UK Employment Law Reforms: What to Expect in 2025–2027

The Employment Rights Bill is not just a long-term vision, it introduces landmark reforms with some immediate changes and tight deadlines. With certain measures, such as the new day-one rights, due to take effect as early as April 2026, employers will have as little as nine months to prepare and adapt.

 

The scale of reform is significant:

• Legal and Financial Pressures: Stronger protections will bring greater scrutiny to pay practices, especially for hourly workers, requiring employers to ensure wages fully comply with complex legislation.
  
  
• Operational Challenges: Changes such as occupational sick pay from day one of absence will demand better systems for absence tracking and seamless payroll integration — a logistical shift that is far from simple.
  
  
• Tax and Payroll Implications: Every policy change ripples into employment tax and payroll processing, making compliance not just a legal necessity but also a financial and administrative challenge.
  
  

For employers, these reforms mean more than updating contracts and policies,  they require end-to-end readiness across HR, payroll, and compliance systems. Without careful planning, businesses risk non-compliance, financial penalties, and reputational damage.

 

In 2025, the government will initiate several foundational measures:

• Sick Pay Expansion: Approximately 1.3 million low earners will gain access to statutory sick pay for the first time.
  
  
• Parental Leave Entitlements: Employees will receive day-one rights to paternity and unpaid parental leave.
  
  
• Fair Work Agency Establishment: A new agency will be launched to enforce employment rights and ensure compliance.
  
  

These steps are designed to provide immediate benefits to workers while allowing businesses time to adapt.

The year 2026 will see the introduction of several key reforms:

• Day-One Employment Rights: Employees will be protected from unfair dismissal from their first day of employment.
  
  
• Enhanced Family Leave: Improvements to maternity and paternity leave will be implemented.
  
  
• Zero-Hours Contracts Ban: Most zero-hours contracts will be abolished, providing greater job security.
  
  
• Flexible Working Default: Flexible working arrangements will become the default, with employers required to justify any refusal.
  
  
• Minimum Wage Adjustments: The minimum wage structure will be reformed to ensure fairer pay across all age groups.
  
  

These changes are expected to significantly improve working conditions and employee satisfaction.

In 2027, the final phase of reforms will be implemented 

 

• Employment Status Clarification: A two-part framework for defining employment status will be introduced, impacting eligibility for minimum wage and other rights.
  
  
• Continued Consultations: Ongoing discussions with employers, workers, and trade unions will refine and adjust policies to ensure they meet the needs of all stakeholders.
  
  

These measures aim to provide long-term clarity and stability in the workforce.

 

 

While these reforms are designed to benefit workers, they also present challenges and opportunities for employers:

• Increased Compliance Costs: Businesses may face higher costs due to expanded sick pay, parental leave, and the need to adjust to new employment standards.
  
  
• Enhanced Employee Engagement: Improved working conditions can lead to higher employee morale and productivity.
  
  
• Need for Policy Adjustments: Employers will need to update contracts, HR policies, and training programs to comply with new regulations.
  
  

Employers are encouraged to stay informed and prepare for these changes to ensure a smooth transition.

The government remains committed to engaging with all stakeholders throughout the implementation process. Regular consultations will help refine policies and address any emerging issues. Employers, workers, and trade unions are encouraged to participate in these discussions to shape the future of employment law in the UK.

 

These reforms represent a significant shift in UK employment law, aiming to create a fairer and more secure working environment for all. Employers and employees alike should stay informed and prepared for the upcoming changes.

 

With sweeping employment law reforms rolling out between 2025 and 2027, many organisations will face challenges in keeping policies, contracts, and compliance processes up to date. This is where modern HR technology — particularly OpenHR, can play a crucial role:

 

• Automated Compliance: HRIS platforms can track upcoming legislative changes, update contract templates, and ensure sick pay, parental leave, and flexible working entitlements are correctly applied.
  
  
• Policy Management: Centralised document management helps HR teams roll out updated policies and provide employees with easy access to the latest rights and entitlements.
  
  
• Employee Data Insights: HR Analytics within HRIS software can highlight trends in absence, flexible working uptake, or parental leave, helping employers adapt to new entitlements effectively.
  
  
• Improved Employee Experience: OpenHR tools make it easier for employees to request leave, track working hours, or access benefits, aligning with the push towards transparency and fairness.
  
  
• Scalability for SMEs: For small and medium-sized businesses facing new compliance burdens, cloud-based HR systems provide affordable ways to stay legally compliant without overloading internal teams.
  
  

By integrating HR technology into their operations now, employers can reduce risk, save administrative time, and focus on creating a workplace culture that benefits from — rather than struggles under — the upcoming employment law reforms.

 

 

 

References:

Associated Press. (2025, July). UK’s new Labour government unveils overhaul of workers’ rights. AP News. Article

 

UK Government. (2025). UK labour market enforcement strategy 2025–26: Annex B (large print). Article

 

KPMG UK. (2025). UK government confirms key dates in Employment Rights Bill roadmap. KPMG. Article

 

Garside, J. (2024, 10 October). Employers must protect workers from sexual harassment under new employment bill. The Guardian. Article

 

The Times. (2024). Autumn of discontent as new employment rights enter enterprise network. The Times. Article

 

KPMG UK. (2025). UK government confirms key dates in Employment Rights Bill roadmap. KPMG. Article