Understanding the Employment Rights Act

Update (January 2026): This article on the Employment Rights Bill has been updated to reflect the Employment Rights Act 2025, which passed in December. We’ve corrected timelines, clarified unfair dismissal rules, and added details on the Fair Work Agency and umbrella company regulation.

The Employment Rights Act, which became law on 18th December 2025, will bring major changes to UK employment law during 2026-27 as part of the government’s plan to “make work pay” and tackle insecure work. This guide explains what’s changing, when it happens, and the exact steps employers and agencies should take now to stay compliant.

Key changes include:

Unfair dismissal protection after six months
New family leave rights
Stronger shift protections
Updated agency worker rules
A new enforcement body (the Fair Work Agency)

For employers, recruitment agencies, HR teams, and compliance officers, this isn’t simply about staying on the right side of the law – it’s about preparing for a fairer, more stable future of work.

Here’s what you need to know – and how to prepare.

What is the Employment Rights Act 2025?

The Employment Rights Act 2025 is a major reform of UK employment law. It aims to strengthen workers’ rights, improve job security, and support business productivity by modernising protections across the workforce.

It became law on 18 December 2025. Most changes will roll out across 2026–2027, with detailed rules set by secondary legislation.

The Act applies to:

UK employers of all sizes
Recruitment agencies and umbrella companies
HR teams and compliance professionals

Key changes you need to know

Let’s break down the changes into simple sections. Each one affects how you hire, manage, and support your workforce.

Zero hours and flexible work

The Act introduces:

The right to guaranteed hours for workers on irregular contracts
Reasonable advance notice for shift schedules
Compensation for last-minute shift cancellations

These rights also apply to agency workers, with anti-avoidance rules and new tribunal remedies.

For example, a care agency scheduling staff week by week will now need to provide consistent hours or risk non-compliance.

Unfair dismissal and fire and rehire

Unfair dismissal will be available after six months’ service. Until now, workers needed two years of service before they could claim unfair dismissal.
The Act also cracks down on “fire and rehire”: dismissing employees for refusing worse contract terms will be considered automatically unfair in most cases.

For example, a company trying to force employees onto zero-hours contracts could now face tribunal claims if staff are dismissed for not agreeing.

Parental leave, paternity, and bereavement rights

Day-one rights for unpaid parental leave and paternity leave start from April 2026.
A new right to unpaid bereavement leave will be introduced (minimum one week within 56 days).
Paternity leave can be taken after shared parental leave, offering more flexibility for new parents.

Workplace protections and harassment

Employers will be legally required to take all reasonable steps to prevent:

Sexual harassment, including from customers or other third parties
Discrimination against pregnant workers or new parents
Retaliation against whistleblowers who report wrongdoing

Detailed rules will follow in secondary legislation.

Trade union rights and recognition

The Act makes it easier for trade unions to gain recognition and access workplaces:

Lower thresholds for union recognition
Simpler ballot rules
Shorter notice for strikes (10 days instead of 14)
Stronger protection against dismissal for striking
Repeal of laws requiring minimum service levels

Agency and umbrella workers

For the first time, umbrella companies will face direct regulation under the Employment Agencies Act, with enforcement expected in 202. The Act also gives more protection to agency workers:

Regulation of umbrella companies to stop misuse and non-compliance.
Stronger rights around shift notice and cancellation pay for agency staff, including fair pay for cancelled shifts and advance scheduling rights.

For example, an umbrella company that withholds holiday pay or deducts fees without consent will now face stricter penalties.

What is secondary legislation?

While the Act sets the framework, secondary legislation will fill in the finer details throughout 2026 and 2027. This refers to additional legal rules introduced without passing a new law, allowing the government to clarify and enforce specific provisions.

Keep an eye on gov.uk and ACAS updates to stay informed as more rules are published.

Enforcement: What happens if you don’t comply?

A new watchdog, the Fair Work Agency (FWA), will oversee the enforcement of:

Holiday pay
Minimum wage
Statutory sick pay
Agency and umbrella worker rights
Modern slavery laws

The FWA will be able to:

Inspect businesses
Issue fines and penalties
Bring tribunal claims on behalf of workers

The FWA will operate similarly to HMRC, with powers to inspect, fine, and enforce – but with a specific focus on workers’ rights. Those likely to be inspected first would include high risk industries and repeat offenders.

Labour Market Enforcement Undertakings (LMEUs)

For serious breaches, the FWA can issue Labour Market Enforcement Undertakings. If you ignore these, you could face:

Court orders
Unlimited fines
Director-level liability
Even imprisonment in extreme cases

Also worth noting: the tribunal claim window is expected to be extended from three to six months, subject to secondary legislation.

When will these changes happen?

Date	What’s happening
December 2025	Act became law
February 2026	Union law changes start
April 2026	Fair Work Agency launches; day-one parental and paternity leave
Late 2026-2027	More changes via secondary legislation
2027	Umbrella company regulation begins

What employers and agencies should do now

To avoid falling behind, agencies and employers should take action now. Here's a simple checklist to guide your next steps:

Update policies and contracts

Add clauses for guaranteed hours, notice periods, and leave rights.
Amend unfair dismissal and redundancy policies.
Revise agency agreements to include new protections.

Upgrade systems and tools

Ensure HR software supports day-one rights, bereavement leave, and flexible scheduling.
Enable short-notice shift pay tracking.

Train your teams

Educate managers on harassment prevention, dismissal processes, and whistleblowing rules.
Include compliance training in onboarding for managers and payroll/HR teams.

Communicate with employees

Use plain language to explain new rights.
Offer FAQs or Q&A sessions.
Signpost support channels.

Review key areas

Audit shift allocation and leave processes.
Review agency and umbrella worker arrangements.
Monitor updates from the FWA and industry bodies.

Proactive preparation is key

This isn’t simply a policy change – it’s a reset of how the UK approaches work. Businesses that prepare now will avoid disruption, reduce legal risk, and build stronger, more resilient teams.

Being proactive means:

Better recruitment and retention
Stronger staff relationships
A reputation for fairness and compliance

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📌 Useful resources

Employment Rights Act factsheets on gov.uk
ACAS guidance on workplace rights
Gov.uk guide to employment law changes

Your common questions answered

Is unfair dismissal now a day‑one right?

No, it’s scheduled to be a six‑month qualifying period from 1st January 2027.

When does day‑one parental and paternity leave start?

April 2026, with transitional notice rules.

What is the Fair Work Agency and when does it start?

It’s a new enforcement body launching April 2026.

Are zero‑hours contracts banned?

No, but the Act now requires employers to offer guaranteed hours, give proper notice of shifts, and pay workers if shifts are cancelled at short notice.