UK Employment Rights Act 2025 and FCA Non-Financial Misconduct Guidance — Key Considerations for Financial Services Employers
Financial services firms face a concentrated period of reform. The Employment Rights Act 2025[1] (the “ERA 2025”) introduces the most significant changes to UK employment law in over a decade with staggered implementation dates[2]. At the same time, the FCA’s final non-financial misconduct framework, including guidance published in Policy Statement PS25/23 (“FCA Guidance”) will take effect on 1 September 2026[3]. Together, these developments create a dual employment and regulatory risk landscape for financial services firms, requiring early and coordinated preparation across HR, legal, and compliance.
Against this backdrop of a concentrated period of employment and regulatory change, the sections below focus on the ERA 2025 reforms of greatest relevance to financial services employers, while also addressing the FCA Guidance and setting out practical steps to address both.
Unfair Dismissal Protection
Currently, employees require two years’ continuous service to qualify for ordinary unfair dismissal protection. Employers must establish a potentially fair reason for dismissal and demonstrate that they acted reasonably, including by following a fair procedure. Compensatory awards are currently capped at the lower of 52 weeks’ gross pay and 123,543.
From 1 January 2027, the qualifying period for unfair dismissal protection reduces from two years to six...
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