The Employment Rights Bill was approved and finalised on 18 December 2025, after many rounds of parliamentary “ping pong”, becoming the Employment Rights Act (ERA) 2025. Its final form is substantively very similar to previous versions, with one important exception: the retention of a qualifying period for unfair dismissal rights (albeit reduced from two years to six months) and the removal of any cap on unfair dismissal compensation.
Although we now have a finalised ERA 2025, many key areas of detail are subject to consultations and further regulations. This article summarises the Act’s key provisions, the areas of outstanding detail, anticipated timelines (as set out in the government’s updated timeline on 4 February 2026), and what organisations could or should be doing now to prepare.
On 16 December 2025, the House of Lords resolved the final point of dispute in the Employment Rights Bill – whether the cap on unfair dismissal should be removed – paving the way for Royal Assent before Christmas.
The Bill introduces sweeping employment law reforms, including new provisions on strikes and trade unions, enhanced protective awards for collective redundancies, and restrictions on fire-and-rehire practices. It also reduces the qualifying period for unfair dismissal claims to six months from January 2027, although the timing for removing the compensation cap remains uncertain.
Implementation will be phased through 2026 and 2027, supported by over 20 consultations and secondary legislation following Royal Assent.
Further to the Employment Rights Bill that was published on 10 October 2024, the government has launched a consultation on strengthening statutory sick pay. The consultation seeks views on the amount of statutory sick pay that employees earning less than the current eligibility threshold should receive as part of the amendments to the Employment Rights Bill.
In an article for Practical law, Stephen Ratcliffe and Rachel Wilson discuss the employment tribunal decision of Thandi and others v Next Retail Ltd and another, which considers the extent to which employers can rely on markets factors as a “material factor” defense to an equal pay claim
In an article published in HR magazine, David Woodward gives advice on what businesses should consider when conducting a workplace investigation.
A dismissal will be automatically unfair if the sole or principal reason for dismissal is that the employee took or sought to take parental leave. In Hilton Foods Solutions v. Wright, the EAT has decided that this protection does not require the employee to have made a formal request. Communications about taking parental leave might reach a stage that could be described as having sought to take the leave. This will be a question of fact for employment tribunals.
The Employment Appeal Tribunal held that a single redundancy required some form of wider workforce consultation, and that this should be the norm for all individual redundancy exercises. Nevertheless, taking into account the facts of this case and long-established case law and rules on collective consultation, we consider that the main point is that consultation takes place with affected employee(s) at a time when it could make a difference.
The European Parliament has now formally adopted the Pay Transparency Directive having reached political agreement on its provisions with the Council of the EU at the end of 2022. Its provisions are likely to enter into force in most EU member states in 2026. The measures in the Directive are significant and touch on many aspects of the employment lifecycle.
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