How to prepare your business for employment rights changes
Ahead of the changes reportedly taking effect from 1 January 2027, employers should seriously consider a more forward-thinking approach to performance management – closely monitoring issues as they arise, keeping clear internal records of performance or conduct concerns, and making effective use of probationary periods where necessary, says Olivia Russo
“The early bird catches the worm” could not ring truer. With the Employment Rights Act 2025 shaking up the UK employment law landscape, it is time for employers to take proactive action today to avoid expensive consequences tomorrow.
With day-one unfair dismissal rights being shelved amid concerns this would dampen employers’ appetite to hire, the government has announced the Act will nevertheless significantly reduce the qualifying period from two-years to six months. This change is compounded with the removal of the compensation cap for unfair dismissal claims, leaving the amount open-ended for employers.
By removing the compensation cap, it is also truer than ever that “prevention is better than cure”. The financial ramifications if claims cannot be settled outside of a tribunal could be substantial, especially when managing senior-level exits. Uncapped compensation in the employment tribunal raises the stakes for employers as it could drive up settlement values, with employees less inclined to compromise and having more bargaining power. For small businesses, the risk is especially acute, as prolonged negotiations and higher payouts may be unsustainable. Ahead of the changes reportedly taking effect from 1 January 2027, employers should seriously consider a more forward-thinking approach to performance management – closely monitoring issues as they arise, keeping clear internal records of performance or conduct concerns, and making effective use of probationary periods where necessary.
Day-one rights for paternity leave and unpaid parental leave will be in full swing by April 2026. By removing the existing service requirements, employees will no longer need 26 weeks’ service to qualify for paternity leave, nor one year’s service to become eligible for unpaid parental leave. As a result, employers will be exposed to these rights much earlier in the employment relationship. Given the imminence of these reforms, employers who fail to prepare for these changes risk disruption to the workforce and potential claims arising if requests are mishandled. Proactive steps should therefore be taken now to update internal policies, review procedures, and ensure managers and HR teams are properly trained to respond lawfully and consistently.
Redundancies
With trends showing that redundancies are moving higher up the corporate agenda, and with the collective consultation regime now tightening, the cost of getting it wrong is escalating fast. Under the Act, collective consultation and notification obligations may be triggered not only where 20 or more redundancies are proposed at a single establishment, but also where the threshold is met across the organisation as a whole. This significantly widens the net for triggering collective consultation, meaning it is much easier for employers to inadvertently tip into collective consultation territory. In a clear move to strengthen compliance, the Act doubles the maximum protective award from 90 days’ pay to 180 days per affected employee if businesses do not consult with their employees properly. For large-scale businesses or those with many highly-paid employees, the increased award creates the potential for eye-watering financial exposure. In practice, this means employers should start to look at efficient tracking methods in relation to the number of redundancies being made and at which sites – not just within individual teams. Decisions taken in isolation could now trigger organisation-wide obligations. Compliance is no longer a tick-box exercise and robust oversight will be essential to stay on the right side of the law.
In a climate where financial and reputational risks are at an all-time high, being proactive is no longer optional for employers – it’s essential.
Olivia Russo is an employment solicitor at law firm JMW in London