Employment Rights Act 2025 - What does it mean for hospitality?

The widely publicised Employment Rights Bill became law on 18 December 2025 as the Employment Rights Act 2025 (ERA 2025). With sweeping reforms, the act is the biggest update to workers’ rights in a generation.

The act itself is vast – bringing in numerous changes including changes to how dismissals are regulated, new restrictions on contract variations, and reducing to 6 months the unfair dismissal qualifying period among others.

But what are some of the most important changes that could impact your hospitality operations and what do you need to do now to ensure that these changes don’t become another pressure point for your business?

The first batch of changes took effect from 6 April 2026, with one major change being Statutory Sick Pay (SSP) will be payable from day one of sickness absence – removing the current three day waiting period. The lower earnings limit for SSP eligibility will also be removed.

The cost impact of this in the industry will be significant given the higher number of employees in lower paid and variable hours work, with a higher risk of short term absence spikes needing to be managed via fair processes and support upon returning to work.

The three day waiting period undoubtedly discouraged unnecessary short-term absence (particularly when many hospitality businesses report the top reason for absence being a hangover!), or encouraged staff to swap shifts when someone was unable to work.

Additionally, paternity leave and unpaid parental leave will become day one rights. This is also likely to lead to more unplanned short term absences and shift disruption, particularly within younger workforces.

Regarding collective redundancy processes, the maximum protective award (compensation for failure to collectively consult) is doubling to 180 days pay per employee, with further changes on collective redundancy envisaged in 2027.

The Fair Work Agency is also due to be established on 7 April 2026, but exactly when their enforcement powers will start remains unclear. It is hoped the Fair Work Agency will deal with more straightforward workplace disputes including national minimum wage and holiday pay claims, without needing an Employment Tribunal hearing.

From October, new rights are being brought in around guaranteed hours for workers with regular patterns, reasonable notice of shifts, compensation for short notice cancellation and extension of protections for agency workers. This is likely to be the single biggest structural change within hospitality workforce models, and I anticipate tighter work forecasting requirements with less flexibility around shift work, late rota changes and the supply of agency workers.

Tipping laws will also be strengthened, including consultation with workers when developing or revising tipping policies, and increased transparency.

Whilst we saw significant changes to the law on preventing sexual harassment in the later part of 2024, the ERA 2025 will increase the duty to take “all reasonable steps” to prevent sexual harassment – reintroducing employer liability for third party harassment such as by customers and guests. These changes are likely to bring about huge operational risk within hospitality, as guest conduct, alcohol service, late-night environments and lone working can all heighten exposure.

Laws relating to the practice of dismissal and re-engagement, commonly referred to as “fire and rehire” are also tightening, with dismissals linked to refusing changes to certain core terms treated as automatically unfair – with only narrow exceptions. Practically, this will lead to a higher risk when changing shift patterns, guaranteed hours, pay structures and service charges.

Workers will have a longer time to issue Employment Tribunal claims as well, with the time-limit extending from 3 to 6 months.

In January 2027 the ordinary qualifying period to bring an unfair dismissal Tribunal claim will drop to 6 months from two years, with the compensation cap – currently the lower of £118,223 or a year’s pay – removed. With hospitality businesses often experiencing a higher turnover of staff, this will inevitably lead to more Tribunal claims as more employees are able to claim ordinary unfair dismissal.

The only silver lining appears to be that the lowering of the qualifying period may simplify claims and avoid unnecessarily complicated discrimination based claims for employees with under two years service.

To ensure your business is ready, it’s best to prepare now – updating sickness policies, SSP FAQs, family leave policies, payroll processes and absence reporting lines. Additionally, you should review your template letters and processes for contract variations to build in longer time durations to implement contractual change projects.

Any tipping forms – including card tips, cash tips and service charges – also need to be mapped, with current policies considered to ensure they align with new tipping laws.

Managers may benefit from additional training on day one SSP handling and the use of disciplinary action where it is suspected processes are being abused, while also being empowered to deal with shift planning, cover, handover processes, and keeping accurate records.

Consistency is key – businesses should implement robust and consistent scheduling, planning, cross department training and documentation development, as the sector should anticipate dealing with compliance issues such as pay, holidays and time records via the new Fair Work Agency while ensuring necessary documents are retained and consistent processes are followed to deal with the longer period of time employees will have to raise workplace disputes.

Probation review processes will be fundamental once the ordinary unfair dismissal qualifying period drops to six months, and managers need to upgrade their training on managing capability/performance and conduct issues.

Your HR and Operations teams should also understand when the requirement to collectively consult will be triggered and ensure proper consultation process is followed.
They should also consider now whether they can design a guaranteed hours offer to employees previously engaged on zero hour contracts to plan ahead for the practical difficulties anticipated.

Finally, consider introducing venue specific harassment risk assessments taking into account things like alcohol service, night shifts and lone working. This should be complemented with processes and supervisors and managers who are appropriately trained to deal with situations.

Visible signage to guests and customers setting out unacceptable behaviours are imperative – and should be followed up in terms and conditions documentation – while a process should be in place to log incidents, collect evidence such as CCTV, and refuse to serve alcohol.

With the first raft of changes taking effect from April 2026 – the time for hospitality businesses to adapt to these changes is here.