The Employment Rights Act (the Act) received Royal Assent on 18 December 2025. This legislation marks a definitive turning point in UK employment law, significantly rebalancing the power dynamic in favour of employees while imposing substantial new obligations on employers. The Act will come into force in stages over the next two years, with many provisions yet to be finalised.
This article looks at some of the Act’s most expansive reforms and how companies can adapt to an increasingly litigious and regulated environment — particularly through the adoption of robust risk management strategies and employment practices liability (EPL) and directors and officers (D&O) insurance.
This is one of the most impactful changes brought about by the Act. The qualifying period for unfair dismissal claims will be reduced from two years to six months, and the current compensation cap (the lower of 12 months’ pay or 118,223) is also being removed. This change is expected to take effect in January 2027.
The change is expected to increase the volume of unfair dismissal claims brought by employees as more become eligible to claim, and removing the compensation cap will make such claims more attractive, especially for high earners. The value of claims is also likely to increase as the cap is removed.
Employers should review and update induction, probation, and performance management procedures to bring...
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