Employment Rights Act 2025 – what to expect over the next 12 months

Last month the government published an updated timetable for the ongoing reforms under the Employment Rights Act 2025, providing employers with greater certainty about when many of the remaining changes will take effect.

It was already known that the headline changes under the act – the reduction of the unfair dismissal qualifying period to six months and the abolition of the compensation cap – were coming into force on 1 January 2027. Now, however we have more clarity on the timing of the other 2027 changes, albeit a number of details remain subject to ongoing consultation and secondary legislation.

Below is a summary of some of the key employment law developments due to take place over the next 12 months:

March 2027

Dismissal and re-engagement

The changes to the law on ‘fire and rehire’ that were expected on 1 January have now been postponed to March 2027 with no date confirmed as yet. This delay may be welcomed by employers as it affords an opportunity to implement organisational changes and amendments to terms and conditions of employment ahead of the developments in the law.

The government has also published an updated draft code of practice on dismissal and re-engagement, and a response to the consultation on fire and rehire rules.

Under the new rules, changes to certain ‘restricted variations’ (including reductions in pay, pension benefits, contractual hours, leave entitlement and some shift pattern changes) will generally be automatically unfair unless the employer can satisfy a very narrow financial difficulties exception. Employers can no longer rely simply on a sound business rationale and a reasonable procedure.

Even where the proposed change is not a restricted variation (for example, location or role changes), the new code requires a much more robust consultation process. Employers will be expected to provide extensive information about the proposal, consult at a genuinely formative stage, meaningfully consider alternatives, engage with trade unions or employee representatives where appropriate, and demonstrate that dismissal and re-engagement is truly a last resort.

The response to the consultation confirms how the new protections will apply to changes to expenses, benefits in kind, and shift patterns. Taking a restrictive approach, most general expenses and benefits in kind will be excluded from the definition of ‘restricted variations’, (meaning employers retain operational flexibility to alter them, subject to consultation requirements). However, dismissing an employee to cut or remove contractual sums or benefits related to travel expenses, accommodation expenses, or long-term accommodation offered as a benefit in kind will be automatically unfair.

In relation to shift patterns, only specific, extreme changes, such as changes between day and night working (and vice versa), or between weekday and weekend working (and vice versa) are designated as restricted variations.

The practical effect of these changes is that employers will face greater scrutiny of both their substantive justification and their consultation process, with the risk of an employment tribunal increasing compensation by up to 25% for non-compliance with the code. Given the upcoming removal of the unfair dismissal compensation cap, failure to comply could be extremely costly.

April 2027

Collective redundancy consultation

Changes to the thresholds for triggering collective consultation obligations in redundancy situations are expected to take effect from April 2027. While we now know the implementation date, the government has yet to confirm the precise thresholds, which remain to be finalised following consultation.

Employers planning restructures and redundancy exercises will therefore need to keep a close eye on further developments in this area, as the changes could potentially expand the circumstances in which collective consultation obligations arise.

Gender pay gap and menopause action plans

Large private and voluntary sector employers (those with 250 or more employees) will be required to publish both:

• gender pay gap action plans; and
• menopause action plans.

These requirements are intended to move reporting beyond the publication of pay gap data and towards demonstrable action to address workplace inequalities.

Equivalent obligations for employers in the public sector will come into force in March 2027.

Day-one right to unpaid bereavement leave

One reform where we do have a reasonable level of detail is the introduction of a day-one right to unpaid bereavement leave. This will extend statutory bereavement protections beyond the current framework for parental bereavement leave and will give employees the right to take leave following the death of a qualifying person from the start of employment. Further regulations will provide additional detail on eligibility and operation, but employers should begin reviewing existing compassionate leave policies in anticipation of the new right.

August 2027

Electronic trade union ballots

Electronic balloting will be introduced for trade union recognition and de-recognition processes.
The move is intended to modernise existing procedures and may increase participation rates in statutory ballots administered through the Central Arbitration Committee.

September 2027

Ban on confidentiality clauses relating to discrimination and harassment

From September 2027, employers will be prohibited from relying on confidentiality provisions to prevent workers from speaking about workplace harassment or discrimination. The reform represents a significant shift in approach to non-disclosure provisions and will require employers to review standard settlement agreement templates, grievance documentation and other workplace policies.

Sexual harassment: guidance expected

Employers should also watch for the publication of statutory guidance on what constitutes ‘all reasonable steps’ to prevent sexual harassment. However, it is important to remember that the substantive duty itself has already come into force, on 30 October 2026. Employers should therefore already be taking active steps to assess risks, deliver training, review policies and implement preventative measures.

October 2027

Flexible working reforms

The Employment Rights Act will introduce changes to flexible working procedures, including a new process that employers must follow when handling requests. Although further detail is awaited, employers should expect additional procedural requirements and safeguards around the consideration of flexible working applications.

Enhanced protection for pregnant employees and new mothers

October 2027 is also expected to bring increased protection from dismissal for pregnant employees and those returning from maternity leave. There will be a stricter test of fairness for dismissals during the protected period, which will extend from notification of pregnancy until six months following the end of maternity leave. During the protected period, employers will be able to rely on any of the existing five potentially fair reasons for dismissal, but will have to show that the dismissal was a ‘proportionate means of achieving a legitimate aim’. This test, which is the same as the existing test for indirect discrimination, will apply instead of the ‘range of reasonable responses’ test that usually applies in ordinary unfair dismissal cases.

The government also intends to introduce similar enhanced unfair dismissal protection for employees during adoption leave, shared parental leave, neonatal care leave and bereaved partner’s paternity leave.

A response to the consultation on the above was published in October.

December 2027

Regulation of umbrella companies

New powers regulating umbrella companies are expected to come into force in December 2027, with oversight transferred to the Fair Work Agency. This forms part of the government’s wider programme of strengthening labour market enforcement and increasing protections for agency workers and individuals engaged through labour supply chains.

What should employers be doing now?

Although many of these reforms remain over a year away, the publication of the implementation timetable provides welcome certainty and an opportunity for employers to begin planning.

In particular, organisations may wish to:

• monitor developments relating to collective redundancy consultation thresholds;
• review pay gap reporting processes and consider how gender pay gap and menopause action plans will be developed;
• update compassionate leave policies in anticipation of the new bereavement leave entitlement;
• review settlement agreement and confidentiality provisions ahead of the restrictions on NDAs;
• begin considering updates to flexible working and family leave related policies ahead of the October 2027 reforms.

While the finer detail of several measures is still to come, the updated roadmap gives employers a much clearer indication of the changes on the horizon and the timeframe within which they will need to prepare.