Six Key Steps to Prepare for the Employment Rights Act 2025

This article is provided by BRC Associate Member, Womble Bond Dickinson.

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The Employment Rights Act 2025 (ERA 25) was passed on 18 December 2025 and will come into effect in stages over the next 18 months to two years.

A number of measures in the ERA 25 will have significant impacts on retailers. Particularly important changes include reforms to unfair dismissal law (given high rates of staff turnover in the sector) and the introduction of liability for third party harassment (given the number of customer-facing roles in retail).

We don't have full details of all of the proposals yet and - many will be subject to consultation and further regulations later in the year. However, there are practical steps retailers can take now to prepare:

Step 1: Review family leave and sickness policies

From 6 April 2026, paternity leave and unpaid parental leave will become day-one rights (although employees will still require 26 weeks' service to qualify for statutory paternity pay). Additionally, statutory sick pay will be payable from the first day of absence and to employees earning less than the lower earnings limit (at 80% of weekly earnings). This will increase costs for many retailers.

Steps to prepare include:

• Updating policies;
• Ensuring your payroll systems will enable you to implement the new SSP rights; and
• If you offer enhanced paternity leave pay, considering whether you will pay that from day 1.

Step 2: Prepare for trade union law reforms by reviewing your relationships with employees and representative bodies

From 1 October 2026, trade unions will be able to request access to workplaces, including electronic access to your employees. Employers will also be required to provide employees with a statement of their right to join a trade union (and send regular reminders of that right).

Additionally, from 6 April 2026, there will be changes to the voting process for statutory trade union recognition. Currently, 40% of workers in a bargaining unit need to vote in favour for an application for statutory trade union recognition to succeed. However, under the ERA 2025, instead, a simple majority of those voting will be sufficient.

Taken together, these changes (alongside others in the ERA 25) will make it easier for trade unions to gain recognition. So, what steps can you take to prepare for these changes?

If you already have a staff forum or other employee representative body, consider how effectively it communicates with employees and whether those relationships could be strengthened. You should also look at how effectively you communicate with that body. If you don't have an employee representative body, consider establishing one.

Reviewing employee communications and any staff survey results may also help identify areas for improvement. A happy, engaged workforce is less likely to seek union recognition.

Step 3: Consider how you will combat third-party harassment

From 1 October 2026, employers will be liable for acts of harassment carried out by third parties (such as customers or suppliers) against staff unless they can demonstrate that they have taken all reasonable steps to prevent such harassment occurring. This could mean, for example, that an employer would be liable for a racist comment made by a customer to an employee.

Government commentary during the passage of the ERA 25 suggests an acknowledgement that employers have less control over third parties than over their own employees. As a result, the steps required to avoid liability may be less onerous than those expected under the existing preventative duty relating to sexual harassment by employees.

So what can retailers do to prepare? We may get updated guidance from the Equality and Human Rights Commission's (EHRC). However, the EHRC's existing technical guidance on sexual harassment and harassment at work already covers third party harassment and provides a useful starting point (Sexual harassment and harassment at work: technical guidance | EHRC). Employers should therefore review that guidance and consider what additional steps they could be taking. Protecting staff in this way is also, quite simply, the right thing to do.

Step 4: Review probation and recruitment procedures

From 1 January 2027, employees with at least six months' service will have the right to claim unfair dismissal. This means that anyone who joins you on or before 1 July 2026 will gain unfair dismissal rights on that date.

Additionally, the cap on the compensatory award for unfair dismissal claims will be removed, significantly increasing financial risk associated with getting dismissal processes wrong.

Practical steps retailers can take now include:

• Reviewing disciplinary and performance management processes dealing with employees with short service;
• Introducing probation periods of less than six months or, if you already operate probation periods, review existing lengths;
• Ensuring robust processes exist for monitoring performance during probation so that, if a relationship is not working, it is identified and tackled early; and
• Strengthen recruitment procedures with a view to making better hiring decisions and reducing the risk.

Step 5: Consider whether contract changes should be made now

From 1 January 2027, the restriction of the use of 'fire and rehire' to change employees' contract terms will come into effect. While full details are still awaited, it is anticipated that dismissals for refusing to agree to changes to pay, hours and holiday will be automatically unfair. There will be an exception if the changes are necessary due to financial difficulties likely to affect the employer's ability to carry on its business and the employer could not reasonably have avoided them.

Retailers may therefore wish to:

• Review whether there are any potential contractual changes they have been considering. If so, they could commence a fire and rehire process before the new law comes into force rather than risk delaying and not being able to make the changes; and
• Include flexibility clauses in new contracts to allow for future changes where appropriate.

Step 6: Audit your use of low and zero hours contracts

Although full details are still awaited, retailers will be required to carry out regular reviews (likely every 12 weeks) of hours worked by zero-hours and low-hours workers. Employers will then need to offer guaranteed hours contracts based on actual working patterns. In addition to zero-hours workers, the right will also apply to low hours workers (those who are only guaranteed a certain number of hours). There will also be additional rights for qualifying workers to be given reasonable notice of shifts and compensation for changes to shifts.

While these reforms are not expected to take effect until some point in 2027, retailers should begin preparing now by auditing their use of zero and low hours contracts and considering operational changes that could reduce reliance on them.

Conclusion

The ERA 25 will have significant implications for retailers and it will not be possible to mitigate all of them. However, taking the preparatory steps outlined above will place businesses in a stronger position to manage risk and adapt effectively.