United Kingdom: Employment – 2025 Highlights and 2026 Outlook

This year has seen some changes in the United Kingdom for employers and, most significantly, has given us an insight into the many changes and likely challenges ahead in light of the current draft of the Employment Rights Bill. This article outlines the key highlights from 2025 and looks ahead to 2026.

2025: Highlights

1. Extension of the Acas early conciliation period: All new cases reported to the Advisory, Conciliation and Arbitration Service (“Acas”) for early conciliation on or after 1 December 2025 will be subject to a 12-week early conciliation period rather than the current six-week period. The reason given for the change is to ease the pressure on Acas following a rise in the demand for early conciliation; however, it remains to be seen how doubling the period for conciliation will achieve this. Given that the effect of early conciliation is to pause the limitation period on employment tribunal claims (usually three months), the change will significantly increase the period of time in which individuals can bring a claim in the Employment Tribunal. This will be extended further when tribunal limitation periods are doubled from three to six months under the Employment Rights Bill—see further below.

2. Family rights: With effect from 6 April 2025, a new right to statutory neonatal care leave and statutory neonatal care pay was introduced. Eligible employees are now entitled to one week of leave and statutory pay for each week the baby is in neonatal care for up to a maximum of 12 weeks. This right is in addition to other statutory rights such as maternity, paternity, adoption and shared parental leave. As a result, it is recommended that employers introduce a neonatal care policy to reflect the new statutory rights.

3. For Women Scotland Ltd v The Scottish Ministers: This was a significant case in which the Supreme Court held that the definitions of "woman," "man," and "sex" in the Equality Act 2010 refer to biological sex. As such, and by way of example, the definition of a "woman" in the Equality Act 2010 excludes a trans woman holding a gender-recognition certificate. This case has a number of practical consequences for employers. Careful consideration is now needed in relation to the drafting of policies or guidance relating to sex and gender, particularly in areas such as single-sex facilities and positive action. We are awaiting the publication of the updated code of practice from the Equality and Human Rights Commission.

2026: Outlook

1. The Employment Rights Bill: Some of the key changes to look out for next year will be implemented by the long-awaited Employment Rights Bill. Too many to describe in full, we have set out below a selection of some fundamental reforms due to come into effect or in relation to which there will be further details released (it is worth noting, according to recent reports, the Government is also planning to launch 26 consultations on certain aspects of the Bill after it becomes law):

• Unfair dismissal: The Government had proposed to remove the qualifying period of two years currently required to bring an unfair dismissal claim, meaning that employees would have had the right not to be unfairly dismissed from day one of their employment. Following significant opposition to the proposal from the House of Lords, however, the Government has announced that this will not go ahead and instead, the qualifying period will remain but will be reduced from two years to six months. The Government has also stated that "the compensation cap will be lifted". At the time of writing, it remains unclear exactly what this means – currently there is a cap on unfair dismissal compensation which is the lower of one year's pay and a fixed amount set by regulations each year (currently £118,223). It is thought that the Government's statement may mean that the cap of one year's pay will be removed but that the fixed maximum amount will remain. Previously, the changes were not expected to come into effect until Autumn 2027, but it seems now, given they are simplified in nature, they could come into force in 2026. Employers would be well advised to monitor these developments closely and take steps to prepare, such as training managers to spot underperformers at a significantly earlier stage than is currently necessary. Other proposed new ‘day-one’ rights, for sick pay and paternity leave, will still become day one rights as proposed, coming into force in April 2026.
• Fire and rehire: The Employment Rights Bill will effectively outlaw fire and rehire practices; i.e. the process of recontracting employees onto new terms by terminating their existing contracts and offering new (amended) terms. Under the proposals, from October 2026, this will only be permitted in cases where there are financial difficulties which are affecting the business's survival and there are no alternatives. In light of this, it is likely that flexibility clauses within contracts that allow amendments without an employee's consent will become increasingly important.
• Duty to prevent sexual harassment: In October 2024, a new requirement came into force which requires employers to take reasonable steps to prevent sexual harassment of employees during the course of their employment. However, the Employment Rights Bill intends to extend the scope of this duty to require employers to take "all reasonable steps." In addition, the Bill will make employers liable if their employees are harassed by third parties in the course of their employment. It is anticipated that the expanded duty will come into force in October 2026 and that it will be an onerous one for employers. Most employers will by now have updated their relevant policies as a result of the new duty introduced last year but they will need to be ready to make further updates as a result of these significant changes. Also anticipated are regulations that will specify exactly what reasonable steps are, as the Government’s call for evidence regarding this closed on 30 June 2025.
• Extension of limitation periods: The Employment Rights Bill will extend the time limit to bring claims in the Employment Tribunal from three months to six, except for breach of contract claims arising or outstanding on the termination of employment. This change is anticipated to come into effect in October 2026. By giving employees more time to bring a claim, it seems likely that we will see an increase in the number of claims in the Employment Tribunal and it remains to be seen how the Employment Tribunals will cope without additional resources, given the existing backlog of cases waiting for hearing dates.
• Collective redundancies: It is currently necessary to consult collectively if 20 or more employees are proposed for redundancy at the same site within a 90-day period, but not if that number is split across multiple sites. Under the Employment Rights Bill, an alternative threshold will trigger this duty if a certain aggregate number of redundancies across all sites is reached. The change is due to take effect in 2027, by when further detail will be known about the proposed aggregate threshold. For businesses with more than one site in the United Kingdom, this could obviously result in collective consultation requirements being triggered more easily and employers will need to ensure that there is a central oversight in place to monitor redundancy proposals across all UK sites.

2. Non-financial misconduct: With effect from 1 September 2026, the Financial Conduct Authority is amending its Conduct Rules, and its requirements as regards to fitness and propriety assessments and regulatory references, to include expressly non-financial misconduct (bullying, harassment and violence) for non-banking firms. Guidance on the new requirements has been drafted and is anticipated to be published by the end of this year. Although the standards are based on UK discrimination law, they are broader and different in certain respects, meaning that HR and Compliance teams will need to work together more than ever to assess when the employment law and/or regulatory thresholds have been crossed.

3. Reform of non-compete clauses: The Government has just published a working paper inviting views on options to reform non-compete clauses in employment contracts. This is part of the Government's "growth mission" and commitment to a dynamic labour market. The options include introducing statutory limits on the length of non-compete clauses; banning non-compete clauses in employment contracts; banning non-compete clauses below a salary threshold; and combining a ban below a salary threshold with a statutory limit. Responses to the working paper are required by 18 February 2026. While it remains to be seen which proposal will be taken forward, employers should watch this space, given the potential scope for reform.

2025 saw the publication of the first and subsequent drafts of the Employment Rights Bill—a Bill that is set to reshape much of the employment law landscape in the UK. 2026 will see the first of its changes come into effect and further details released of various others. The timetable for implementation is staggered and gives employers a reasonable period to prepare but employers will need to monitor developments and move quickly as soon as sufficient details of the reforms are released.