Employment Rights Bill Update – December 2025

Employment Rights Bill Update – December 2025

Last updated: 15 December 2025 – reflecting the latest parliamentary debate on the Employment Rights Bill currently before Parliament

The Employment Rights Bill is back in Parliament this week for final consideration, marking one of the most significant shake-ups of UK employment law in decades.

This guide sets out what is already law, what is confirmed or expected to be introduced in 2026–2027, and what small businesses should have done or should now prepare for.

We will continue to update this article as the Bill progresses and new guidance is released, so make sure you are signed up to our mailing list to get the latest updates direct to your inbox.

Part One: What's Been Decided

These changes are already law or have confirmed start dates. By now, you should have reviewed your policies, made the necessary updates, and communicated them to your teams — but it's worth double-checking that everything is in place.

1. Flexible Working From Day One

Effective 6 April 2024 – Employment Relations (Flexible Working) Act 2023

Employees can request flexible working from their first day of employment. They can make two requests per year, and employers must respond within two months.

What you should have done:

• Reviewed and updated your flexible working policy to remove the old "26 weeks' service" rule.

• Trained managers to handle requests fairly and consistently.

• Communicated the change to employees.

2. Extended Redundancy Protection for Pregnancy and Family Leave

Effective 6 April 2024 – Protection from Redundancy (Pregnancy and Family Leave) Act 2023

Employees who are pregnant or on adoption or shared parental leave now have redundancy protection that extends up to 18 months after birth or adoption.

What you should have done:

• Reviewed your redundancy procedures to ensure selection criteria and consultation processes are fair and documented.

• Updated policies to reflect the extended protection period.

• Briefed managers on their responsibilities and how to identify suitable alternative roles.

3. Carer's Leave Act 2023

Effective 6 April 2024

Employees are entitled to one week of unpaid carer's leave each year to care for dependants with long-term needs. This is a day-one right.

What you should have done:

• Added a Carer's Leave policy to your handbook.

• Ensured HR and line managers understand how and when this leave can be taken.

• Communicated the entitlement clearly to your employees.

4. Neonatal Care (Leave and Pay) Act 2023

Effective 6 April 2025

Parents whose baby spends at least seven continuous days in neonatal care within 28 days of birth are entitled to up to 12 weeks of neonatal care leave, with statutory pay for those who meet the service and earnings criteria.

What you should have done (or should be preparing for):

• Updated family leave and payroll policies to include neonatal care leave.

• Ensured payroll systems are ready to process statutory payments.

• Communicated the upcoming right to managers and staff.

5. Tips, Gratuities and Service Charges

Effective 1 October 2024 – Employment (Allocation of Tips) Act 2023

Employers that receive or control tips must pass 100 per cent to staff (less only tax or National Insurance). You must have a written tips policy, follow the Statutory Code of Practice, and keep records for three years.

What you should have done:

• Drafted and shared a written tips policy with all affected employees.

• Reviewed tronc or tip-sharing systems to ensure fairness and compliance.

• Trained managers and payroll staff on the new rules.

Part Two: What's Still to Come (Confirmed and Expected)

The Employment Rights Bill is being debated in Parliament this week, with Royal Assent expected in early 2026. Some provisions have already been confirmed, while others are still being finalised. The following are the key areas small businesses need to plan for.

1. Unfair Dismissal Qualifying Period

The qualifying period for unfair dismissal claims will reduce from two years to six months. The proposed day-one right has been dropped. This change is expected to take effect from 1 January 2027, following Royal Assent.

What to plan ahead for:

• Review probation periods and dismissal procedures to reflect earlier eligibility for claims.

• Make sure managers understand that dismissals after six months' service will carry higher tribunal risk.

2. Unfair Dismissal Compensation Cap

The Government intends to remove the current cap on compensation for unfair dismissal, which means awards could become unlimited. Details are being finalised and expected to be confirmed in 2026.

What to plan ahead for:

• Review your approach to dismissal and settlement.

• Budget for higher compensation exposure in the event of a claim.

3. Zero-Hours and Casual Contract Reform

Expected to take effect during 2026. Employers will need to:

• Offer guaranteed hours that reflect average hours worked.

• Give reasonable notice of shifts.

• Pay compensation for late cancellations or reductions in hours.

What to plan ahead for:

• Record working patterns for all casual and zero-hours staff.

• Prepare to update contracts once regulations are finalised.

• Review scheduling processes for fairness and notice.

4. Predictable Working Patterns (Right to Request)

The Workers (Predictable Terms and Conditions) Act 2023, originally due in 2025, may be absorbed into or replaced by the zero-hours reforms. It allows workers to request more predictable hours where work patterns are irregular.

What to plan ahead for:

• Keep accurate records of hours and shift patterns.

• Monitor government updates, as this right may merge with zero-hours obligations in 2026.

5. Fire and Rehire Code of Practice

Expected during 2026. The new statutory Code will regulate how employers can change terms and conditions through dismissal and re-engagement. Tribunals will be able to increase compensation by up to 25 per cent for breaches.

What to plan ahead for:

• Review redundancy and change-management policies.

• Avoid using fire-and-rehire without thorough consultation.

6. Statutory Sick Pay Reform

Expected from April 2026. Statutory Sick Pay (SSP) is expected to be payable from the first day of absence, and the lower earnings threshold will be removed.

What to plan ahead for:

• Review sickness policies and payroll systems.

• Budget for higher short-term absence costs.

7. Redundancy Consultation Rules

Consultation is ongoing, with implementation expected during 2026. The rules are likely to require earlier consultation and may lower the thresholds for collective redundancy triggers.

What to plan ahead for:

• Review redundancy procedures to ensure early and fair consultation.

• Keep templates for consultation documentation up to date.

8. Trade Union and Collective Bargaining Reforms

Phased introduction expected from late 2025 into 2026. The Bill will expand union access rights, strengthen protections for lawful industrial action, and promote collective bargaining in low-pay sectors.

What to plan ahead for:

• Review how you handle union requests and staff engagement.

• Ensure consultation records and communication practices are transparent.

9. Parental Leave and Day-One Rights

From April 2026, paternity and ordinary parental leave are expected to become day-one rights, alongside new flexibility in how leave can be taken.

What to plan ahead for:

• Update family leave and payroll policies.

• Communicate the upcoming changes to staff.

Part Three: What's Been Dropped or Revised

Worker Status Reform

Plans to merge the employee, worker, and self-employed categories have been dropped. Continue to use the current three-tier approach and review contractor relationships regularly.

Right to Disconnect

The proposed right to ignore work communications outside normal hours is not included in the Bill and remains a cultural consideration, not a legal requirement.

Part Four: What Small Businesses Need to Do Now

As we reach the end of 2025, most of this year's legislative changes should already be reflected in your policies and procedures. If you have not yet completed these updates, now is the time to make sure everything is in place before the next wave of reforms begins in 2026.

1. Review and update your employee handbook and contracts to ensure all 2024 and 2025 legal changes are covered — including flexible working, redundancy protection, carer's leave, and the new rules on tips.

2. Check that managers are fully trained on how to handle flexible working requests, redundancy processes and carer's leave, and that they understand the practical implications of the latest legislation.

3. Confirm that your family-leave and payroll policies are ready for neonatal care leave, which comes into force in April 2025. If you have not yet communicated this change internally, do so early in the new year.

4. Stay on top of parliamentary developments as the Employment Rights Bill moves through its final stages. Start planning now for the 2026–2027 reforms, such as zero-hours contract changes, sick-pay reform, and the new unfair-dismissal rules.

5. Review budgets and workforce planning to prepare for increased costs linked to statutory sick pay reform and the likely removal of the unfair-dismissal compensation cap.

6. Communicate clearly with your employees about any updates made this year and what to expect in 2026. Transparent communication helps build trust and reduces confusion when new rights take effect.

Part Five: Small Business Q&A

Q1. Do I have to approve every flexible working request?

No. You can refuse for valid business reasons, but requests must be handled fairly and within two months.

Q2. Can carer's leave be refused?

It can be postponed if operations would be seriously disrupted, but it must be granted within a reasonable time and confirmed in writing.

Q3. Is carer's leave paid?

No, it is unpaid unless you choose to offer enhanced terms.

Q4. What records do I need for tips?

Keep detailed records of all tips and their allocation for at least three years.

Q5. Can I deduct admin or card-processing fees from tips?

No. Since October 2024, deductions other than tax or NIC are prohibited.

Q6. When does neonatal care leave apply?

For babies born on or after 6 April 2025 who spend at least seven consecutive days in neonatal care within 28 days of birth.

Q7. What happens if I don't follow the tips law?

Employees can bring a tribunal claim, and you may have to repay withheld tips and compensation.

Q8. What's the difference between predictable working rights and zero-hours reforms?

The predictable working right allows workers to request regular hours. Zero-hours reforms will require employers to provide guaranteed hours matching average patterns.

Q9. When will unfair dismissal changes take effect?

The qualifying period is expected to reduce to six months from 1 January 2027.

Q10. Will unfair dismissal compensation be uncapped?

Yes, that is the current proposal, though details are still being finalised in Parliament.

Q11. What other changes are coming in 2026–2027?

Reforms are expected to SSP, zero-hours contracts, redundancy consultation, union access, and fire-and-rehire practices.

Final Thoughts

As 2025 draws to a close, it's the perfect time to pause, reflect, and make sure your HR foundations are ready for the changes ahead. The past year has already brought major updates from flexible working and carer's leave to redundancy protection and the new rules on tips and 2026 will bring even more as the Employment Rights Bill moves into law.

Before you sign off for Christmas, take a moment to review your handbook, contracts, and people policies. Make sure they reflect everything that's already in force and are ready for what's coming next. It's far easier to make small updates now than to scramble once the next wave of reforms takes effect.

And if you're looking at your to-do list and wondering how you'll fit it all in why not give yourself the gift of time this Christmas and let KUHR help?

Complete our HR Health Check and start 2026 on the front foot. We'll help you review your contracts, policies, and processes so you can focus on running your business — not worrying about compliance.

Prefer a chat first? Book a call with the KUHR team or email hello@kateunderwoodhr.co.uk and we'll take it from there.

Good HR isn't about red tape — it's about respect, clarity, and communication.

Kettle on. Standards up. Let's make 2026 the year your people and your business thrive.

This article is part of KUHR's Employment Rights Bill 2025 Update Series. We'll keep this guide refreshed as new developments are confirmed — so check back or subscribe to stay in the loop.