Employment Law Updates for 2026: United Kingdom
The United Kingdom is preparing for one of the most significant reforms of labour law in recent years. The Employment Rights Bill, which was introduced in autumn 2024, provides for far-reaching reforms in the areas of remuneration, leave, legal proceedings, flexible working, dismissal and trade union rights. Although some proposals have been modified and royal assent came later than expected, phased implementation will begin in April 2026, with further measures to be introduced in 2027. For employers, the lead-up period is the perfect opportunity to review their policies, contracts and HR practices before these changes come into force.
In this blog, we explore the key aspects of these developments and what they mean for employers in everyday practice. We, as Parakar, can support your organization in dealing with these changes, complying with regulations, and translating new requirements into manageable, day-to-day processes.
A new fair work agency
One of the most significant reforms is the creation of a fair work agency, which is expected to be fully up and running in 2026-2027. This body will consolidate the enforcement of labour laws and deal with everything from minimum wage and holiday pay compliance to statutory sick pay and temporary agency work. The agency will not wait for complaints, but will proactively carry out inspections and impose civil penalties for non-compliance. Employers must have their payroll records, working time records and contract details ready for inspection, as enforcement will become stricter.
Strengthening ACAS and early dispute resolution
Dispute resolution is about to undergo a major reform. ACAS will play a stronger role, particularly in the areas of dismissal, compensation and disputes over flexible working. Early resolution will become even more important, and procedural missteps could prove costly. Clear documentation, consistent decision-making and timely legal input will be essential to staying on the right side of the law.
Unfair dismissal qualifying period
The landscape of unfair dismissal is changing dramatically. From 2027, the qualifying period will be cut from two years to six months, while the statutory cap on damages will be removed entirely. This means that dismissals, even at an early stage of employment, will be subject to much stricter scrutiny and potential payouts could be significantly higher. Employers will need robust probationary periods, clear performance documentation and fair processes to mitigate risk.
Employment tribunals
The tribunal reforms are expected to lead to an increase in the overall number of claims from 2026 onwards. Although the bill does not substantially reform the legal system, the combination of more extensive employee rights, higher financial risks and stricter enforcement is expected to lead to more and more attractive lawsuits for claimants.
Removal of the maximum compensation for unfair dismissal
Big changes are coming for unfair dismissal claims. Last-minute changes to the Employment Rights Bill have removed the legal limit on compensation. Previously, payments were limited to the lower of 52 weeks’ salary or a fixed maximum. Under the new rules, there is no limit, which means that potential exposure could be significant, especially for senior or high-earning employees. Although the exact start date has yet to be confirmed, the change is expected to come into effect in January 2027, together with the shortened six-month qualification period. For employers, this means higher dismissal risks, potentially larger settlements and greater challenges in reaching an early resolution.
Requests for flexible working
In 2027, big changes are coming in the area of flexible working. Employers will have to justify any refusal with clear, evidence-based reasons. With courts becoming increasingly strict in their checks, it will no longer be enough to simply have a policy on paper. Companies may need to reconsider how deeply flexible working is embedded in their culture, especially for roles that are traditionally considered less flexible.
Reform of statutory sickness pay
Starting in April 2026, statutory sickness pay (SSP) will start from the first day, eliminating the current three-day waiting period. The income threshold will also be removed, meaning that more low-paid employees will now be entitled to it. The rate will be either the statutory flat rate or 80% of weekly pay, whichever is lower. For employers who do not yet offer increased sickness benefits, this may increase costs and draw attention to the effective management of short-term absenteeism.
Thresholds for collective redundancies
The rules on redundancies will be revised in 2027. The threshold for collective consultation will be raised from 20 redundancies at a single location to 20 redundancies across the entire company. For employers with multiple locations, this may mean that they will have to engage in ongoing consultation and plan earlier when the workforce is being reduced in phases or at different locations.
Higher protective payments for violating the rules on collective redundancies
As of April 2026, the maximum protective payment for non-compliance with the rules on collective consultation will be doubled, from 90 days’ pay to 180 days’ pay. This makes early preparation, clear communication and accurate administration more important than ever when implementing redundancies.
Reforms to trade union legislation
Trade union rights will develop in stages between 2026 and 2027. Initial changes will include shorter strike notice periods, simpler voting procedures, longer strike mandates and no requirement for picket supervisors.
Later reforms will facilitate union recognition, introduce electronic voting, expand access to workplaces and require that employees be informed of their union rights. Protection for union representatives, such as safeguards against blacklisting, will also be strengthened. Overall, these reforms are likely to stimulate union activity and reshape labour relations in many sectors.
Zero-hour and low-hour contracts
The proposed changes to zero-hour and low-hour contracts are expected to come into force in 2027. Employers might have to offer guaranteed hours based on a reference period, give advance notice of shifts, and provide compensation for cancelled or reduced hours. When these changes are implemented, they could increase administrative complications and labour costs, requiring a review of existing staffing strategies.
Dismissal and reappointment
From October 2026, terminations related to an employee’s refusal to accept contractual changes, usually called ‘fire and rehire’, will be automatically considered wrong. Exceptions will only apply in extreme cases where financial survival is at stake and no reasonable alternatives exist. This means that consultation and negotiation will be more important than ever when implementing contractual changes.
Obligation to prevent sexual harassment
In April 2026, a new legal obligation will come into force, requiring employers to take all reasonable measures to prevent sexual harassment. This includes harassment by colleagues, customers and contractors. Employers will be expected to tighten their policies, provide training, assess risks and maintain effective reporting systems. The protection of whistleblowers will also be extended to reports relating to sexual harassment.
Enhanced protection during pregnancy and family leave
From 2027, dismissals during pregnancy, maternity leave and the six months following return to work will be severely restricted, with exceptions in very limited cases.
Protection of this kind could be extended to adoption, shared parental leave, neonatal care and paternity leave. Employers will need thoughtful planning, strong documentation and a sensitive approach when dismissing protected employees.
Rights from day one for family and bereavement leave
From April 2026, paternal leave and unpaid parental leave become a right from day one. Parents can now take paternal leave after shared parental leave, offering more flexibility after birth or adoption.
A new right to one week of unpaid bereavement leave from day one will also be introduced, including cases of pregnancy loss before 24 weeks. Employers will need to adapt their HR systems and family leave policies to reflect these expanded rights.
How Parakar can support
Expanding into the United Kingdom provides access to talented personnel and a dynamic economy, but navigating employment law, taxation, and administrative requirements can be challenging. That’s where Parakar comes in. We offer tailor-made HR solutions to help your company hire staff quickly, compliantly, and efficiently, without having to set up a local entity. From drafting employment contracts that comply with British law to setting up payroll and statutory benefits, we take care of the complex legal and administrative tasks so you can focus on growing your business.
Do you manage remote employees? Parakar makes sure your team is effectively onboarded, paid and fully compliant with UK employment law, whether they work in London, Manchester or remotely elsewhere in the country. We also offer comprehensive support in the area of HR administration and employee relations guidance, enabling you to handle disputes, maintain a positive work culture and fully comply with UK employment law. With Parakar, expanding into the United Kingdom is simple, secure and stress-free.
Get in touch with Parakar today to ensure your business is fully equipped to handle these important responsibilities, allowing you to focus on what truly matters, supporting your employees.
