Are employees more vulnerable to dismissal with the raft of enhanced rights coming in with the Employment Rights Act 2025?

The focus of the Employments Rights Act 2025 (“the ERA”) has been on the enhancement and strengthening of employees’ rights in the workplace. However, the flip-side of stronger rights for workers is that many employers are having to reconsider how they run their businesses, in the light of the increased risks that they face in the management of their employees.

As the provisions of the ERA start being rolled out, could employers take pre-emptive steps ahead of the enhanced rights biting?

It is likely that employers are not only going to look at their recruitment practices and tighten these up significantly, but also consider whether they should streamline their workforce now and/or change pay and benefits so they are in the strongest position in advance of the additional rights coming into effect.

The ability to be agile and to adapt is key for businesses to be successful, profitable and to meet clients’ needs. The introduction of greater rights for employees may impact businesses’ flexibility. Therefore, whilst the enhanced rights represent good news in theory for employees, the period leading up to their implementation may be a particular time of vulnerability for employees.

The Employment team at Thackray Williams has already seen employers focussing on how the ERA may impact their businesses and as part of their reviews, they are looking at their current workforce in light of the new rights staff will have. Part of future-proofing their businesses has been considering whether they should retain all the staff they have, given the potential costs flowing from the enhanced rights. They are asking: can they afford to keep all the staff they have, and can they maintain the pay and benefits? 

What is the main area of concern and why are employees at risk?

As employees will gain more day one rights this will lead to the potential for increased expense across a larger number of staff at an earlier point in the employment of employees for businesses that are already meeting higher National Insurance costs and increased National Minimum Wage rates. Other changes under the ERA will also increase the burden on businesses, additionally impacting recruitment and decisions to retain staff.

What are some of the rights under the Employment Rights Act 2025 that will cause employers to carefully consider their current workforce and contracts?

• Unfair Dismissal: employees currently need two years of continuous service to claim ordinary unfair dismissal. The ERA is reducing the service requirement to bring an unfair dismissal claim to 6 months from January 2027. Coupled with this, the unfair dismissal compensation cap will be removed too, so compensation will be unlimited.

   

  Employers will be considering the value of their employees who will have that service from next year sooner than they might otherwise have had with the current, longer service qualification.

   

• Family friendly rights:  unpaid parental leave will be a day one right for eligible employees from 6 April 2026. This is the right to 4 weeks’ unpaid leave in respect of a child in each [SS1.1]year, which currently only becomes applicable after one year’s service.  Paternity leave will also be a day one right for eligible employees – prior to April 2026, you need 26 weeks’ service at the relevant date to seek paternity leave.

   

  For small employers in particular, managing such additional leave rights alongside annual leave and other leave entitlements may be very challenging in terms of resource management, leading to a bumpy operational ride whilst employees are absent. The rights increase the administrative burden and in turn have a cost and a time implication. It may lead to less harmony in the workplace – and ultimately more disputes.

   

• Dismissal and Reengagement (aka Fire and Rehire): businesses can currently propose and make a change to employees’ terms and conditions for a sound business reason. Where employees refuse to accept the proposals, the employer can dismiss them and offer reengagement on the amended terms. However, this route will be severely restricted from January 2007. Changes to existing terms regarding pay, pensions, hours and time off will require employees’ consent.  Dismissal will not be an option if those changes are not agreed unless the business is facing such severe financial difficulties that it may mean the business cannot carry on as a going concern without such changes.  

   

  Employers may therefore be seeking to push through amendments to terms and introducing less favourable terms in the period leading up to the beginning of 2027.

   

• Statutory Sick Pay (“SSP”): employees currently need to wait three days before they become entitled to receive statutory sick pay, but from April 2026, this waiting period will be removed; SSP will be payable from the first day of absence. The lower earnings limit for eligibility for SSP will be removed too. There will therefore be increased liability for employers when employees are off sick. This will be another source of increased costs for businesses that may impact their decision to retain and recruit staff.

   

• Zero hours contracts: These have long been criticised due to the lack of certainty for employees; although they are not being banned, changes are afoot from 2027. Employers will need to offer guaranteed hours reflecting a regular work pattern, they will need to give reasonable notice of shifts and there will be compensation due if shifts are cancelled, moved or cut short at short notice. Therefore, the flexibility these contracts once offered a business whose needs might be unpredictable is significantly reduced. Employers may therefore rely on dismissing staff instead or choosing not to renew fixed-term contracts.

Conclusion

This period of implementation and introduction of new rights for employees over 2026 and 2027 may leave employees more vulnerable to dismissal now before some of the more significant changes are introduced. The new rights may also lead to recruitment freezes and increased hesitancy in taking on new employees.  In the case of new recruits, employers may be less tolerant and provide them with less time to “bed down” and show their ability, given the new, reduced six-month service eligibility to claim unfair dismissal. Decisions regarding an employee’s continued employment may be made much sooner going forwards than in the current climate, where employers effectively have a longer period to assess the suitability of recruits before they might be liable to an unfair dismissal claim.

How our Employment team can help you

If you would like us to provide training on the changes coming in, to review your policies and contracts or you need assistance with any other employment related matter, please do get in touch with our Employment Team on 020 8290 0440 (Bromley) or 01732 496 496 (Sevenoaks) or employment@thackraywilliams.com.