Written by Kirsten McKenzie. This article is up to date as of December 2025.
As we have previously written, the Employment Rights Act is one of the most significant overhauls to UK employment law in recent memory. Its intent is clear: to modernise protections, reduce exploitation and create more consistency across the workforce. But while the policy aims are progressive, the commercial impact for employers cannot be ignored.
If you’re a CFO, HR Director or any senior leader managing people, budgets and risk, now is the time to get ahead.
Today, we look at the economic impact of the Employment Rights Act, focusing on where costs and complexity are likely to arise and how you can prepare to take on the required changes without disrupting productivity, morale, or profitability.
Why this matters now
The Act has been shaped through a series of consultations, government responses, and amendments made during the legislative process. It is closely tied to the evolving Employment Rights Act 1996 and Equality Act 2010. It touches almost every part of how people are hired, managed, paid and protected, from family leave to dismissal rules, harassment protections, and union representation.
In its October 2024 economic assessment, the government identified that many reforms will raise the compliance bar and increase short-term costs, particularly for employers who rely on flexible contracts, lean HR teams or legacy systems.
Five key areas driving cost and risk
1. Absence costs and Statutory Sick Pay (SSP)
SSP will become a day-one right, and the lower earnings limit is being removed, which means more workers will qualify, including part-time and agency workers.
This could drive a significant cost increase, especially where absence management is weak in your business.
Possible impact on your business:
- Increased payroll spend on SSP.
- Admin burden tracking more absences.
- Operational strain from unplanned cover needs.
Mitigation: Build better absence triggers and upskill managers on handling return-to-work discussions and processes. Use your HR systems and data to report trends, enabling mitigation measures to be introduced.
Check out our Employee Wellbeing Services > https://hunteradams.co.uk/hr-consulting/employee-wellbeing/
2. Unfair dismissal protection from six months
The government initially proposed removing the two-year qualifying period entirely for unfair dismissal claims. However, as of December 2025, this has been revised. Employees will now qualify for protection after six months’ service, a significant reduction that raises the bar for compliance.
Managers will need to be confident in how they handle probation, performance and terminations from early on.
Possible impact on your business:
- More risk of tribunal claims.
- Increased demand for training and policy reviews.
- Pressure on documentation and process quality from the first six months of employment.
Mitigation: Start training line managers now, focusing on constructive feedback and holding difficult conversations. Ensure all conversations are documented. Don’t wait for claims to reveal your weak spots.
Cost Reduction & Downsizing Services > https://hunteradams.co.uk/hr-consulting/cost-reduction-downsizing/
Employee Engagement Services > https://hunteradams.co.uk/hr-consulting/employee-engagement/
3. Parental leave, bereavement and flexible working
Employers must prepare for expanded rights around:
- Day one rights to paternity leave and unpaid parental leave.
- Enablement of parents to take their paternity leave and pay after their shared parental leave and pay.
- New right to unpaid bereavement leave.
- Refusal of flexible working requests to be reasonable.
Possible impact on your business:
For employers with small teams or recruitment processes that lack resilience, this can quickly create a resourcing challenge.
Mitigation: Use your HRIS to forecast and model patterns over a rolling 12-week period. Identify any key skills gaps that any form of absence would impact, and identify solutions to avoid any single points of failure.
Learn about our Employment Rights Bill services > https://hunteradams.co.uk/uk-employment-rights-bill/
4. Harassment, equality and inclusion
The bill strengthens the requirement for employers to take “all reasonable steps” to prevent workplace harassment, especially involving protected characteristics. It also elevates the visibility of diversity reporting and responsibilities under the Equality Act 2010.
Note: Protected characteristics are the personal traits that are legally protected from discrimination under the Equality Act 2010. These include things like age, race, disability, sex, sexual orientation, gender reassignment, pregnancy and maternity, religion or belief, and being married or in a civil partnership.
Possible impact on your business:
- More scrutiny of working environments.
- Need for refresher training.
- Rising pressure to take visible action, not just update policies.
Mitigation: Don’t wait for claims to start rolling in. We recommend you build a psychologically safe workplace, with robust internal reporting tools and inclusive leadership training. Create risk registers and document decision-making rationale.
Employee Engagement Services > https://hunteradams.co.uk/hr-consulting/employee-engagement/
5. Union and redundancy risk
Trade union representatives will have expanded rights, including rights of access to workers and a stronger voice during industrial action.
Meanwhile, “fire and rehire” tactics are expected to be restricted, and the threshold for collective redundancy consultation will change along with an increase to the protective award where there has been a failure to consult. Employers with dispersed teams (e.g. across England, Wales and Northern Ireland) must manage jurisdictional complexity.
Possible impact on your business:
- Higher risk of legal non-compliance.
- Costly delays or reputational damage during restructures.
- Need for long-term strategic workforce planning.
Mitigation: Align your change plans with qualified HR support – and prepare your communications carefully.
Cost Reduction & Downsizing Services > https://hunteradams.co.uk/hr-consulting/cost-reduction-downsizing/
What many employers overlook
Even businesses with in-house HR teams can underestimate:
- The volume of policies that must be updated.
- The depth of training needed for managers.
- The number of working days required to implement the changes needed.
- The impact of queries when new rights go live, especially from agency workers or part-time staff.
It’s not just the law changing. It’s your culture, processes and expectations too.
Getting ahead of the game now will save a lot of time and headaches down the line.
Where employers gain an advantage
Business owners and leadership teams can be really proactive here.
Done right, this isn’t just compliance. It’s a chance to:
- Improve retention and engagement
- Differentiate yourself in recruitment
- Build trust with unions, staff and stakeholders
- Create a fairer, more consistent working environment
You’re setting a new standard and building goodwill that pays off in the long run, not just avoiding risk.
How Hunter Adams can help
We support employers UK-wide to:
- Conduct HR audits and policy reviews.
- Train managers in handling dismissals, absences, and compliance.
- Handle updates across England, Scotland, Wales and Northern Ireland.
- Provide interim HR support where needed.
- Deliver on-the-ground restructuring support.
We’re trusted by scaling businesses, multinationals and charities because we know how to turn legal change into practical, human outcomes.
Let’s make the Employment Rights Act work for your business.
Employment Rights Act Support > https://hunteradams.co.uk/uk-employment-rights-bill/
Get in touch with Hunter Adams > https://hunteradams.co.uk/contact/
Note: As of December 2025, the government has confirmed that protection from unfair dismissal under the Employment Rights Act will apply after six months of service, not from day one as initially proposed.
