Employment Rights Act – What changes can the social care sector expect?

The Employment Rights Act 2025 (ERA) has been enacted at last and is one of the most significant shifts in UK employment law in decades.

From April 2026 through to 2027, employers across all sectors face a raft of complex changes, with the introduction of new rights, obligations and enforcement mechanisms that will reshape workforce strategy, operational planning, and financial management.  

The aim of the legislation is to shift power away from employers and introduce a suite of reforms that will increase regulatory scrutiny, expand employee entitlements, and strengthen collective bargaining. This will inevitably bring many challenges for employers.

What changes will come in April 2026?

One of the first and most significant implications of the ERA will see statutory sick pay extended to begin from the first day of absence, with additional provisions for the lowest earners. This change could increase short-term absences, resulting in additional strain on care businesses at a time when they are facing recruitment challenges. Employers should act now and revisit their absence management systems and employee welfare programmes to curb the impact where possible.

Another key element of the ERA, coming April 2026, is the creation of a new Fair Work Agency. This body marks a new era of enforcement, aiming to consolidate compliance for minimum wage, holiday and sick pay, with the power to issue penalties of up to 200% for underpayments. Full compliance and record-keeping will be necessary, and providers will need six years of data to demonstrate their agreement.

Employers should also be prepared for an increase in trade union action, with the Act lowering the threshold for trade union recognition and introducing new rights for union access to workplaces. With changes due in April and October 2026, employers should not be surprised to see an increase in collective bargaining and should ensure solid employee engagement mechanisms and strategies to mitigate against fallout where possible.

What changes are expected in October 2026?

2026 will bring extensive reforms to the social care sector, with a second wave of reforms coming in October. The most transformational of these will be the creation of the Adult Social Care Negotiating Body, which will be responsible for setting sector-wide pay and conditions through a Fair Pay Agreement (FPA). Once ratified, the FPA should be applied to employee contracts immediately. While the Government has pledged £500 million to support the FPA, this falls well short of the estimated £2.3 billion required to deliver meaningful pay increases. To prepare for the new FPA, care businesses should begin modelling the financial impact of standardised pay structures and have open discussions with commissioners about future funding arrangements.

Also expected in October 2026 is the removal of the two-year qualifying period for unfair dismissal claims. After months of debates, the government and Parliament have agreed that ordinary unfair dismissal protection will apply after six months’ service instead of two years. Employers must improve their recruitment and onboarding processes and ensure all managers are well trained in procedural fairness.

What else is on the horizon?

2027 will see the abolition of zero-hour contracts, with employers instead required to offer guaranteed hours to qualifying workers and provide reasonable notice ahead of shift changes. In addition, any short-notice cancellations will have to be compensated. These changes will reduce flexibility and increase payroll and administrative costs for employers. To address this, employers should audit workforce patterns, consider converting regular staff to fixed contracts, and prepare systems for compliance.

Employees are also set to see enhanced rights to flexible working, greater protection against dismissal during pregnancy and family leave, and the extension of bereavement leave. Cumulatively, it is hoped that these reforms will have a positive cultural effect on many workplaces – normalising flexibility and creating a more compassionate workforce.

How should employers prepare?

The ERA will bring complex challenges for employers both financially and procedurally. To ease any financial pressure, scenario planning should be carried out to assess best-, expected-, and worst-case outcomes, and ensure that funding conversations with commissioners are grounded in realistic projections. Practices should be updated across the entire workforce, with all employees being trained on best practice and new systems. Adapting to the changes at an early stage could help organisations to thrive in a more regulated, employee-centric environment.

Funding is required

The Employment Rights Act 2025 represents a strategic turning point across all sectors. However, the scale and ambition of the reforms will be difficult to meet, especially in publicly funded sectors, if there is no corresponding uplift in funding. Employers who act early, engage constructively, and plan proactively will be best placed to navigate the reforms, protect service quality, and advocate for sustainable funding.

As our clients enter this new era, the key challenge for employers will be balancing compliance with compassion, and regulation with resilience.

Key takeaways

• The Employment Rights Act 2025 has been enacted, with the first wave of changes set to be implemented in April 2026.
• The Act brings greater protections for employees, in the form of statutory sick pay extended to the first day of leave, greater access to trade union support, and greater wage security.
• Employers should act now to prepare for the changes coming in next year. To mitigate financial and procedural impacts, employers should use scenario testing to assess the impact of the new regulations.

For more information

For more information, contact Anna Dabek, partner in the employment and pensions team.