The Employment Rights Bill received Royal Assent on 18 December 2025, officially becoming the Employment Rights Act 2025 (‘the Act’). The government set out its proposed timetable for implementation, with unfair dismissal and zero-hours contract reforms due to be phased in during 2027 and changes to SSP rules coming into force in April 2026. The Act contains over 150 sections that, together, significantly enhance workers' rights.
Here are some insights for Asian Trader readers into three key areas that will be changing:
Unfair dismissal
The Act will reduce the current two-year minimum service requirement for bringing “ordinary” unfair dismissal claims, giving employees the right to bring a claim after six months of employment. The Act will also remove the statutory cap on compensation for unfair dismissal. This currently stands at 12 months’ salary or £118,223, whichever is lower.
These amendments will both come into effect on 1 January 2027, meaning any employees with at least six months’ service can bring an unfair dismissal claim from that date.
Under the Act, it will also be automatically unfair to dismiss an employee for refusing certain contractual changes or to dismiss and rehire them (or a replacement) on substantially the same duties under different terms. However, employers may defend such dismissals if:
- The change is necessary to address severe financial difficulties threatening the ongoing viability of the business, and
- There was no reasonable alternative to imposing the change.
Even if this exception applies, tribunals will still assess the fairness of the dismissal, including consultation and other mitigating actions. This amendment will also come into force in January 2027.
Statutory Sick Pay
Statutory Sick Pay (SSP) is a legal entitlement that eligible employees must receive if they are off sick. Until April 2026:
- Employers had to pay SSP to eligible employees once they had been off work for four or more consecutive working days (the first three days were unpaid “waiting days”).
- SSP was only payable to employees earning above the Lower Earnings Limit (LEL) (currently £129 per week).
- SSP was paid at the flat weekly rate of £118.75 (as of April 2025) for up to 28 weeks.
This has changed with the Act, requiring that from 6 April 2026:
- Day-one entitlement: SSP is now payable from the first day of sickness absence, removing the three-day waiting period.
- All employees are eligible: The LEL has been removed, so all employees qualify for SSP regardless of their income.
- Adjustment for lower earners: Lower-paid employees will receive 80 per cent of their average weekly earnings, or the standard SSP rate (£123.25 per week, as of April 2026), whichever is lower.
Many SME business owners may experience an increase in short-term sickness absence following these changes, and it will be important to ensure that absence management procedures are in place and consistently and fairly implemented.
It will be important to get this right, as the remit of the new Fair Work Agency (also part of the Act) includes enforcement of SSP entitlement, in addition to holiday pay and National Minimum Wage entitlement.
Changes to zero-hour contracts
Under the Act, where zero-hours workers have regularly worked a certain number of hours and pattern over a specific period (which the government has said is likely to be 12 weeks), employers will have an obligation to offer them a guaranteed-hours contract.
However, we don’t have the details of this yet, and as the 2027 implementation nears, clarity is needed on when the obligation will apply, how it will operate in practice, and what exemptions are available for employers.
Employers are not currently under any obligation to give a specific period of notice of shifts unless they have set this out in their contractual terms. The new legislation will introduce a legal requirement for “reasonable notice.” What counts as reasonable remains undefined at present, although the government has said it will not exceed seven days.
In addition to requiring reasonable notice of shifts, the Act creates a new right to reasonable notice of the cancellation, shortening, or movement of shifts, and provides workers with a right to compensation when reasonable notice has not been given. Employers will be responsible for paying compensation for shifts that are set, cancelled or amended with unreasonably short notice. The compensation would be capped at the wages for that shift, or at the wages lost if it’s shortened.
Getting ready for the changes
The government has set out a timetable for implementing the wide-scale changes in stages throughout 2026 and 2027. It’s incredibly important for business owners to stay on top of these changes to protect themselves against potential claims arising from these new legal responsibilities.
However, there are a few things employers can be doing now to prepare for these changes:
1. Audit your staffing model
Review your flexible workforce: who is on casual or zero‑hours contracts, and why? Would it work better for your business in future to move to alternative arrangements?
2. Tighten up your policies and procedures
Reviewing and updating your internal policies and processes for absence management, recruitment, induction, and probation will help you address increased employee rights regarding sick pay and unfair dismissal.
3. Stay informed
As some key details of the new rules have yet to be clarified, there’s no doubt that, in the future, a number of updates will arise, that employers need to be aware of.
Stay informed of government updates and legal guidance, especially regarding exemptions and definitions. If you are still unsure, it’s important to consult an HR or Employment Law expert to ensure you’re following correct procedures and guidance.
Please visit the Citation website for more advice and guidance on these changes.
Gillian McAteerPhoto: Handout