Employment Rights Act 2025: What UK Startups Need To Know

The Employment Rights Act 2025 officially became law on 18 December 2025. Dubbed the “biggest upgrade to workers’ rights in a generation”, the bill brings substantial changes to dismissal rights, contractural arrangements and HR compliance. While the changes will come into effect along a staggered schedule, it is essential to make sure you are prepared.

For founders, directors and HR leaders, the headlines about “Day 1” rights have caused plenty of concern, especially within high-growth companies that have a need for lean and agile HR operations. Here is what has actually changed, when the new rules apply, and what you need to do to prepare your business.

1. Unfair Dismissal: The New Probation Rules

The most debated part of the Act was the “Day 1” right to claim unfair dismissal.
The final version includes a compromise that gives employers some breathing room.

The government has introduced a statutory probationary period of six months (down from the current two-year qualifying period).

• Previously: You had two years to decide if an employee was the right fit before unfair dismissal rights applied.
• From January 2027: This window shrinks to six months. During this initial period, you can still dismiss an employee for poor performance or fit, but the process must be fair and transparent.
  After six months, full unfair dismissal protection kicks in.

What this means

The “wait and see” approach won’t be viable anymore for new hires.
You need a solid onboarding and review process in the first 180 days.

If a hire isn’t working out, you must address it formally within that six-month window.
If you delay, ending the employment becomes significantly harder and more expensive.

2. Immediate “Day 1” Rights: Sick Pay and Leave

While unfair dismissal changes will become effective at a later date, other rights kick in sooner. From April 2026, the following become immediate rights for all employees from their first day:

• Sick Pay: The three-day waiting period for Statutory Sick Pay (SSP) is removed. You must pay sick pay from the first day of illness. The lower earnings limit has also been scrapped, so even lower-paid part-time staff are eligible.
• Parental Leave: Fathers and partners can take paternity leave from day one. The requirement to have worked for you for 26 weeks is gone.
• Bereavement Leave: A new right for all employees to take time off from their first day of employment.

What this means

These changes will hit your cash flow. With no waiting days for sick pay, absence costs start immediately. Review your budget and update your payroll systems to handle these payments from day one.

3. Zero-Hours and Shift Work

If your business model uses flexible or on-demand staff, the rules are tightening.

• Guaranteed Hours: If a worker on a zero-hours contract works regular hours over a 12-week period, you must legally offer them a contract that guarantees those hours.
• Cancelled Shifts: If you cancel a shift at short notice, you must pay the worker compensation.
• Notice: You must provide reasonable notice of shift patterns.

What this means

You can still use zero-hours contracts for genuine ad-hoc work. But if you are using them to fill permanent rotas, you will need to formalize those roles.

4. Flexible Working

Employees already have the right to request flexible working. The new Act makes it harder to say no. You can still refuse a request for valid business reasons, but you must now explain exactly why your refusal is reasonable.

Timeline Summary

Here is an updated timeline based on the latest timetable published by the Department for Business and Trade on Feb 3rd 2026, detailing when each of the upcoming changes is scheduled to take effect.

• 18 February 2026:
  Repeal of most Trade Union Act 2016 rules;
  New notification period for paternity/unpaid parental leave.
  
• April 2026:
  “Day 1” Sick Pay, Paternity Leave, and Unpaid Parental Leave.
  Bereaved Partners’ Paternity Leave introduced.
  Establishment of the Fair Work Agency.
  
• October 2026:
  New employer duties to prevent sexual harassment kick in.
  
• January 2027:
  Unfair dismissal qualifying period reduces to 6 months.
  New rules on “fire and rehire” practices.
  
• Later in 2027:
  Changes to Zero-Hours Contracts, Flexible Working, and broader Bereavement Leave.

How to prepare

The Employment Rights Act 2025 brings the UK in line with many other European countries, putting an end in many ways to the “hire fast, fire fast” era.

Your focus for 2026 should be on better hiring and clearer management. If you build strong performance reviews and fair policies now, these changes will be manageable. If you ignore them, you risk tribunal claims and unnecessary costs just as you are trying to scale.