Employment Rights Act: Legal Changes Employers Must Prepare For
Employers already have a long list of changes to work through under the Employment Rights Act (ERA). The challenge now is deciding what to prioritise.At Auxo’s recent event, Future-Proofing Your Workforce and Understanding the Employment Rights Act, the questions revolved around what needs to be reviewed, changed, or put in place first.Watch the highlights reel for a quick recap of the event.If you want a broader view of how the ERA is affecting workforce planning, you can read the first blog in this series here.From April 2026, the ERA introduces changes across statutory sick pay, leave rights, whistleblowing protections, and umbrella regulation, alongside the introduction of the Fair Work Agency.How is the ERA likely to affect recruitment?These changes are already shaping how employers approach hiring.According to the CIPD Labour Market Outlook, 37% of employers plan to reduce recruitment of permanent staff due to ERA-related reforms, with changes to unfair dismissal rules a key factor.Hiring processes are becoming more thorough, particularly for senior roles, as employers look to reduce the risk of performance or capability issues later.Employers need to attract talent and maintain a strong candidate experience, while taking a more considered approach to hiring decisions.Perspectives from the panel: Janette LucasJanette Lucas (Partner) at Squire Patton Boggs shared her insight on how these changes affect employers, particularly around dismissal risk, workforce rights, and immediate priorities.The questions raised ahead of the panel reflected this, with most centred on the practical steps employers need to take. She highlighted three areas employers should already be focusing on.1. Start with your workforceTake a clear view of whether you have the right people in place to deliver your strategy.This includes:Looking at key talent across the business, including where performance is not where it should be, and taking steps to address this.Considering the timing of exits ahead of the removal of the compensation cap in 2027, when it is expected to become more difficult and expensive to negotiate, particularly for higher earners.Planning any wider workforce changes as early as possible.Changes to “fire and rehire” are also expected to limit how employers implement large-scale changes to employment terms, particularly where agreement cannot be reached.If you rely on a contingent or lower-hours workforce, there is an additional impact to consider. Workers on zero or low-hours contracts are expected to gain additional rights to guaranteed hours in certain circumstances, along with notice of shifts and compensation for cancellations. Some of these rights may also extend to agency workers, which is likely to affect both cost and flexibility. Employers should consider how this impacts their current workforce model.2. Review your pay, policies, and processesEmployers need to ensure that their pay, policies, and procedures support both recruitment and retention, while also providing enough flexibility and protection if issues arise.This includes reviewing:Performance, misconduct, and absence management processesHow probation periods are used in practice, including ensuring they do not extend beyond 24 weeks where early termination may be requiredThe structure of pay, bonus, and incentive arrangementsEmployers will need to think more carefully about who they recruit and whether their current processes are fit for purpose, particularly in relation to performance and dismissal.3. Support your managersMuch of the impact of these changes will sit with line managers.They need to be able to:Manage performance proactivelyHandle more complex and sensitive conversationsApply policies and processes consistentlyThis increases the importance of training and support. Managers need to understand what is expected of them and be equipped to act early and effectively.For more detail on these priorities, Janette has prepared a special edition of their UK Quarterly Board Briefing. It expands on these areas and includes a checklist of practical steps for employers preparing for the ERA 2025 changes.What should employers do about harassment requirements?The ERA introduces a requirement for employers to take “all reasonable steps” to prevent harassment, including by third parties.This change is expected to come into force in October 2026. In the meantime, employers are already under a duty to take reasonable steps, and further guidance from the government is still to come.Applying this to harassment specifically, Janette highlighted a few practical areas to focus on:1) Risk assessmentThe Equality and Human Rights Commission has been clear that employers need to understand where risks exist before deciding what action to take. This means carrying out risk assessments across the business, revisiting them regularly, and making sure they reflect how your organisation operates, including working environments, power dynamics, and day-to-day interactions.2) Policies and proceduresPolicies should be up to date and work in practice, supporting how risks are identified and managed.3) TrainingBe clear on when training was last delivered, how comprehensive it was, and whether it is supported by senior leadership.Employers will need to take a proactive approach to identifying and managing these risks. With increased liability, including for third-party harassment, the focus is on being able to show that reasonable steps have been considered and applied.Key takeaways to rememberStart with your workforceReview performance, plan changes early, and understand how new rights will affect cost and flexibility.Make sure your processes hold upPolicies and procedures need to support real decisions, particularly around performance and dismissal.Expect more complex exitsChanges to dismissal rules are likely to make exits harder to manage over time.Equip your managersLine managers will play a central role in how these changes are applied day to day.Stay on top of risk areasAreas such as harassment require clear processes, regular review, and proper documentation.What should employers do now?The Employment Rights Act will affect how workforces are structured, managed, and reviewed. Where you start will depend on your workforce: its size, structure, and how it is currently managed.If you are assessing your approach, now is the time to look at:How your workforce is structured todayWhether your policies and processes will hold up in practiceWhere risk sits across performance, dismissal, and contingent labourIf you are working with contractors or umbrella providers, these changes also bring added complexity across your supply chain. We covered this in more detail in the second blog in this series here.Auxo works with businesses to connect legal insight with practical workforce decisions, helping bring clarity to structure, processes, and risk.If you want to sense-check your current approach or understand what others in your market are doing, get in touch.You can also follow Auxo on LinkedIn and join one of our upcoming events.
