The Employment Rights Act 2025 has passed its parliamentary debates and is set to bring major changes to UK Employment Law.
Employers now face a limited time to ensure their payroll systems and processes are ready for the upcoming reforms.
What reforms will the Employment Rights Act 2025 bring?
The key regulations of the Employment Rights Act will come into effect on the common commencement dates of 6 April or 1 October.
From April 2026, Statutory Sick Pay (SSP) will be more accessible, with the removal of the Lower Earnings Limit (LEL) and the waiting period.
Paternity leave and unpaid parental leave will also become day-one rights, meaning payroll and leave-tracking systems will need to apply statutory entitlements from the start of employment.
A new Fair Work Agency (FWA) will be introduced, along with a simplified trade union recognition process, shorter employment tribunal time limits and enhanced protections for whistleblowers and against sexual harassment.
From October 2026, changes to tipping laws will require fair distribution of tips through payroll, particularly in the hospitality sector.
These reforms will have a significant impact on your payroll system and careful planning is essential to stay compliant.
How can you prepare your payroll for the Employment Rights Act?
Close collaboration between payroll and HR teams is crucial, as payroll policies will need to be updated to ensure accurate pay outcomes.
Employers should begin by reviewing employment contracts and payroll policies to ensure they are in line with the new reforms.
Training for managers on performance management and record-keeping during probation periods will be vital to minimise litigation risks.
Clear communication with employees is also key to help them understand the changes to pay, benefits and statutory entitlements, reducing the potential for disputes.
Why do your payroll policies and systems need to change?
These reforms introduce additional payroll and compliance requirements. Our team can provide financial and payroll advice to support your business in updating systems and implementing changes efficiently as the various elements of the Act take effect.
For expert payroll guidance and support in relation to these upcoming changes, please contact our team today.