Employment Rights Act 2025: what the SSP and unfair dismissal changes mean for employers

It's important that business owners are aware of these key changes and ensure that company policies and procedures are updated.

The Employment Rights Act 2025 is one of the most significant shifts in employment law we’ve seen in recent years, and employers are already beginning to feel the impact.

The new Statutory Sick Pay (SSP) rules are now in place, extending support to more employees from day one of absence. Meanwhile, further changes to unfair dismissal rights are set to come into effect in January 2027, giving employees legal protection much earlier in their employment.

Together, these laws will change how employers approach absence management, probation periods, performance conversations and employee support. They give you a valuable opportunity to strengthen people practices and build a fairer, more consistent experience for employees.

We’re working closely with Alliotts to help their clients prepare with confidence. Below, we look at what’s changing, why it matters, and the practical steps employers can take now.

Statutory Sick Pay

Since April 2026, SSP has been payable from day one of sickness absence rather than after three qualifying days. Qualifying days are the days an employee would normally be expected to work, for example Monday to Friday. These were previously known as ‘waiting days’.

Another important change is the removal of the lower earnings limit. Employees no longer need to earn at least £125 a week before tax to qualify, meaning SSP is now available to a much wider group of workers, including many part-time and lower-paid employees who may previously have been excluded.

The aim of these reforms is to create a fairer and more consistent system, ensuring employees have access to financial support from the start of an illness. In practice, however, it also means more employees are now likely to qualify for SSP than before.

What SSP changes mean for employers

One of the most immediate effects may be an increase in SSP-related costs, simply because payments now begin earlier and more employees qualify.

You may also notice an increase in short-term absence, as employees no longer lose pay during the first few days of sickness in the way they once did. That makes having a clear and well-managed absence process more important than ever.

Importantly, effective absence management is not about being overly strict when employees are unwell. The strongest absence management approaches are often the most supportive. Employees are more likely to perform better when they feel listened to, treated fairly and supported consistently across the business.

This is where managers play a vital role, because having early conversations, spotting patterns of absence and checking in with employees regularly can make a difference, both in supporting wellbeing and preventing longer-term issues from developing.

If your contracts provide enhanced sick pay, often referred to as contractual or company sick pay, now is also a good time to review how those arrangements interact with the new SSP rules. In particular, you should ensure that no employee receives less than the statutory SSP entitlement.

How to stay compliant – review your absence management approach

Even if you already have an absence policy in place, this is a good opportunity to step back and consider how well it’s working.

Think about what happens when someone is off sick. Are return-to-work meetings taking place consistently? Are managers spotting absence patterns early enough? Do employees understand the reporting process? And perhaps most importantly, do managers feel confident having supportive conversations around absence?

Managers need a clear framework to follow, but they also need the confidence to apply it consistently and fairly. Training can help managers feel more comfortable having early conversations, recognising when additional support may be needed and understanding when a more formal process is appropriate.

Ultimately, strong absence management should support both employee wellbeing and the wider needs of the business.

Unfair dismissal

An employee can bring an unfair dismissal claim if they believe they were dismissed without a fair reason or without a fair process being followed.

Currently, most employees need two years’ service before they can bring that type of claim. From January 1 2027, that qualifying period will reduce to six months.

This means employees will gain legal protection much earlier in the employment relationship. As a result, you will need to identify concerns, provide support and make decisions much sooner than many businesses are currently used to.

Another major change is the removal of the £118,223 compensation cap for successful Employment Tribunal claims. This could significantly increase financial exposure for employers, particularly where senior employees have higher salaries, bonuses, benefits or long-term loss of earnings.

Employees will also have longer to bring a claim. The current three-month time limit will extend to six months, giving individuals more time to seek advice and decide whether to proceed.

A further change, due to take effect in October of this year, concerns ‘fire and rehire’. In most cases, dismissing and re-engaging employees to make contractual changes will become automatically unfair. You are only likely to be able to rely on this approach in very limited circumstances, usually where there is a clear and genuine financial necessity.

What this means for probationary periods

Many employers currently use six-month probation periods as standard. Under the new rules, that timeline will sit very close to the point at which unfair dismissal protection begins.

This means probation periods will need to be managed far more actively than before.

Rather than waiting until the end of probation to assess performance, managers should be holding regular check-ins, setting clear expectations and providing feedback throughout the process. These conversations should not only focus on concerns, but also recognise progress, provide encouragement and help new employees settle successfully into the business.

Of course you’ll want new starters to succeed, and regular communication gives employees the best possible chance to do exactly that.

You may decide to shorten probation periods or introduce earlier formal review points, allowing enough time for decisions to be made fairly and with clear evidence if concerns do arise.

How to prepare for unfair dismissal reforms

Although the unfair dismissal reforms are still ahead, if you’re making hiring decisions now you will already be affected once the changes come into force.

A good starting point is to review your probation, disciplinary and performance management procedures. The earlier concerns are identified and addressed, the easier they are usually to manage fairly and constructively.

Manager training will also become increasingly important. Many managers are promoted because they are star performers, but handling difficult conversations around performance, behaviour or capability requires a different skill set. Giving managers practical guidance and support can make a significant difference to both employee experience and legal risk.

As part of any review of contracts, policies and handbooks for the SSP changes, it also makes sense to update documentation ahead of the unfair dismissal reforms at the same time.

With the compensation cap being removed, it is also worth assessing your potential exposure now, particularly for senior or higher-paid roles where salary, commission, bonuses and notice periods could significantly increase the value of a claim.

We are currently offering a free audit to help businesses identify any gaps in their documentation, processes and manager practices ahead of the reforms.

Speak to an HR specialist

The changes to SSP and unfair dismissal are some of the most important developments in employment law in recent years. Now is the right time to make sure policies, processes and documentation are up to date and working effectively in practice.

Getting the right HR support in place early can help you feel more prepared, reduce risk and create a more consistent experience for employees and managers. We can help with tailored HR advice, policy and handbook reviews, manager training, and support with absence management, performance concerns and employee relations processes.

Watch our webinar recording on Unfair Dismissals.

We hosted a webinar with employment law specialists Herrington Carmichael to explore what the Employment Rights Act 2025 means in practice, and what you should be doing now to prepare.

The session covered the unfair dismissal reforms, with a focus on the everyday HR decisions they are likely to affect, including absence management, probation and performance.

You can watch our webinar recording here on our YouTube channel.

If you have any questions about the new SSP or unfair dismissal rules, please contact our team at info@realityhr.co.uk or call 01256 328 428.

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