The UK employment landscape is currently undergoing its most significant shift in decades. For years, employers have operated under a familiar set of rules: a two-year "buffer" before employees could claim unfair dismissal, waiting periods for sick pay, and caps on how much a tribunal could award.
The Employment Rights Act 2025 has effectively torn up that rulebook.
While these changes aim to boost job security and worker rights, they present a massive compliance challenge for business owners and HR departments. Many companies in England and Wales are still operating on autopilot, relying on outdated contracts and management styles that could lead to costly tribunal claims.
As employment law solicitors UK, we are seeing a surge in inquiries from concerned employers. To help you stay ahead, we’ve identified the seven most common mistakes businesses are making with the new Act: and, more importantly, how you can fix them before they become legal liabilities.
1. Relying on the "Two-Year" Safety Net
For a long time, the two-year qualifying period for unfair dismissal was a cornerstone of UK employment. It gave employers a long window to assess a new hire’s fit. If it didn't work out within 24 months, a dismissal was relatively straightforward (excluding "automatically unfair" reasons).
The Mistake: Many employers still believe they have two years to "decide" on an employee.
The Reality: Under the new Act, the qualifying period for unfair dismissal is being slashed to just 6 months (effective from 1 January 2027). This means your window for "easy" exits has shrunk by 75%.
How to Fix It:
You must overhaul your recruitment and performance management. If a new hire isn't performing, you need to address it: and potentially conclude the employment: within the first five months. Waiting until month seven will now expose you to a claim for unfair dismissal. If you find yourself in a situation where a quick exit is necessary but the deadline has passed, consulting unfair dismissal solicitors UK is essential to mitigate risk.
2. Missing the "Day-One" SSP Deadline
Statutory Sick Pay (SSP) used to have a built-in "waiting period." Employees generally had to be off for three consecutive days before the payment kicked in on day four. Furthermore, there was a Lower Earnings Limit (LEL) that excluded the lowest-paid workers from receiving SSP at all.
The Mistake: Assuming the three-day waiting period still applies or that low-wage part-timers aren't eligible for sick pay.
The Reality: From 6 April 2026, SSP becomes a day-one right. The waiting period is gone, and the Lower Earnings Limit has been removed.
How to Fix It:
Update your payroll systems and sickness policies immediately. You need to budget for increased sick pay costs, especially for part-time or low-income staff who were previously ineligible. Ensure your managers understand that every day of sickness now carries a statutory cost from the very first minute.
3. Treating Paternity Leave as an "Earned" Perk
In the past, fathers or partners had to complete 26 weeks of continuous service to qualify for paternity leave. This gave employers time to settle a new hire in before they took extended time off.
The Mistake: Denying paternity leave requests for new hires who haven't "put in the time" yet.
The Reality: Paternity leave: alongside unpaid parental leave: is now a day-one right (from 6 April 2026).
How to Fix It:
Your employee handbook likely still lists the "26-week" or "one-year" eligibility criteria for various family leaves. These clauses are now legally void. You must update your parental leave policy to reflect that any employee, regardless of their start date, is entitled to these rights. Failure to grant these rights could lead to claims of discrimination or automatic unfair dismissal.
4. Underestimating the "Uncapped" Compensation Risk
Perhaps the most daunting change for employers is the removal of the statutory cap on the compensatory award for unfair dismissal. Historically, there was a maximum limit on what an employee could be awarded (unless the case involved discrimination or whistleblowing).
The Mistake: Budgeting for tribunal losses based on the old statutory caps.
The Reality: From 1 January 2027, the cap is removed. This means the financial liability for a single poorly handled dismissal could theoretically reach hundreds of thousands of pounds, depending on the employee’s salary and future loss of earnings.
How to Fix It:
The stakes for getting a dismissal "wrong" have never been higher. You can no longer treat a tribunal award as a "calculable business cost." To protect your company, every dismissal must follow a rigorous, legally compliant procedure. If you are unsure about the process, seeking advice from employment law solicitors UK is no longer optional: it is a survival strategy.
5. Using Outdated "Fire and Rehire" Tactics
"Fire and rehire": the practice of dismissing employees and offering them a new contract on inferior terms: has been a common (though controversial) tool for corporate restructuring.
The Mistake: Using dismissal as a way to force through changes to pay or hours to save money.
The Reality: The Act makes "fire and rehire" automatically unfair from 1 January 2027. There is a very narrow exception for employers in "severe financial difficulty" who have no other choice, but the threshold for this is incredibly high.
How to Fix It:
If you need to change contractual terms, you must focus on genuine consultation and mutual agreement. Forced changes are now a legal minefield. If your business is struggling and you believe restructuring is the only way forward, you need a specialist settlement agreement solicitor UK to help navigate the exit or transition of staff legally.
6. Neglecting the Importance of Settlement Agreements
With the removal of the compensation cap and the shortening of the unfair dismissal window, the courtroom has become a much scarier place for employers.
The Mistake: Thinking you can "handle" a difficult exit through a standard dismissal process without formal protection.
The Reality: Even a "fair" dismissal can be challenged, and with uncapped awards, a disgruntled employee has every incentive to sue.
How to Fix It:
Settlement agreements are becoming the gold standard for high-risk exits. By offering an enhanced severance package in exchange for the employee waiving their right to bring a claim, you buy "certainty." Given the new risks under the 2025 Act, working with a settlement agreement solicitor UK to draft robust agreements is the best way to avoid the unpredictability of an uncapped tribunal award.
7. Failing to Conduct a Comprehensive Policy Audit
The final mistake is simply doing nothing. Many business owners believe that because some of these changes don't kick in until 2026 or 2027, they have plenty of time.
The Mistake: Waiting until the week before the deadline to update contracts.
The Reality: The transition period is when the most mistakes happen. If you hire someone today, they will hit their 6-month mark right as the new laws come into force.
How to Fix It:
You need a full audit of your HR documentation. This includes:
- Employment Contracts: Updating probation periods and leave eligibility.
- Staff Handbooks: Removing mentions of the "two-year rule" and "SSP waiting days."
- Manager Training: Ensuring your team knows how to manage performance tightly within that new 6-month window.
Conclusion: Don't Face the New Act Alone
The Employment Rights Act 2025 is designed to give power back to the workforce. While that’s a positive step for society, it places a significant burden of proof and financial risk on you, the employer.
At Tyndel Solicitors, we specialise in helping businesses navigate these complex transitions. Whether you need an audit of your current contracts, advice on a difficult redundancy, or a settlement agreement solicitor UK to manage a sensitive exit, our team is here to provide the professional integrity and legal expertise you need.
Ready to protect your business? Contact Tyndel Solicitors today for a consultation on how the new Act affects your specific workforce.
