternity Leave will also be introduced, providing time off following the death of a child’s mother or primary adopter.
The Act also strengthens protections for workers who report sexual harassment through whistleblowing provisions. Collective redundancy protections are being increased, raising the financial consequences for non-compliance with consultation requirements.
The Fair Work Agency and Enforcement
A new body, the Fair Work Agency, is being established to uphold workers’ rights and assist businesses with compliance. This agency is intended to simplify enforcement and provide a more accessible avenue for resolving disputes. The agency’s specific powers and operational details are still being finalized.
Employer Concerns and Hiring Plans
While the changes are welcomed by labor advocates, they are causing apprehension among some employers. A recent survey indicates that 37% of UK firms are planning to cut permanent hiring as a direct result of the new labor laws. This suggests a significant potential impact on the labor market and economic growth. The Times reported that the changes are contributing to a slowdown in job creation.
City A.M. Reported that Labour’s employment legislation and national insurance increases are being blamed for rising joblessness. Reuters also highlighted the concerns, noting that a third of employers are considering reducing headcount.
Looking Ahead: Ongoing Consultations and Future Changes
The implementation of the Employment Rights Act is not a one-time event. Several consultations are underway, with potential changes extending into 2027. One key area under review is the reform of contractual non-compete clauses, which could significantly alter the landscape for employee mobility. The government is also considering reducing the three-tier employment status system – currently encompassing employees, workers and the self-employed – to a two-tier system by removing the distinction between employees and workers. Consultation on employment status is expected this year.
Slaughter and May notes that the Act introduces 28 wide-ranging reforms, including a potential reduction in the qualifying period for unfair dismissal protection from two years to six months, slated for . The original proposal for day-one protection was dropped before Royal Assent, as were provisions for a statutory probation period.
Impact and Implications
The Employment Rights Act 2025 represents a fundamental shift in the balance of power between employers and employees in the UK. While the long-term effects remain to be seen, the initial indications suggest a more regulated and employee-friendly environment. Businesses will need to proactively adapt to the new rules, invest in compliance measures, and potentially adjust their hiring strategies. The phased implementation is intended to ease the transition, but the scale of the changes requires careful planning and attention.
Ius Laboris highlights that the UK is undergoing landmark labour reform, with the Act being described as the biggest overhaul of employment rights in a generation. The changes are expected to have a ripple effect across various sectors, impacting everything from recruitment and HR practices to workplace relations and legal compliance.
