Employment Law Reforms: What Employers Need to Know Before 2027

Employment law in England and Wales is changing quickly. Since the Employment Rights Act 2025 received Royal Assent on 18 December 2025, its reforms have been arriving in stages, with several landing within months of each other. Three matter most for employers: a longer window to bring tribunal claims, earlier and costlier unfair dismissal exposure, and tougher rules on sexual harassment.

Six months to bring a tribunal claim

From 1 October 2026, the time limit to bring claims for most employment tribunal claims doubled from three months to six (strictly, six months less one day). It covers unfair dismissal, discrimination, whistleblowing detriment and unlawful deductions from wages.

Transitional rules mean it will not apply to every dispute:

• The six-month limit applies only where the act or failure complained of occurred on or after 1 October 2026.
• For a series of acts or failures, it applies only if the last one occurred on or after that date.
• Otherwise, the previous three-month limit still applies.

The existing routes for late claims remain, namely where it was not “reasonably practicable” to claim in time or where extending time is “just and equitable” in discrimination claims.

ACAS Early Conciliation https://www.acas.org.uk/early-conciliation also stays in place, although its period has been extended from six to twelve weeks. When you factor in the current tribunal delays, a claim may reach an employer potentially 12 months after the employee has left and long after the events of the claim took place.

That creates real risks for employers who may have not realised a claim was on the horizon. Evidence deteriorates as memories fade and managers move on. Employees will have more time to prepare and those that make early data subject access requests may obtain material they would previously have seen too late. Employers now face a longer period of uncertainty when deciding on document retention and settlement.

Unfair dismissal: six months’ service and no compensation cap

Employees currently need two years’ service to claim ordinary unfair dismissal albeit there are other claims that they can bring earlier. However the new changes provide unfair dismissal protection after six months from 1 January 2027. Employees with six months’ or more service on that date will be protected immediately. Government analysis suggests around 6.3 million more employees will gain protection, which will inevitably mean more claims.

The compensatory award for unfair dismissal for successful claimants is currently capped at the lower of £123,543 or 52 weeks’ gross pay. This is also being removed which will allow for higher awards including pension losses  specially those who are much higher earners.  The basic award and statutory redundancy pay are unaffected, and the Government does not plan further consultation before implementation.

Together, these changes shorten the time available to assess new starters and remove any ceiling on the cost of a badly handled dismissal. Employers will see higher settlement values, particularly for senior or highly paid staff.

Employers should:

• tighten recruitment so that the right people are hired from the outset;
• structure probation with clear expectations with regular documented reviews;
• review risk management and insurance in light of uncapped exposure; and
• make sure dismissal procedures are robust and take advice early.

Sexual harassment: whistleblowing protection and a higher duty

From 6 April 2026, a report that sexual harassment has occurred, is occurring or is likely to occur is expressly a protected disclosure under section 43B of the Employment Rights Act 1996, with harassment defined by section 26(2) of the Equality Act 2010.

The usual tests still apply, including reasonable belief and the public interest. Where they are met, protection covers past, present and anticipated harassment, shields workers from detriment and employees from dismissal, and allows dismissed employees to seek interim relief.

This sits within a wider tightening. Since 26 October 2024, employers were required to take “reasonable steps” to prevent sexual harassment. From October 2026, that duty is  extended to employers having to take “all reasonable steps” with additional liability for employers for harassment of employees by third parties such as clients, contractors, visitors, students, attendees at events etc

Employers should:

• update whistleblowing and dignity-at-work policies;
• carryout risk assessments and address any need for additional protection for employees,
• train their employees specifically as to risks within their work place environments,
• train managers to recognise protected disclosures; and
• make sure reporting routes encourage people to come forward including anonymous reporting options.

Five priorities for employers

1. Grievance and appeal handling. Prompt, credible, well-documented procedures give employers the best chance of resolving disputes before proceedings begin.
2. Manager training. Teach managers to keep clear, factual, contemporaneous notes and to run investigatory, grievance and disciplinary meetings properly.
3. Early investigation. Deal with grievances, disciplinary issues, whistleblowing concerns and harassment allegations promptly, while evidence and recollections are fresh.
4. Document retention. Keep relevant records and emails accessible for longer, and check that HR systems do not delete material while a claim remains possible.
5. Settlement strategy. Review higher-risk disputes earlier, and decide sooner whether internal resolution, ACAS conciliation or another route makes commercial sense.

Conclusion

None of this demands wholesale change, but it raises the value of careful recruitment, structured probationary periods, early investigation/ resolution and good record keeping. If you’d like to discuss any of the issues raised, please drop me an email via [email protected] or call 0161 832 3304.