Employment Rights Bill Update – December 2025

Last updated: 16 December 2025 – The Employment Rights Bill has passed Parliament and is set to become law

On 16 December 2025, Parliament passed the Employment Rights Bill, setting the stage for one of the biggest shake-ups in UK employment law for decades. The Bill now moves forward for Royal Assent and will start to come into effect throughout 2026 and 2027.

This update explains what is already in place, what has just been confirmed, and what small businesses should have already done or now start preparing for. We will keep this article updated as official start dates are confirmed, so make sure you are signed up to our mailing list for the latest information.

Part One: What's Been Decided

These changes are already law or have confirmed start dates. By now, you should have reviewed your policies, updated your documents, and communicated these changes to your team.

1. Flexible Working From Day One

Effective 6 April 2024 – Employment Relations (Flexible Working) Act 2023

Employees can now request flexible working from their first day of employment. They can make two requests per year, and employers must respond within two months.

What you should have done:

• Updated your flexible working policy to remove the 26-week service rule.

• Trained managers to handle requests fairly and within the new time limits.

• Communicated the change to employees.

2. Extended Redundancy Protection for Pregnancy and Family Leave

Effective 6 April 2024 – Protection from Redundancy (Pregnancy and Family Leave) Act 2023

Employees who are pregnant or on adoption or shared parental leave now have protection from redundancy for up to 18 months after birth or adoption.

What you should have done:

• Updated redundancy procedures and selection criteria.

• Trained managers and HR teams on extended protections.

3. Carer's Leave Act 2023

Effective 6 April 2024

Employees can now take one week of unpaid carer's leave each year from their first day of employment.

What you should have done:

• Added a Carer's Leave policy to your handbook.

• Told your employees about this new right.

• Trained managers to approve and manage requests appropriately.

4. Tips, Gratuities and Service Charges

Effective 1 October 2024 – Employment (Allocation of Tips) Act 2023

Businesses that receive or control tips must pass 100 per cent of those tips to staff, less only tax and National Insurance. You must have a written tips policy and keep records for at least three years.

What you should have done:

• Written and shared a clear, fair tips policy.

• Reviewed your tronc or tip-sharing arrangements.

• Trained payroll and management teams on the new requirements.

5. Preventing Sexual Harassment in the Workplace

Effective 26 October 2024 – Worker Protection (Amendment of Equality Act) Act 2023

Employers now have a proactive legal duty to take reasonable steps to prevent sexual harassment at work. This means prevention and culture-building, not just reacting when something goes wrong. If a tribunal finds that you failed to take reasonable steps, compensation can be increased by up to 25 per cent.

What you should have done:

• Reviewed and updated your equality, dignity at work and anti-harassment policies.

• Delivered regular training to staff and managers.

• Ensured leadership sets the right tone and culture from the top.

6. Neonatal Care (Leave and Pay) Act 2023

Effective 6 April 2025

Parents whose baby spends at least seven continuous days in neonatal care within 28 days of birth will be entitled to up to 12 weeks of neonatal care leave. Eligible employees will also receive statutory pay.

What you should be preparing for:

• Updated family-leave and payroll policies.

• Checked that your payroll system is ready to handle these payments.

• Communicated the new entitlement to staff.

Part Two: What's Still to Come

The Employment Rights Bill has now passed both Houses of Parliament. The following confirmed reforms will take effect from 2026 onwards.

1. Statutory Sick Pay Reform

Effective April 2026

Statutory Sick Pay will be payable from the first day of absence, and the lower earnings limit will be removed.

What to plan ahead for:

• Update your absence and payroll policies.

• Budget for higher short-term sickness costs.

2. Parental Leave and Day-One Rights

Effective April 2026

Paternity and ordinary parental leave will become day-one rights, with new flexibility in how the leave can be taken.

What to plan ahead for:

• Update family-leave policies and payroll systems.

• Communicate the new rights to staff.

3. Zero-Hours and Casual Contract Reform

Expected mid-2026

Employers will be required to offer guaranteed hours that reflect average work patterns, provide reasonable notice of shifts and pay compensation for short-notice cancellations.

What to plan ahead for:

• Track working patterns.

• Review contracts and scheduling systems to ensure fairness and proper notice.

4. Predictable Working Patterns (Right to Request)

This right, likely to be introduced alongside the zero-hours reforms, will allow workers with irregular hours to request a more predictable pattern.

What to plan ahead for:

• Keep accurate records of hours and shift patterns.

• Watch for further government guidance.

5. Fire and Rehire Code of Practice

Expected late 2026

A new statutory code will regulate how employers change terms by dismissal and re-engagement. Tribunals will be able to increase compensation by up to 25 per cent if the code is breached.

What to plan ahead for:

• Review your redundancy and change-management processes.

• Avoid using fire-and-rehire without full consultation.

6. Trade Union and Collective Bargaining Reforms

Phased introduction during 2026

The Bill expands trade-union access rights and simplifies the process for lawful industrial action.

What to plan ahead for:

• Strengthen consultation and record-keeping procedures.

• Ensure managers understand their role in union engagement.

7. Redundancy Consultation Rules

Expected late 2026

New rules will require earlier and broader consultation in redundancy situations, particularly across multiple sites.

What to plan ahead for:

• Review your redundancy consultation procedures and documentation.

8. Unfair Dismissal Qualifying Period

Effective 1 January 2027

The qualifying period for ordinary unfair dismissal claims will reduce from two years to six months.

What to plan ahead for:

• Review probation and dismissal procedures.

• Train managers to handle dismissals appropriately under the shorter timeframe.

9. Unfair Dismissal Compensation Cap

Effective 1 January 2027

The statutory cap on compensatory awards for unfair dismissal will be removed. Compensation will be based on actual financial loss rather than a fixed limit.

What to plan ahead for:

• Review your approach to dismissals and settlements.

• Update budgets to reflect the increased risk exposure.

Part Three: What's Been Dropped or Revised

Worker Status Reform

Plans to simplify employment status definitions have been dropped. Continue using the existing employee, worker and self-employed categories and review contracts regularly.

Right to Disconnect

The proposed right to ignore work communication outside working hours has not been included. For now, it remains a matter of company culture, not law.

Part Four: What Small Businesses Need to Do Now

As of December 2025, most of the 2024 and 2025 changes should already be in place. With the Employment Rights Bill now passed, you should take the following steps to make sure you are ready for what's next:

1. Review and update your employee handbook and contracts to reflect all confirmed changes.

2. Make sure managers are trained on flexible working, redundancy protection, carer's leave, tips compliance and the new unfair-dismissal rules.

3. Confirm your family-leave and payroll policies are ready for neonatal care leave and the April 2026 reforms.

4. Start planning for the 2026 and 2027 reforms, including zero-hours contracts, sick pay from day one and the removal of the unfair-dismissal compensation cap.

5. Review your budgets and risk management plans to allow for higher dismissal liabilities and sickness costs.

6. Communicate clearly with your employees to build trust and reduce confusion as the new rights take effect.

Part Five: Small Business Q&A

Do I have to approve every flexible working request?

No, but you must consider them fairly and respond within two months.

Can carer's leave be refused?

It can be postponed if business operations would be seriously disrupted, but it must be allowed within a reasonable time.

Is carer's leave paid?

No. It is unpaid unless you decide to offer enhanced pay.

Can I deduct admin or card fees from tips?

No. Since October 2024, deductions other than tax or National Insurance are not allowed.

When does neonatal care leave apply?

For babies born on or after 6 April 2025 who spend at least seven continuous days in neonatal care within 28 days of birth.

Why is the qualifying period for unfair dismissal changing?

The Bill reduces it from two years to six months from January 2027 to provide earlier protection.

Will unfair dismissal compensation be uncapped?

Yes. From January 2027, there will be no statutory cap, and compensation will reflect actual financial loss.

What's the difference between predictable working rights and zero-hours reforms?

Predictable working rights allow workers to request regular hours. The zero-hours reforms will require guaranteed hours for those who regularly work similar patterns.

What other changes are coming in 2026 and 2027?

Expect sick pay from day one, guaranteed hours, a fire-and-rehire code, redundancy consultation changes and expanded trade-union access rights.

Final Thoughts

With the Employment Rights Bill now law, the UK is entering a new era of workplace reform. These changes are designed to create greater security, predictability and fairness for workers, but they also bring new obligations for employers.

Before you sign off for Christmas, take a little time to check that your policies, contracts and procedures reflect this year's changes and are ready for what's ahead in 2026.

And if you are looking at your to-do list and wondering how you will get it all done, why not give yourself the gift of time this Christmas and let KUHR help.

Complete our HR Health Check and start 2026 on the front foot. We can review your contracts, policies and practices so you can focus on running your business, not worrying about compliance.

Prefer a chat first? Book a call or email hello@kateunderwoodhr.co.uk and we'll take it from there.

Good HR isn't about red tape. It's about respect, clarity and communication.

We'll be going through each and every one of the new changes in 2026 before they take effect, so you know exactly what's changing, why it matters and what you need to do.

Kettle on, standards up, and let's make 2026 the year your people and your business thrive.

This article is part of KUHR's Employment Rights Bill 2025 Update Series. We will keep this guide updated as new details are confirmed, so check back or subscribe to stay informed.