EMPLOYMENT RIGHTS ACT 2025: Passage after Lords agreement

From flexibility to regulation: How the Employment Rights Act rewrites the rules at work

After almost a year of intense parliamentary scrutiny and negotiation, the Employment Rights Bill has successfully cleared the House of Lords and is now set to become law as the Employment Rights Act 2025. This marks a major overhaul of the UK’s employment law framework and a key delivery against the Government’s “Make Work Pay” agenda.

Final Parliamentary passage

On 16 December 2025, peers in the House of Lords agreed to the Government’s latest amendments, allowing the Bill to finally complete its passage through Parliament and move on for Royal Assent imminently. The Bill’s journey through “ping-pong” between the Commons and Lords focused on resolving key points of contention, particularly around unfair dismissal rights, guaranteed hours provisions, and the cap on compensation.

The successful agreement follows months of negotiations involving Government ministers, business groups and trade union representatives — including constructive discussions that helped bridge divisions over the most contentious provisions.

Next Steps & Implementation

Although the Act will shortly receive royal assent, most of the detailed reforms will be introduced in phased waves across 2026 and 2027. Employers should prepare for significant changes to contracts, policies and HR practices - especially in areas like sick pay, parental rights, dismissal procedures, flexible working requests and union engagement.

Secondary legislation and consultations will shape much of the practical detail, and stakeholders will have opportunities to influence how new rights are implemented.

As a reminder, the elements which we expect to come into effect "on Royal Assent or shortly after":

1. Repeal of the Strikes (Minimum Service Levels) Act 2023

2. Repeal of the great majority of the Trade Union Act 2016 (some provisions will be repealed via commencement order at a later date)

3. Removing the 10 year ballot requirement for trade union political funds

4. Simplifying industrial action notices and industrial action ballot notices

5. Protections against dismissal for taking industrial action

Then... elements to come into effect in April 2026:

1. Collective redundancy protective award – doubling the maximum period of the protective award

2. 'Day 1' Paternity Leave and Unpaid Parental Leave

3. Whistleblowing protections

4. Fair Work Agency body established

5. Statutory Sick Pay – remove the Lower Earnings Limit and waiting period

6. Simplifying trade union recognition process

7. Electronic and workplace balloting

Key Compromises and Provisions

Unfair Dismissal Qualifying Period
A central sticking point during passage was the proposal to provide unfair dismissal protection from day one of employment. The Government has now compromised by introducing a six-month qualifying period before an employee can bring an ordinary unfair dismissal claim, replacing the original manifesto pledge but still significantly reducing the existing two-year threshold.

The Government has also committed that this qualifying period can only be altered by primary legislation, making future changes more deliberate.

Further, after a very last minute introduction, the 52 week/£118,000 compensation cap for ordinary unfair dismissal claims is to be completely abolished. This caused real concern, not only from a logistical perspective, but also the fact it was shoe-horned into the legislation. The Government’s compromise has been to promise an impact assessment of the change before it comes into effect on 1 January 2027.

Zero-Hours and Guaranteed Hours Contracts
The Act introduces stronger protections for zero-hours and low-hours workers, including obligations on employers (and in some cases agencies) to offer guaranteed hours reflecting regular work patterns, along with reasonable notice of shifts and compensation for late changes.

Trade Union and Industrial Relations Reforms
The legislation will significantly reshape industrial relations: simplifying trade union recognition, relaxing strike ballot and notice requirements, and repealing much of the Trade Union Act 2016 along with the Strikes (Minimum Service Levels) Act 2023. Roles and rights for union representatives are also strengthened under the new framework.

Practical HR Considerations

• Review contracts and handbooks now for SSP, parental leave and zero-hours terms.

• Prepare for new dismissal procedures as qualifying periods change.

• Engage early with trade unions on access, recognition and ballot processes.

• Keep on top of secondary legislation consultations over the coming months.

This Act represents one of the biggest modernisation efforts in UK employment law in decades. Employers must act now to anticipate and embed these changes effectively.