First published on Wednesday, December 17, 2025
Last updated on Wednesday, December 17, 2025
After months of back and forth between the Houses of Parliament, the Employment Rights Bill has been finally passed by both Houses. This means the Bill is set to become law as soon as it receives Royal Assent tomorrow.
The Bill’s most prevalent hurdle came in the shape of day-one unfair dismissal rights. This kept the debate going, with the House of Lords insisting on a six-month qualifying period back in September.
Eventually, Labour agreed to drop the day-one unfair dismissal rights. However, an unexpected proposal to drop the cap on compensation for unfair dismissal in tribunals kept the debate going.
On 16th December, peers in the House of Lords did come to an agreement on the Bill, finally passing this stage. Next, the Bill will get Royal Assent and become law tomorrow.
What happens next?
The Bill will get Royal Assent this week before Parliament breaks over the holidays. It comes with around 30 key reforms, bringing in 173 new pieces of law. Not all the changes are coming in at once, though. This is where it gets complicated, especially for small business owners.
A few changes around trade union and industrial action will be coming into place soon after the Bill becomes the Employment Rights Act. But the big changes you probably need to prepare for will be coming in throughout 2026 and 2027.
In April 2026, big changes are coming to sick pay, parental leave, dismissals and redundancy come into place. Then in October 2026, prepare for more legislation on tips, sexual harassment prevention, trade union rights and tribunal claim time limits.
It’s then in 2027 when the headline changes on the six-month period for unfair dismissal and zero-hours contracts will come into place.
How can business owners prepare?
Head of HR Advisory Services Gemma O’Connor offers some advice:
Small business owners need to recognise that while headline changes on unfair dismissal rules might not be coming into effect until 2027, the immediate priority is auditing existing contracts and policies to navigate all of the new legal requirements.
There is a lot for anyone to get their head around, especially when you’re trying to run your business at the same time. Luckily, we’ve got a handy timeline of the changes you need to be aware of as a small business owner, along with tips on how to prepare.
Get ready for the Employment Rights Act now with this free guide on the big changes.
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