What does the Employment Rights Act mean for your employee benefits strategy?

The Employment Rights Act 2025 came into force in December 2025. The new rules started rolling out in early 2026, with additional provisions due to come into force in 2027. The Act aims to improve job security, promote fair treatment, and ensure consistent enforcement by establishing a new Fair Work Agency. The Act also seeks to ensure that worker representatives can support employees when needed.

What does the Employee Rights Act include, and how could it affect your employee benefits strategy?

In this guide, we'll focus on the changes the Employee Rights Act makes to employee benefits. However, the Act introduces extensive changes to employment law, so we'll provide a brief overview here. At the time of writing (September 2026), some provisions are already in force, with more to follow, so we'll look at these separately.

Changes already in place

The changes already in force relate to trade unions, redundancy, the gender pay gap, menopause support, record-keeping, and administration.

They include changes to industrial action mandates, dismissal following strikes, recognition of trade unions and associated ballots, and a new collective redundancy protective award if employers fail to consult during a collective redundancy process.

There are new protections for employees who disclose sexual harassment. Employers must keep records of annual leave and holiday pay for at least six years. They're also encouraged to create gender pay gap and menopause action plans. This is currently voluntary but is expected to become mandatory for employers with at least 250 staff at some point in 2027.

Paternity leave and ordinary parental leave

Before the Employment Rights Act 2025 was enacted, parents had to meet eligibility criteria to qualify for ordinary parental leave and paternity leave. Ordinary parental leave entitles all parents to up to 18 weeks of unpaid parental leave to care for a child from birth until the child's 18th birthday. Previously, an employee needed to have worked for the same employer for a qualifying period of one year, but under the new act, it becomes a day-one right.

Fathers can also request paternity leave, which provides two weeks of paid leave from the first day of employment, and they can take it after shared parental leave if they wish.

Sick pay

Statutory sick pay used to begin from the fourth day of illness, and an employee had to earn at least £125 per week on average to qualify. The new act makes statutory sick pay (SSP) payable from the first day of illness and removes the lower earnings limit. This likely increases the number of people who will receive SSP, depending on their working patterns and pay levels. The previous threshold is lower than minimum wage for a full-time employee, but part-time or casual staff may qualify for the first time.

Menopause action plans

The new legislation recognises the potential impact of menopause on employee productivity and ability to participate in the workplace. Research suggests that up to 10% of women aged between 40 and 55 have left the workforce due to their symptoms. Menopause symptoms can also affect performance, but policies that support employees during menopause lessen the negative impact.

The act includes provisions for menopause action plans, which are currently voluntary. However, these will become compulsory at some point in 2027, depending on further legislation.

Upcoming changes

The Employment Rights Act has already made changes to employment law, but it will introduce other measures in the future. Separate legislation will provide further details before the rules come into force.

From the end of October 2026, employers will have a duty to take all reasonable steps to prevent sexual harassment in the workplace. This includes third-party harassment from clients or suppliers.

The Act increases employment tribunal time limits. There are also new provisions relating to trade unions' access to workplaces, collective redundancy and increased worker protections for employees who are union members or participate in industrial action. There are other industry-specific changes relating to catering and hospitality, adult social care and the seafaring industry.

One of the most significant changes relates to unfair dismissal claims. Under existing legislation, workers must have completed 2 years of service before they can make a claim for unfair dismissal. The new act shortens that period to 6 months.

Flexible working arrangements

Flexible working arrangements have become part of the business landscape over the past few years, with workers requesting them to help create a better work-life balance. These can involve flexible working hours, location, or both. Under the new legislation, any employer who refuses a request must tell the employee the business reason for the refusal and explain why they believe it's reasonable.

Government guidance provides 8 acceptable reasons for refusal. An employer can refuse a flexible working request if the changes will result in:

• Extra costs that will damage the business.
• Additional work that you can't distribute to other workers.
• Additional work for which the business can't recruit new staff to cover.
• A drop in quality.
• Performance issues.
• An inability to meet customer demand.
• No or minimal work to do during the requested working hours.

An employer can also refuse if they're planning to make changes to the workforce that will impact staffing levels or working patterns.

There are also proposed changes to zero-hours contracts, which some staff may use to achieve flexible working patterns. The legislation recognises that employers' use of zero-hours contracts can be exploitative and introduces a right to guaranteed working hours upon request. Employees will also be entitled to compensation for cancelled, shortened, or rearranged shifts, along with reasonable notice periods for any shift changes.

Bereavement leave

Currently, employers can grant bereavement leave based on what is reasonable for their business. However, the Act will create a statutory right to unpaid bereavement leave. Further consultations will take place to determine the minimum period and when the rights will apply.

Fathers and partners can take up to 52 weeks of unpaid bereaved partner's paternity leave if a child's mother dies. This is subject to eligibility criteria set out under separate employment law.

The Government created the Fair Work Agency, which opened on 7th April 2026, to bring together existing enforcement bodies and ensure companies comply with employment law, both new and existing provisions.

Changes in employment law that create new employee rights, working patterns, and entitlements to parental and bereavement leave will likely affect your business development and financial risk levels.

We recommend reviewing your employee benefits in light of the Employee Rights Act to ensure your current offering meets the new statutory requirements, so that you can make changes if needed. It's also worth considering whether you can enhance your existing benefits as part of your recruitment and retention strategies.

Seek professional advice

Professional advice will help you understand the employment law changes introduced by the Employment Rights Act. Some employee benefits may form part of an employee's written contract while others may have become contractual benefits through common usage and practice. It's a good idea to consult with employment lawyers, accountants and HR professionals to understand the new employment rights and receive practical guidance to ensure you meet your statutory duties and avoid discrimination that may lead to unfair dismissal claims.

Your accountant can also advise on your tax position and how to offset any cost increases resulting from the changes.

Statutory minimum benefits

The Act makes changes to the eligibility requirements for statutory minimum benefits, such as statutory sick pay, unpaid parental leave, and paternity leave. You must also continue to provide a workplace pension and meet minimum annual leave requirements. Professional guidance can help you identify employees who may qualify for certain statutory benefits for the first time, and adjust your working processes accordingly.

Review existing employee benefits

Reviewing your existing employee benefits may reveal that you already meet the new statutory requirements with your current policies. However, when carrying out a review, it's worth going further to assess whether your employee benefits package is competitive and meets employees' needs.

You can benchmark your benefits against your competitors based on the public information they provide. Also, consider your workforce demographics and whether your benefits reflect their life stages. For example, if many employees are starting families, parental leave and pay will likely be a priority. Talking to your employees or using surveys to seek their views will help you understand their expectations.

Consider usage data for paid schemes

It's a good idea to check usage data for paid schemes, such as health insurance, to assess your return on investment and identify which services employees value. However, you should bear in mind that employees may not engage with certain benefits because they don't know what's available.

Reviewing your communication strategy could help to increase engagement.

Changes to employment rights and your review may mean you need to adjust your existing employee benefits. As we've mentioned, seeking professional advice helps you avoid breaches of contract or unfair treatment. You can also introduce changes that reflect your team's needs and priorities. Changing suppliers can help you save money and provide improved benefits, but there are potential pitfalls.

Here are a few measures to implement if you're considering making changes to your employee benefits.

Employee consultations

Conversations with your employees ensure they understand the reasons for any proposed changes. The Employment Rights Act introduces significant employment law changes, meaning you'll likely need multiple training sessions and discussions to explain these. However, when focusing on benefits, staff forums, focus groups, and individual conversations allow staff to share their views once you've created a plan. You can then make further adjustments before implementing changes.

As mentioned, the Act provides for workplace access for trade unions, so it's worth inviting worker representatives to consultations.

Consult external stakeholders

Changes to benefits and working practices can impact third-party stakeholders as well as employees. You may already be communicating with them about your expectations following the changes to your duty to prevent sexual harassment and third-party harassment. Any changes to benefits can also affect your budget, company culture and reputation, impacting future investment and relationships with suppliers. Trade unions will be keen to engage with the process and support employees.

Get advice on supplier changes

Changing your suppliers can help you support employees with high-quality benefits while also making them more cost-effective.

Seeking professional advice ensures you comply with contractual agreements and understand the consequences should you need to break an existing contract. It can also help ensure that your new provider offers terms and conditions that are at least as good as those of your current provider. For example, changing your health insurance provider can result in reduced coverage or additional policy exclusions. A broker can help you compare quotes with your current policy and switch without incurring penalties.

Communicate clearly

Clear communication is vital during any change process, but it can also help to increase employee engagement with their benefits. This can help to boost morale, increase retention rates and attract recruits. An effective communication strategy is an ongoing process, with workplace training, emails highlighting benefits and central resources that employees can access when needed.

Fire and rehire protections

Change processes can be complex, particularly those involving pay, hours or contractual terms. Historically, some organisations have used dismissal and re-engagement (known as 'fire and rehire') to push through changes when negotiations stalled. The Act expressly removes this option. Dismissing an employee and rehiring them on worse terms and conditions will, in most cases, automatically be treated as unfair dismissal. Beyond the legal risk, the practice has drawn considerable public and media criticism in recent years, reminding us that stakeholder relationships and reputation are worth careful consideration throughout any change process.

Reviewing your employee benefits to ensure you comply with new employment law changes also allows you to enhance your benefits package. Some statutory changes may increase costs, but investing in insurance and introducing low-cost benefits can help mitigate them.

Sick pay

You must now pay statutory sick pay to employees from the first day of absence, and there is no minimum salary requirement, meaning your sick pay costs may increase. This could impact your ability to pay enhanced sick pay if you already do so. If you currently offer this as a benefit but pay for it with company funds, income protection insurance can make it more affordable.

Income protection cover pays a percentage of an employee's usual salary for up to two years of absence. There's typically a waiting period, meaning payments don't start immediately, but it can help you reduce the overall cost, particularly during longer absences.

Supporting parents

Fathers can take paid paternity leave from the first day of employment, which may impact staffing levels or increase costs if you need to recruit agency workers to cover the absence. However, helping parents feel supported in the workplace can increase productivity and engagement, benefiting your business overall.

Enrolling in the Workplace Nursery Scheme can help employees save money on childcare. If this isn't feasible for your business, consider sharing information about tax-free childcare and other parenting resources. An employee discount scheme can help parents save money on days out, holidays, and other expenses so that they can make the most of their money.

Health insurance

Employee health insurance provides your staff with quick access to healthcare, which can reduce sickness absence. It also typically provides other services, such as member rewards and discount schemes, health assessments, and well-being support. If you've reviewed your benefits package, consider how you can tailor your coverage to suit employees' needs and priorities.

As mentioned, switching providers can help you save money but may also mean adding new exclusions. Getting advice from a broker can help you navigate the process, whether you choose to move to a new provider or make changes to your existing policy.

Menopause action plans

Menopause action plans are currently voluntary but will become compulsory in 2027. Creating your plan now gives you time to consult with employees, gather information and seek professional guidance where needed.

An effective plan should include training and education to increase awareness of the effects of menopause symptoms on employees. This also helps you introduce appropriate workplace adjustments and may be an important factor when considering flexible working requests. Consider ways to provide resources employees can access when needed. These can be educational or signpost staff to sources of support. Peer support can be valuable and available via various platforms that enable employees to meet in person or chat online.

How health insurance can help

Most health insurance policies don't cover menopause treatment with medications such as HRT but can provide other support services. Virtual GP services, telephone helplines, and out-patient coverage can provide advice and investigations, particularly when there may be more than one cause of new symptoms. Some providers offer virtual GPs with specialised training in menopause, or services that provide menopause treatment plans with specialist referrals where coverage allows. Other insurers partner with online providers to offer access to apps or online support forums.

Menopause can cause mental health changes, and health insurance provides mental health support that you can tailor to your needs. Most providers also offer employee assistance programmes which include counselling sessions.

Flexible working arrangements

The new law introduces a requirement for you to explain any rejection of a flexible working request to the employee and explain why your decision is reasonable. You can refuse a request for various reasons, including high costs or a need to maintain minimum service levels, but you must be prepared to explain your reasoning. Being proactive and creating a clear policy based on essential business tasks and how they influence working hours and location helps you consider requests efficiently and creates clarity for your team. Communicating with your employees about the policy before they request flexible working demonstrates your commitment to work-life balance and sets clear expectations about any future requests.

Bereavement leave

Unpaid bereavement leave will become a statutory requirement in 2027. The Government has yet to confirm the minimum required leave, although it's expected to be at least one week. Bereavement leave is currently subject to your discretion, so you may already provide leave that will exceed the minimum requirement. If not, consider how the new law will impact your business and the measures you can put in place to cover employees during an absence.

Separate legislation relating to parental bereavement leave and bereaved partner's paternity leave remains unaffected.

The Employee Rights Act 2025 has wide-ranging implications for employers and may alter your employee benefits strategy. At Globacare, we help you choose insurance policies that support a cost-effective, high-quality employee benefits package. Contact us for tailored advice.