UK Employment – 2025 Recap and Key Actions for 2026

This is a time of major change for employers in the UK.  In this alert we have recapped major actions for UK employers from developments from 2025 and have flagged the key changes to prepare for in 2026 and beyond.

The Employment Rights Act 2025 ( “the ERA”) has now passed into law, and sets the tone for the next two years, with staged implementation affecting many aspects of employment law, including dismissal rights, harassment prevention duties and rights of zero hours workers (amongst many others). Alongside this, the failure-to-prevent fraud offence is now live for large organisations, ACAS early conciliation has been extended and there are new limits on the scope of NDAs and guidance on the handling of Data Subject Access Requests. Looking ahead, further reforms on non-competes, employment status, misconduct in Financial Services-regulated firms, EU platform work and pay transparency will require proactive planning across contracts, policies, training and governance for many employers.

We are currently working with clients on the following key employment actions for 2026:

• Review core employment policies: update family‑friendly, sickness absence, whistleblowing and anti‑harassment policies to reflect recent and upcoming leave changes (including day‑one rights for certain leave from April 2026) and the new duty to take all reasonable steps to prevent sexual harassment (from October 2026).
• Revise probation and performance frameworks: align probationary periods, capability processes and documentation with the reduced six‑month qualifying period for unfair dismissal due to take effect on 1 January 2027 (noting that employees hired from 1 July 2026 onwards will have protection if still employed by this date).
• Prepare for fire‑and‑rehire restrictions: consider whether contract flexibility provisions (e.g. mobility, duties, hours) should be introduced or clarified now, to prepare for new restrictions expected from October 2026.
• Review access to gender segregated spaces: we expect the equalities regulator, the EHRC’s guidance shortly, updated to reflect the 2025 landmark ruling that sex under the Equality Act 2025 refers to biological sex.
• Update NDA and confidentiality templates: ensure that non-disclosure agreements and settlement agreements do not prevent victims of crime from making certain ‘Permitted Disclosures’.
• Implement fraud‑prevention procedures: organisations that are in scope (see below) should consider implementing or reviewing existing fraud risk assessments and prevention practices.
• Pay transparency and gender equality: employers with an EU workforce should prepare for the new obligations by auditing pay structures, removing pay‑secrecy clauses and defining objective pay/progression criteria.
• Strengthen sexual‑harassment prevention: conduct and document risk assessments; ensure that training and reporting channels meet the ‘all reasonable steps’ duty from October 2026.
• Review social media usage and disciplinary policies: to reflect the latest guidance from 2025 case law, reflecting that disciplinary action for comments made on social media needs to reflect whether the post was the employee’s own or a re-post, whether the views expressed are relevant to the employee’s role and the impact on the reputation of the employer – as well as the level of offence caused.

Data Subject Access Requests

The data privacy regulator, the ICO, has published guidance on the handling of data subject access requests reflecting changes under the Data (Use and Access) Act 2025.

Key changes for employers are the following:

Only a “reasonable and proportionate” search needs to be carried out in response to data subject access requests. The volume of information to be searched, the circumstances of the search and the difficulty in accessing different sources are all relevant – although still need to be weighed against the data subject’s “fundamental” right of access. Legislators considered and rejected a right to reject complaints which were “vexatious” which would have been helpful to employers.

The one-month deadline (three months for complex requests) is paused where the controller reasonably needs clarification in order to progress the search.

Companies rejecting a complaint should notify data subjects of the company’s internal complaints procedures as well as the possibility of complaining to the ICO.

Our privacy team’s fuller overview of the UK’s Data (Use and Access) Act is here: Data, Privacy & Security Report - June 2025 | Index

ACAS Early Conciliation

From 1 December 2025, the period for the ACAS Early Conciliation period has been extended from 6 to 12 weeks, to try and reduce the pressures on ACAS regarding demand and the complexity of cases they are dealing with

Failure to Prevent Fraud Offence

From 1 September 2025, the Economic Crime and Corporate Transparency Act 2023 introduced a strict liability ‘failure to prevent fraud’ offence applicable to “large organisations” that meet two of three thresholds: (a) more than 250 employees; (b) over £36 million turnover; and/or (c) over £18 million in total assets.

An organisation can be criminally liable when an associated person commits a Schedule 13 fraud offence (e.g. fraudulent trading, fraud by abuse of position) on its behalf with intent to benefit the organisation or its customers. Criminal liability can arise even if the benefit is non-financial. Convictions can attract unlimited fines.

In the event an organisation is prosecuted for this offence, it will need to demonstrate to the court that it had reasonable fraud prevention measures in place at the time the fraud was committed.

The Home Office has published guidance that organisations can follow to implement reasonable prevention measures. It is structured around six guiding principles: top-level commitment; risk assessment; proportionate preventative procedures; due diligence; communication and training; and monitoring and review. Practical measures may include clear disciplinary consequences, access controls for sensitive data, well-being monitoring tied to fraud risk, third‑party risk tools, and proportionate, risk-based training, alongside robust monitoring and investigation frameworks.

Restrictions on use of Non-Disclosure Agreements (From 1 October 2025)

The Victims and Prisoners Act 2024 came into effect on 1 October 2025. Since this date, any non-disclosure agreement (“NDA”) terms have been unenforceable to the extent they seek to prevent a victim of crime (or a person who reasonably believes they are a victim of crime) from making a ‘Permitted Disclosure’.

Permitted Disclosures include (but are not limited to) disclosures from the victim to:

• Police or other bodies which investigate of prosecute crime – for the purpose of helping them investigate or prosecute the crime;
• Qualified lawyers – for the purpose of obtaining legal advice regarding the crime;
• Regulated professionals (e.g. doctors, teachers or social workers) – for the purpose of obtaining professional support or help related to the crime.
• Victim support services (e.g. helplines, counselling, charities that offer confidential support) – for support and recovery from the crime.
• Regulators that oversee the ‘regulated professionals’ mentioned above (e.g. the General Medical Council for doctors) – for example, so the victim can report the crime to the relevant regulator or to co-operate with their investigations.
• Close family – for the purpose of obtaining support in relation to the crime. Close family includes a child, parent or partner.

Companies should ensure that these Permitted Disclosures are carved out of NDAs (which includes settlement agreements that have non-disclosure/confidentiality clauses).

The government also plans to pass legislation to prohibit NDAs and Confidentiality Agreements that would prevent workers from speaking about harassment. There will be limited exceptions which may include where the provision is part of a settlement agreement on which the individual has taken legal advice.

FCA Regulation

Companies with entities in the regulated financial services sector should be aware that the regulator, the FCA, will be expanding its conduct rules (COCON) from 1 September 2026 to make clear that a broader range of non‑financial misconduct, including bullying, can amount to a breach at all firms subject to the Senior Managers and Certification Regime (SMCR).  Whether there is a breach will depend on factors including the level the perpetrator is at in the organisation, the duration of the conduct, whether it is part of a pattern, and what its impact is.  Both compliance and disciplinary policies should be reviewed ahead of the 1 September change date.

Budget Changes - Salary Sacrifice Pension Changes (From April 2029)

Under current rules, employers and employees have the benefit of National Insurance Contribution (“NIC”) and Income Tax relief on any amounts paid into pensions via salary sacrifice (subject to certain National Minimum Wage and annual allowance restrictions).

As announced in the Autumn 2025 Budget, however, from 6 April 2029 only the first £2,000 per employee, per tax year, of pension contributions made via salary sacrifice will continue to be exempt from NICs. Employee contributions above this cap will be subject to both employer and employee NICs.

Employer pension contributions other than by way of salary sacrifice will remain exempt from NICs. The Income Tax treatment of pension contributions will remain unchanged.

Employment Rights Act

The Employment Rights Act 2025 — Legislative Journey and Core Changes

The Employment Rights Act 2025 (“the ERA”) finally became law on 18 December 2025, with many provisions to take effect during 2026. The Government made late changes to secure passage of the Act, notably reducing the unfair dismissal qualifying period from two years to 6 months (reversing the pledge for day-one protection) and removing the cap on unfair dismissal compensation.

The government has committed to at least 26 consultations post‑Royal Assent, including zero-hours contracts and day-one rights, reflecting a phased and consultative implementation model.

ERA Implementation Roadmap — Key Timings and Measures

Below we note some key dates and changes from the Government’s Implementation Roadmap.

From 18 December 2025

• Repeal of various restrictions on strike action in the Trade Union Act 2016 and the Strikes (Minimum Service Levels) Act 2023.

From April 2026

• Maximum protective awards for collective redundancies to double from 90 to 180 days per employee.
• ‘Day one’ rights to paternity leave (instead of 26 weeks, as at 15 weeks before the expected birth week) and unpaid parental leave (instead of one year).
• Removal of lower earnings limit and waiting period for statutory sick pay.
• Disclosures about sexual harassment will expressly amount to a protected disclosure for the purpose of whistleblowing protection.

From October 2026

• Employer obligations to take ‘all’ reasonable steps to prevent sexual harassment and a new duty to prevent third-party harassment (of any type).
• Trade union enhanced rights including right of access to workplaces and a requirement to tell employees of their right to join a union as part of their employment terms.

Date TBC – no earlier than October 2026

• Extending Employment Tribunal time limits for most claims from three to six months.

From 1 January 2027

• Minimum length of service to qualify for unfair dismissal protection reduces from 2 years to 6 months. This means that employees hired from 1 July 2026 onwards will have unfair dismissal protection if still employed as at 1 January 2027.
• Cap on compensation for unfair dismissal to be removed (currently capped at the lower of one year’s pay and £118,223).
• Automatically unfair to dismiss an employee for refusing to agree to changes to key contract terms (fire and rehire) except in narrow situations of extreme financial distress (to be consulted on).

From 2027 – Date TBC

• Right to unpaid bereavement leave.
• New regulations on zero hours contracts for employees and agency workers - rights to guaranteed hours based on a reference period (expected to be 12 weeks); right to reasonable notice of shifts and compensation for short-notice cancellations.
• Flexible work requests - employers must now state the reasons for refusing a request and be able to demonstrate that the refusal is reasonable 
• Mandatory action plans to address gender pay gap and support menopausal employees (for employers with 250+ employees only).
• Enhanced protection for pregnant workers, those on maternity leave and those who have returned from maternity leave in the past 6 months.
• Expanded collective redundancy consultation triggers.

EU Updates

Pay Transparency Directive – 2026 Implementation

The EU Pay Transparency Directive is to be implemented by all Member States by June 2026 sets a high bar for openness on pay. It requires employers with 100+ workers to conduct gender pay reporting, to remedy any unexplained ≥5% gaps within six months, as well as for all employers to disclose pre‑employment pay ranges and refrain from asking salary history, to publish objective criteria for pay and progression, to provide employees with average pay data by sex for the same or equal‑value work, and to ban pay secrecy clauses. Despite the headline of “transparency,” the Directive also requires all employers to revisit their pay structures by aligning to specific gender-neutral criteria and be ready to provide that justification to employees on request.

Whilst the UK is not a Member State and is not subject to the Directive, it has its own equal pay regime. Employers with 250+ employees must already report their gender pay gap data and from 2027 (as per the Employment Rights Act) those employers must also publish gender equality action plans. UK employers should audit pay data, identify and address unjustified disparities, define categories of work of equal value, prepare for cultural and industrial‑relations impacts, mitigate litigation risk, and update documentation to remove pay secrecy provisions.

The UK Government separately issued a call for evidence in 2025 regarding potential reforms closely aligned to the Directive: salary ranges in adverts, salary‑history bans, disclosure of pay structures and progression criteria, employee access to equal‑value pay comparisons, and proactive steps to prevent equal pay breaches. It is, therefore, possible that further changes similar to those envisaged under the Directive will be implemented in the future.

EU Platform Workers Directive – Implementation by 2 December 2026

The Digital Platform Workers Directive is to be implemented by Member States by 17 December 2026. It applies to digital labour platforms operating in the EU—regardless of where they are based—defined by services provided at a distance via electronic means, at the request of a recipient, involving organisation of work, and using automated monitoring or decision‑making systems. 

The Directive introduces robust rules on algorithmic management and transparency, requiring consultation with worker representatives (or directly with workers) for changes to automated monitoring, disclosure of metrics such as average hours worked and income, and an enhanced role for human decision‑makers. It provides legal protections against adverse consequences arising from algorithmic selection and obliges Member States to set deterrent penalties, including possible administrative fines up to EUR 20 million or 4% of worldwide annual turnover, whichever is higher.

Other Potential Changes in 2026

Non-Compete Reform

In November 2025, the UK government launched a working paper inviting views on options for the proposed reform of non-compete clauses in employment contracts. Views can be submitted by individuals and organisations until 18 February 2026.

There are five different options for review presented in the paper, as follows:

1. A statutory limit on the length of non-compete clauses: this would potentially be three months (as proposed by the previous government) although the paper invites views on other durations.
2. A statutory limit on the length of non-compete clauses according to company size: an example is given of 3 months’ limit for companies with over 250 employees and 6 months for companies with fewer than 250 employees.
3. A ban on non-complete clauses: this would make non-competes unenforceable in their entirety (as is already the case in some U.S. states).
4. A ban on non-compete clauses below a salary threshold: this would aim to protect lower-paid workers from having a period of time out of work or facing disproportionate costs of challenging a non-compete clause.
5. Combining a ban below a salary threshold and a statutory limit of three months on the length of non-compete clauses: this would ensure that non-compete clauses are eliminated for lower-paid workers whilst also giving limits on their use for higher earners.

Once the consultation closes we will wait to see whether the Government plans to progress any of the options. Given there will be a great deal of work associated with the implementation of the Employment Rights Act (see below) over the next couple of years, in our view it is unlikely that non-compete reform will be implemented for some time. In anticipation, however, employers can start to ensure that employment contracts include adequate notice periods and garden leave provisions to delay employees from starting new employment, and that other appropriate protections are included (for example, non-solicitation, team move - and potentially non-deal restrictions which are not currently in scope of any reforms). 

Employment Status Consultation

The Government has committed to consulting in 2026 on reforming employment status, potentially removing the distinction between "employees" and "workers" versus self-employed contactors. “Workers” have “halfway house” rights and benefits, between employees and contractors. Their benefits include annual leave, pension, minimum wage and potentially sick pay, and protections including a right to a statement of terms and protection against discrimination and whistleblowing – but not unfair dismissal protection like employees.

This area is overdue for simplification not least because the employment rights and tax status tests also differ.