The Employment Rights Act 2025: What UK businesses and employees need to know

The Employment Rights Act 2025 is the most significant update to UK employment law in decades. With unfair dismissal reforms, zero-hours contract changes, and enhanced employee protections, the Act affects employers, HR teams, managers, and employees alike.

Understanding the changes is crucial: businesses must adapt processes to reduce risk and strengthen workforce management, while employees gain greater clarity, security, and fairness in the workplace.

Podcast

Want to hear an in-depth discussion on these changes? Listen to our latest podcast episode here as Constantine Law Managing Partner John Hayes and HR leader Amanda Rajkumar give practical insights and expert guidance. Find it on your preferred platform:

This article explores two of the key reforms, their impact, and suggested strategies for delivering the changes.

Key changes in the Employment Rights Act 2025

1. Unfair Dismissal Reforms

   • Lower qualifying period: Employees will be eligible to bring unfair dismissal claims after just six months, compared to the previous two-year threshold.

   • Removal of compensation caps: Compensation for unfair dismissal will no longer be capped, meaning higher earners and senior staff may make larger claims.

   
   

🎧 Want expert analysis on unfair dismissal reforms? Listen to the full podcast episode for actionable guidance.

2. Changes to Zero-Hours and Agency Contracts

   • Greater predictability in working hours and protections for agency workers.

   • Employers may need to rethink scheduling systems and workforce planning to maintain operational flexibility.

   
   

Why employers need to act now

Even though changes to unfair dismissal don't come into force until January 2027, the law will apply to employees starting from July 2026 due to the six-month qualifying period. Employers need to focus on:

• Recruitment and onboarding: Set clear expectations and objectives during recruitment and from day one in the job.

• Performance management: Conduct regular check-ins, document outcomes, and manage underperformance proactively.

• Leadership and HR support: Train managers to address issues early and fairly.

• Policy and contract review: Ensure compliance with new dismissal and scheduling requirements.

Performance management: Fairness and risk mitigation

The Act underscores that performance management is both a leadership responsibility and a legal necessity. As Amanda puts it in the podcast; "Kindness without clarity is now organisational risk".

Employer strategies:

• Conduct frequent check-ins instead of relying solely on annual appraisals.

• Maintain clear documentation of objectives, progress, and feedback.

• Address underperformance early, coaching employees rather than avoiding difficult conversations.

  
  

Workforce planning and strategic HR

The near abolition of zero hours contracts is likely to encourage businesses to treat workforce planning as strategic, not administrative. Strategies to deal with the changes might include:

• Assessing internal talent pools before hiring externally.

• Considering multi-skilling, hybrid contracts, and scheduling technology to maintain flexibility.

• Engaging employees in planning conversations to balance business needs with fairness.

For employees, this approach means more opportunities for development, predictable shifts, and fairer treatment in hiring, scheduling, and performance reviews.

Balancing flexibility and protection

The UK remains between extremes: less rigid than European employment law but more protective than the US “employment at will” model.

• Employers retain operational flexibility but must ensure fairness, transparency, and compliance.

• Employees gain protections that improve job security, clarify rights, and create safer workplaces.

This balance can support a positive organisational culture, reduce turnover, and foster productivity while meeting legal obligations.

Final thoughts: Opportunities for both employers and employees

The Employment Rights Act 2025 is not just a set of legal changes, it is a call to action for organisations and employees alike. Businesses and employees that embrace these changes together will benefit from fairer workplaces, stronger performance, and more resilient organisations.

The reforms challenge both sides to act proactively, but they also present opportunities to improve workplace culture, empower employees, and enhance strategic decision-making.

For tailored advice on any of the issues covered in the episode, contact us here:

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