Employers across the luxury retail, fashion, hospitality and high-end services sectors will face one of the most significant shake-ups of UK employment law in years when the qualifying period for unfair dismissal claims is cut from two years to six months on 1 January 2027, under the Employment Rights Act 2025.
The change, which applies in England, Scotland and Wales, will be accompanied by the removal of the statutory cap on compensatory awards for successful ordinary unfair dismissal claims, potentially increasing payouts in some cases. Existing day-one protections against discrimination and automatically unfair dismissal are unaffected.
Tribunal Deadlines Lengthened, Enforcement Stepped Up
From 1 October 2026, the time limit for the majority of employment tribunal claims will increase from three months to six months, subject to rules for individual claim types. The longer window could give some claimants more time to weigh up whether to pursue a case.
Several reforms have already come into force. The Fair Work Agency, a new enforcement body, was established on 7 April 2026, marking a more active approach to enforcing employment rights.
From 30 October 2026, employers will become subject to a strengthened duty to take 'all reasonable steps' to prevent sexual harassment, alongside new provisions addressing harassment by third parties such as customers and clients, where the employer failed to take reasonable preventative steps.
The maximum protective award for certain failures relating to collective redundancy consultation also doubled in April 2026, while day-one Paternity Leave and Unpaid Parental Leave took effect the same month. Further changes to collective redundancy consultation thresholds, along with enhanced dismissal protections for pregnant women and new mothers and new bereavement leave, are scheduled for 2027.
Flexible Working Rules Tighten Further
Flexible working is set for further change, though not immediately. Employees already have a day-one right to request flexible working under existing law. The Act will additionally require employers to refuse such requests only where reasonable on specified business grounds, with the government intending this reasonableness test to take effect in autumn 2027.
Zero‑Hours Contracts and 'Fire and Rehire' Under Review
Reforms to zero-hours and low-hours contracts remain in development. The government has proposed rights to guaranteed hours, reasonable shift notice and payment for shifts cancelled, moved or curtailed at short notice, covering qualifying workers and, subject to further consultation, agency workers. A detailed implementation timetable has not yet been finalised.
New restrictions on so-called 'fire and rehire' practices are due to take effect in January 2027, alongside the unfair-dismissal changes. The Act also introduces measures affecting trade unions, including changes to recognition rules, workplace access and balloting procedures.
Gender Pay Gap Plans To Become Mandatory
Gender pay-gap reporting is also due to change. Employers with 250 or more staff can currently publish voluntary action plans alongside their pay-gap data; these are intended to become mandatory from spring 2027, subject to secondary legislation, requiring practical steps addressing pay gaps and support for employees experiencing menopause.
Employment lawyers say the cumulative effect of the changes represents one of the most substantial overhauls of UK employment law in recent years, though the reforms are being phased in over an 18-month period rather than taking effect simultaneously.
Employers are advised to review contracts and policies, strengthen record-keeping, update harassment procedures and ensure senior management understands the staggered implementation timetable ahead of each relevant date.
