The Employment Rights Act 2025: What's Changing and How to Protect Yourself
The Employment Rights Act 2025 represents the most significant reform of UK employment law in decades. Most of its biggest changes take effect from 1 January 2027, but the direction of travel is already clear — and it shifts the balance of risk firmly towards employees who know their rights and put them in writing.
Unfair Dismissal: Protection After Six Months, Not Two Years
Currently, most employees must have two years' continuous service before they can claim "ordinary" unfair dismissal. The Act reduces that qualifying period to six months. According to the Department for Business and Trade, the change is due to commence on 1 January 2027, and from that date protection extends immediately to employees who already have six months' service. The government estimates a further 6.3 million employees will gain this protection.
Note that day-one protections against discrimination and "automatically unfair" dismissal (for example, dismissal for whistleblowing or for asserting a statutory right) already exist and are unchanged.
The Compensation Cap Is Being Abolished
At present, the compensatory award for unfair dismissal is capped at the lower of 52 weeks' gross pay or a statutory limit (£123,543 as of 6 April 2026). The Act removes that cap entirely from 1 January 2027. The basic award and statutory redundancy pay, which are calculated by formula, are not affected.
In practice most awards will stay modest — the median tribunal award in 2023–24 was £6,746, and only 6% exceeded £50,000 — because compensation reflects actual financial loss, which employees are expected to mitigate. But for higher earners and those with limited re-employment prospects, the potential exposure rises significantly.
Tighter Limits on "Fire and Rehire"
The Act significantly restricts the practice of dismissing employees and re-engaging them on worse terms. Dismissals aimed at forcing through changes to key contractual terms — such as pay, hours, pension or shift patterns — will generally be automatically unfair, subject to a narrow exception where the employer faces genuine financial collapse. The maximum protective award for failing to consult collectively has also been doubled to 180 days' pay (effective 6 April 2026).
More Time to Bring a Claim
Two procedural changes give employees more room to act. The ACAS early conciliation period was extended from six to twelve weeks in December 2025, and from October 2026 the time limit for bringing most tribunal claims doubles from three to six months. That is more breathing space — but it is not a reason to delay gathering evidence.
Why Putting It in Writing Matters More Than Ever
With more employees protected and bigger awards possible, employers are expected to follow proper procedure even more carefully — and so should you. If you have a workplace dispute, a clear written grievance creates a dated record, engages the employer's obligations under the ACAS Code of Practice on Disciplinary and Grievance Procedures, and strengthens your position if the matter escalates to ACAS early conciliation or a tribunal. For civil claims outside the tribunal, a letter before action is the standard first step.
This article is general information, not legal advice, and time limits are strict — if your situation is serious, also seek advice from ACAS, Citizens Advice, or a solicitor.
Sources
- Department for Business and Trade — Unfair dismissal factsheet (Employment Rights Act 2025)
- Lewis Silkin — "What's in the Employment Rights Act?" (May 2026)
- Wedlake Bell — "Unfair dismissal reform: what employers need to know now" (April 2026)
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