FAQ’s – Employment Rights Act 2025

Does the Employment Rights Act 2025 apply to small businesses?

Yes. The Employment Rights Act 2025 applies to employers of all sizes, including SMEs and micro-businesses. While some obligations may feel more onerous for smaller employers, there is no general exemption based on headcount. In practice, smaller businesses are often more exposed because they rely on informal processes, flexible working arrangements, or undocumented practices, all of which are likely to come under greater scrutiny as enforcement increases.

Will employers need to change existing employment contracts?

In many cases, yes. While existing contracts will not automatically become invalid, employers should expect to review and, where necessary, update contracts to reflect changes around working hours, sick pay entitlement, family leave, and predictability of work. Employers using zero-hours or variable-hours contracts should be particularly cautious, as contractual wording that no longer reflects how work is actually carried out is likely to increase legal risk.

What happens if an employer gets it wrong under the Employment Rights Act 2025?

The risk is not limited to employment tribunal claims. One of the key themes of the Act is stronger enforcement, including the introduction of a new Fair Work Agency with powers to investigate non-compliance. That means employers may face enforcement action even where an individual employee does not bring a claim. For businesses, this increases the importance of compliance, record-keeping, and manager training, rather than relying on the hope that issues will not escalate.

Will probation periods still be allowed?

Yes, probation periods will still be lawful, but their practical value will change. With unfair dismissal protection expected to apply after six months’ service, probation periods will need to be actively managed rather than treated as a formality. Employers who allow probation to drift, fail to document concerns, or delay difficult conversations may find that they have lost the opportunity to exit fairly before legal protections apply.

Does the Employment Rights Act 2025 ban zero-hours contracts completely?

No, zero-hours contracts are not banned outright. However, the Act introduces rights designed to prevent exploitative use of zero-hours arrangements. Where individuals work regular or predictable patterns, they are expected to gain rights to guaranteed hours. This means employers may still use zero-hours contracts in genuinely casual or ad-hoc situations, but they will need to justify their use and be prepared for challenges where patterns become established.

Will employers have to pay compensation for cancelled shifts?

Yes, in certain circumstances. The reforms include rights to compensation where shifts are cancelled or changed at short notice. The intention is to discourage employers from placing the financial risk of unpredictable work entirely on workers. The exact detail will be set out in regulations, but employers should assume that last-minute cancellations will increasingly carry a cost.

How does the Employment Rights Act 2025 affect sickness absence management?

Day-one statutory sick pay changes will require employers to rethink how they manage short-term and long-term absence. Processes that rely heavily on waiting periods before sick pay applies will need updating, and employers will need to ensure that absence policies are applied consistently from the first day of employment. This makes early intervention, return-to-work discussions, and occupational health input more important than ever.

Can employers still use settlement agreements?

Yes, settlement agreements will remain lawful and widely used. However, the Act limits the use of NDAs where they attempt to prevent disclosures relating to harassment or discrimination. Employers will need to ensure that confidentiality clauses are carefully drafted and that managers understand what can and cannot be said to employees when disputes arise. Over-reliance on “standard wording” without legal review will carry greater risk.

Does the Employment Rights Act 2025 increase the risk of employment tribunal claims?

In the short term, the risk is less about an immediate surge in claims and more about earlier exposure. With key protections applying sooner, employees will reach a point of legal protection more quickly, and poorly handled issues are more likely to escalate. Over time, the combination of earlier rights and stronger enforcement is expected to increase overall employer risk where processes are weak or inconsistent.

When should employers start preparing for the Employment Rights Act 2025?

Now. Although many provisions will be phased in across 2026 and 2027, preparation takes time. Employers who wait for confirmed commencement dates before acting are likely to find themselves under pressure. Reviewing contracts, updating policies, training managers, and auditing working practices in advance is far less disruptive than reacting once changes are live.

Where can employers get guidance on complying with the Employment Rights Act 2025?

Official guidance is expected from bodies such as ACAS as regulations are finalised. However, guidance alone will not tell employers how to apply the law in the context of their own workforce. Many businesses will benefit from proactive HR advice to interpret the changes, assess risk, and implement compliant, workable solutions tailored to their organisation.