Employment Law Changes 2026: What your business needs to know - Part 2

The reforms don’t stop there. A further package of major changes is expected to take effect in January 2027 and continue throughout the year, with some of the most impactful provisions still to come. If anything, the 2027 reforms go even further, tackling unfair dismissal protections, zero-hours contracts, flexible working rights, and more. 

 

It’s worth noting that the government has not yet confirmed the precise dates for all the 2027 changes, and many remain subject to secondary legislation and further consultation. We’ll keep you updated as more details are confirmed. In the meantime, here’s what we know and how you can start preparing now. 

 

 

 

From 1 January 2027, the qualifying period for unfair dismissal claims will be reduced from two years to six months. This is one of the most significant changes in the package and will mean employees gain protection from unfair dismissal much earlier in their employment. Importantly, this applies to employees already in post on that date, so anyone hired from around the end of June 2026 onwards will gain the protection from January. 

 

Review how you manage probationary periods, performance issues, and early exits. Getting the first six months right will be critical. Ensure your managers are trained in fair dismissal processes from day one of employment. 

 

 

 

From January 2027, the statutory cap on compensatory awards for unfair dismissal will be removed. The current cap, the lower of £118,223 or a year’s salary, will no longer apply, allowing tribunals to award significantly higher sums, particularly for senior or high-earning employees. 

 

The financial risk of mishandling a dismissal increases significantly. It will also become more costly to negotiate settlements, particularly with higher-paid employees. This makes it essential to have robust, well-documented dismissal procedures in place. 

 

‘Fire and Rehire’ restrictions take effect 

 

Originally expected in October 2026, the government has delayed the implementation of ‘fire and rehire’ restrictions until 1 January 2027. From that date, dismissing employees to re-engage them on different terms and conditions will be automatically unfair in most circumstances, unless the business is facing significant financial difficulty. An updated Code of Practice will also be issued to support these changes. 

 

If you need to change employment terms, you’ll need to negotiate and obtain genuine agreement from employees. Consider adding effective variation clauses to employment contracts now, before the new law takes effect, and seek legal advice before making any changes to key terms such as pay, hours, or holidays. 

 

 

 

Although flexible working requests became a day-one right in April 2024, the law will go further in 2027. If an employer rejects a flexible working request, they will need to identify which of the eight acceptable business reasons applies and explain in writing why they consider the refusal reasonable. This is already good practice, but it will become a legal requirement. 

 

What this means for you: Start documenting your reasoning for turning down flexible working requests now, so it becomes second nature by the time the law changes. Ensure managers understand how to handle requests properly. 

 

 

Protections against dismissal will be strengthened for pregnant workers and those returning from maternity, adoption, parental, or bereavement leave. The Act will effectively ban dismissals during pregnancy and for a six-month return-to-work period, except in limited circumstances. 

 

Review your redundancy selection processes and dismissal decision-making to ensure that pregnant employees and those returning from maternity or other leave are properly protected. Train managers on these enhanced protections. 

 

 

 

A new day-one right to at least one week of unpaid bereavement leave will be introduced, covering a broader range of relationships than the current parental bereavement leave. It will also include bereavement following a miscarriage before 24 weeks. 

 

Review your compassionate leave policies to ensure they meet the new statutory requirements. Many employers already offer bereavement leave, but you’ll need to confirm that your entitlements meet at least the new minimum. 

 

 

Employers will be required to offer guaranteed-hours contracts to workers who regularly work consistent hours over a reference period (likely 12 weeks). Workers on zero-hours and low-hours contracts will also gain rights to reasonable notice of shifts and compensation for late cancellations or changes. 

 

If you rely on zero-hours or flexible contracts, start reviewing your workforce arrangements now. Consider which workers follow consistent patterns and how you’ll manage the transition to guaranteed-hours contracts. 

 

 

 

From April 2026, employers will be encouraged to develop voluntary action plans on gender equality and on supporting employees through the menopause. However, these will become mandatory in 2027, meaning businesses will need formal, documented plans in place. 

 

Use the voluntary period from April 2026 to get ahead. Start developing your gender equality and menopause action plans now so you’re well prepared when they become compulsory. 

 

 

The 20-employee threshold for triggering collective consultation obligations will apply across the whole business, rather than on a per-establishment basis. This means organisations with multiple sites will be far more likely to trigger collective consultation requirements when making redundancies across different locations. 

 

If your business has multiple locations, you’ll need to consider redundancies across the whole organisation when deciding whether collective consultation is required. Combined with the doubled protective award already in effect from April 2026, getting this wrong could be very costly. 

 

 

 

While many of these changes are still awaiting confirmation, the direction is clear. Here’s how to prepare: 

Longer-term planning: 

 

1. Review and strengthen your dismissal procedures ahead of the 2027 changes 

2. Consider the financial implications of uncapped unfair dismissal awards 

3. Ensure all managers receive up-to-date employment law training 

4. Begin reviewing zero-hours and flexible workforce arrangements 

5. Start developing gender equality and menopause action plans voluntarily 

6. Review redundancy consultation processes, especially if you operate across multiple sites 

 

Taken together, the 2026 and 2027 reforms constitute the most significant overhaul of UK employment law in decades. The earlier you start preparing, the better placed you’ll be to protect your business, support your team, and avoid costly mistakes. 

If you need support preparing your business for these changes or advice on how they apply to your circumstances, get in touch with Humber HR People. We’re here to help you stay compliant and ahead of the curve. 

 

If you need support preparing your business for these changes or advice on how they apply to your circumstances, get in touch with Humber HR People by emailing kate@humberhrpeople.co.uk. We’re here to help you stay compliant, protect your business, and support your team.