Enactment of Employment Rights Act 2025 with Phased Implementation Through 2027
New Legislation Enacted
Author: Stephanie Compson, Partner & Head of Knowledge Management and Innovation
On December 18, 2025, the Employment Rights Act 2025 (ERA 2025) became law, marking a significant expansion from the original bill and introducing major reforms to employee relations, trade union rights, and enforcement of employment law compliance. The legislation is expected to prompt substantial operational changes for employers as new rights and regulatory frameworks take effect in stages.
Some measures took effect immediately upon Royal Assent, including the repeal of the Strikes (Minimum Service Levels) Act 2023. Additional amendments to trade union laws will follow two months later, including rollbacks of changes previously introduced by the Conservative Government relating to industrial action. Most remaining provisions require secondary legislation and are expected to be implemented gradually throughout 2026 and 2027.
The Government has announced that many measures will be subject to further consultation, with several already underway and as many as 26 additional consultations anticipated. As a result, implementation timelines may shift depending on consultation progress and regulatory development.
ERA 2025 Reduces Qualifying Period for Unfair Dismissal and Removes Compensation Cap
New Legislation Enacted
Author: Ben Smith, Senior Associate
In a late amendment to the Employment Rights Act 2025 (ERA 2025), the Government abandoned its initial plan to introduce day-one unfair-dismissal protection and instead enacted changes that substantially expand employee eligibility. The qualifying period for unfair-dismissal rights will be reduced from two years to six months, and future modifications will require legislation, making the threshold more difficult for future governments to amend.
The ERA 2025 also removes the statutory cap on the compensatory award for unfair dismissal. The basic award—calculated using a statutory formula that considers age, salary, and length of service—remains unchanged and subject to an existing cap. Regulations are still required to bring these reforms into force, but parliamentary debate indicates that the Government intends an effective date of January 1, 2027. It is assumed, though not yet confirmed, that the removal of the compensatory-award cap will commence at the same time.
These changes will apply in England, Wales, and Scotland, but not in Northern Ireland.
Immigration Updates: New Laws on Earned Settlement, Visa Sponsorship and Skills Thresholds
New Legislation Enacted
Author: Vanessa Ganguin, Partner (Consultant)
Recent and upcoming reforms implementing the Government’s May 2025 White Paper include increasing the minimum English language requirement for visa sponsorship beginning in January 2026. The Government has also launched a public consultation on an “Earned Settlement” model, which proposes significant and retrospective changes to the qualifying period for permanent residence in the United Kingdom. The consultation closes on February 12, 2026, and changes are expected to begin rolling out from April 2026.
The Migration Advisory Committee has been instructed to review roles eligible for visa sponsorship under the
Temporary Shortage List, with a call for evidence open until February 2, 2026. Separately, the Border Security, Asylum and Immigration Act 2025 became law on December 2, 2025. Once the relevant provision takes effect, it will expand right-to-work checks to non-employees, including workers, subcontractors, and gig economy workers. A new Code of Practice will be issued before the provision becomes effective.
On December 16, 2025, the Government increased the Immigration Skills Charge by 32%. At the same time, the continued digitalisation of the visa system—through the transition to fully digital work visas and the removal of passport vignette endorsements—is changing how employers conduct right-to-work checks.
Further Changes Proposed to the Use of Confidentiality Provisions
New Regulation or Official Guidance
Author: Jenny Allan, Associate
Section 17 of the Victims and Prisoners Act 2024 took effect on October 1, 2025, voiding any contractual clause that restricts a “victim”—or someone who reasonably believes they are a victim—from disclosing information to specified individuals or organizations. Permitted recipients include police, qualified lawyers, and victim support services. Effective December 12, 2025, regulations expanded the list to allow disclosures to additional bodies for the purpose of pursuing compensation claims.
The Act defines “victim” broadly to include individuals who have suffered physical, emotional, mental, or economic harm as a direct result of criminal conduct or related circumstances. This includes people who witnessed the conduct or directly experienced its effects. “Criminal conduct” refers to any offense, regardless of whether it has been reported or prosecuted.
Following these developments, the Government announced plans to replace Section 17 with a significantly broader provision that would eliminate the requirement for disclosures to be made to specified individuals for specified purposes. This proposal is currently under consideration in the Victims and Courts Bill, with an implementation date yet to be confirmed.
Potential Reform of Post-Employment Non-Competes
Proposed Bill or Initiative
Author: Hannah Drury, Associate
The Government has published a working paper seeking views on potential reforms to post-employment non-compete clauses, which restrict employees from joining competitors or starting rival businesses after leaving employment. Under current UK law, such clauses are not prohibited, but they are void as restraints of trade unless the employer can show they are no broader than reasonably necessary to protect legitimate business interests. Courts assess enforceability based on multiple factors, including the duration of the restriction.
The working paper outlines several reform options, including:
- Banning non-compete clauses in employment contracts or banning them below a salary threshold
- Introducing statutory limits on the duration of non-compete clauses, potentially tied to employer size
- Combining a ban for employees below a salary threshold with a three-month statutory limit for higher-earning employees
The consultation also seeks input on broader issues, such as barriers workers face when defending enforcement actions in court. The consultation remains open until February 18, 2026, and the working paper does not indicate any timeline for potential legislation, as these proposals remain in the early stages.
