Employment Law Changes: What Employers Need to Know

The Employment Rights Act 2025 introduces a number of significant changes for employers, with important reforms taking effect in October 2026 and January 2027.

We are writing to you as it is important that employers are aware of these changes and are preparing for them.

Changes from 30 October 2026

From 30 October 2026, employers will be required to take all reasonable steps to prevent sexual harassment at work. This heightens the existing duty, which currently requires employers to take ‘reasonable steps’ only.

From the same date, employers will be liable where an employee is harassed by a third party in the course of their employment and the employer has failed to take all reasonable steps to prevent it. Importantly, the protection is not limited to sexual harassment and extends to other forms of unlawful harassment covered by the Equality Act 2010.

For employers, this makes it important to review harassment policies, risk assessments and training, particularly where employees regularly interact with customers, clients or other third parties. ACAS identifies measures such as assessing third-party harassment risks, recording incidents, updating policies, providing training and reviewing relevant customer and supplier terms.

Changes from 1 January 2027

From 1 January 2027, the qualifying period for ordinary unfair dismissal claims will reduce from two years’ continuous service to six months. The right to request written reasons for dismissal will also apply after six months’ service, and the current statutory cap on compensatory awards for unfair dismissal will be removed.

This represents a significant shift for employers. Currently, employees with less than two years’ service are unable to bring ordinary unfair dismissal claim. From January 2027, employees will gain unfair dismissal protection much earlier in their employment.

Employers will still be able to dismiss employees for legitimate reasons, including misconduct, capability and redundancy. However, once an employee has six months’ service, employers will need to ensure there is a fair reason for dismissal and that a fair process is followed.

What Does This Mean in Practice?

Case Study 1: Expiry of a Fixed-Term Contract

An employee is engaged on a 12-month fixed-term contract beginning on 1 April 2026. The employer decides not to renew the contract when it expires on 31 March 2027.

Many employers assume a fixed-term contract can simply be allowed to expire. However, the expiry and non-renewal of a fixed-term contract amounts to a dismissal. From January 2027, employees with at least six months’ service will have unfair dismissal protection.

Accordingly, employers should:

• • Consider the reason for the non-renewal.
  • Ensure the reason falls within a potentially fair reason for dismissal.
  • Follow an appropriate consultation and dismissal process.
  • Consider suitable alternative employment where appropriate.

Failure to do so could expose the employer to an unfair dismissal claim, where prior to the change in law, an employee could easily and legitimately bring a 12 month fixed term contract to an end without needing to take the above steps.

Case Study 2: “Problem Employees” and the 1 January 2027 Deadline

An employee has 18 months’ service and has ongoing performance and conduct issues. The employer has not yet commenced any formal process and is aware that unfair dismissal protection will extend to employees with six months’ service from 1 January 2027.

There may be a temptation to terminate employment just before 1 January 2027 to avoid the increased risk. However, employers should exercise caution.

Where the effective date of termination falls before 1 January 2027, the existing two-year qualifying period will continue to apply. However, statutory notice can extend the effective date of termination. For employees with less than two years’ service, the statutory minimum notice period is generally one week, meaning that the practical deadline for dismissal would be 24 December 2026 and not 31 December 2026.

Employers should also avoid rushed decisions. Employees can still bring claims including for discrimination, whistleblowing detriment, and automatic unfair dismissal regardless of their length of service.

Employers considering dismissals before the new rules take effect should therefore take advice imminently and make sure that any existing performance or conduct concerns are being properly documented and managed.

Key Takeaways

The reduction in the qualifying period for unfair dismissal claims represents a significant change for employers. Businesses should review probation procedures, fixed-term contracts, dismissal processes and performance management procedures ahead of 1 January 2027.

In the meantime, employers should prepare for the harassment changes taking effect on 30 October 2026. Policies and training should reflect the more onerous duty to take all reasonable steps to prevent sexual harassment, as well as ensuring that they are prepared for third-party harassment liability.  

If you are unsure whether your current policies and procedures are compliant, please contact me or a member of Employment Team for a readiness review.