The Employment Rights Act 2025 represents one of the most significant overhauls of UK employment law in a generation. Its provisions go far beyond incremental reform, they signal a decisive shift in the balance of power between employers and employees, with profound implications for compliance and risk management.

Trade Unions

One of the most notable changes is the strengthening of trade union access rights. Trade unions will have enhanced powers to enter workplaces, making it easier to organise, recruit, and represent workers directly on site.

From October 2026, employers will also be under a positive duty to inform employees of their right to join a trade union. This is a marked shift from the historically more passive approach in UK law.

In practice, this means that employers will need to proactively communicate trade union rights, likely through onboarding and internal communications. Workplaces may see increased union presence and activity, particularly in sectors where unionisation has historically been low.   HR teams will need to be trained on how to engage constructively and lawfully, with union representatives. We may see that negotiations work better with unions involved, rather than employees representing themselves when they have an issue.

The return of employer liability for third-party harassment

The Act reintroduces employer liability for harassment by third parties in relation to certain protected characteristics. Employers will be liable where a third party (such as a customer, client, or service user) harasses an employee in the course of their employment and the employer has failed to take all reasonable steps to prevent that harassment. This is a major development, particularly for public-facing businesses.

Sectors such as retail, hospitality, healthcare, and transport will face significantly increased legal exposure. Employers will need to look at comprehensive training programmes for staff and managers, clear and robust anti-harassment policies and documented risk assessments, especially for high-risk roles, and systems for reporting and responding to incidents. In reality, this will require a large-scale compliance exercise across many organisations. We are expecting further regulations on this in due course.

Menopause on the agenda

The Act also reflects the growing recognition of menopause as a workplace issue. Menopause action plans are voluntary for larger employers but from April 2027, they will become mandatory for employers with 250+ employees.

Smaller employers will still be expected to demonstrate fair and consistent support for menopausal workers. This means that employers will need to think carefully about workplace adjustments, absence management, and performance expectations.

There will be increasing scrutiny of how organisations support employees experiencing menopause symptoms.

The Fair Work Agency

The establishment of the Fair Work Agency from 7 April 2025 marks a fundamental shift in enforcement. This will be the first UK enforcement body of its kind, with responsibility for core employment rights such as, national minimum wage, statutory sick pay, holiday pay.

Critically, employers will be required to maintain proper records. Failure to do so could result in penalties. This change means that enforcement becomes more centralised and proactive and that employers face greater scrutiny, even without employee complaints. Record-keeping will move from being “good practice” to essential risk protection.

Unfair Dismissal

Two key changes will significantly increase exposure to unfair dismissal claims:

• Qualifying service reduced from 2 years to 6 months (from January 2027)
• Removal of the compensation cap, currently £118,233

The shorter qualifying period means that many more employees will gain protection much earlier and that employers will need to follow a fair procedure for all dismissals after 6 months, regardless of whether someone is still in their probationary period.

Compensation for unfair dismissal in the employment tribunal will no longer be artificially limited. High earners, including senior executives, may recover significantly larger awards. This fundamentally alters the litigation landscape. Historically, employers could take a commercial view that exposure was capped and that ceiling will disappear. In practice, settlement strategies will change dramatically, and employers will need stronger procedural compliance to defend claims. The cost of getting dismissals wrong, particularly at senior level, could increase substantially.

Fire and rehire

From January 2027, the Act will place severe restrictions on the use of so-called “fire and rehire” practices, making it extremely difficult for employers to impose changes to fundamental terms such as pay and working hours in the way some have done historically.  Dismissal and re-engagement will only be lawful in very limited circumstances. The practical reality is that contractual change will need to be achieved through genuine consultation and agreement, rather than unilateral action. Employers should be acting now: reviewing contractual flexibility clauses, identifying any changes they may need to implement in the near term, and ensuring that future workforce planning takes account of the much tighter regime. Waiting until the new rules come into force is likely to be too late.

Taken together, these reforms point to a very different workplace environment which will be more regulated and compliance-driven, employers will need to invest heavily in policies, training, and documentation. Informal or inconsistent practices will carry greater risk. With earlier access to unfair dismissal rights, stronger union presence, and enhanced protections, the balance will shift towards employees. The combination of expanded rights and uncapped compensation is likely to drive more, and higher value, claims. Issues such as harassment and menopause support cannot be addressed through policies alone; they will require genuine cultural engagement. With the Fair Work Agency in place, employers can expect more scrutiny without waiting for claims to arise.

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The Employment Rights Act 2025 is not simply another piece of legislation to “tick off” from a compliance perspective. It represents a structural shift in UK employment law; employers are going to have to prepare for these changes, invest in compliance and training and take culture seriously.

For more advice, please contact our Employment Team.