Employment Rights Act 2025

Employment Rights Act 2025 receives Royal Assent

The Employment Rights Bill was finally approved in the House of Lords after an extended parliamentary process, and received Royal Assent on 18 December 2025. The House of Lords gave way on the last major issue: removal of the cap on a compensatory award for unfair dismissal. Only a few changes, such as repealing the minimum service levels restrictions on strike action and some industrial action provisions took effect immediately on or soon after Royal Assent. The majority of the changes introduced by the legislation will be implemented gradually over the next two years according to the Government’s Implementation Roadmap (published back in July 2025) although it remains to be seen whether the Government can stick to the timings outlined given the extended ping pong process and the considerable delay in finalising the legislation.

Among some of the most significant changes, the Act will reduce the qualifying period for ordinary unfair dismissal claims from two years to six months, remove the cap on the compensatory award for unfair dismissal, broaden the right to statutory sick pay and ban fire and rehire processes in most circumstances.

It will be essential for businesses to understand, plan for and implement these significant changes during 2026. CMS’ UK Employment team has produced numerous materials to help employers understand the nature and impact of the reform on their business operations and to support them with starting to prepare for the changes.

Further information:

For further information about how the changes are likely to impact on your business and the ways in which we can help you to prepare, please get in touch via your usual CMS Employment team contact or CMSEmployment.Team@cms-cmno.com.