Over recent months, HR professionals and business leaders joined our webinars on the Employment Rights Act 2025, focusing on trade union reforms, probationary changes, and fire and rehire. Our live polls revealed a striking trend, that while businesses know major change is coming, most are unprepared and adopting a “wait and see” approach.
This hesitation stems from a shifting reality. For years, employers have relied on the two-year unfair dismissal qualifying period, informal contract flexibility, and the assumption that unions were irrelevant to them. The 2025 Act changes this meaning passive waiting is no longer a viable strategy.
Here is further analysis of each session:
Probation periods
While 93% of businesses operate a probationary period (typically six months), very few rate their process as very effective at catching poor hires. Line managers rarely maintain consistent documentation, usually only keeping records when major performance issues arise. Consequently, many employers have quietly relied on the two-year unfair dismissal qualifying period as their true safety net.
That strategy becomes untenable on 1 January 2027, when the qualifying period drops to just six months.
We have found that this legal shift is fundamentally altering recruitment strategies:
- 70% of businesses plan to become significantly more risk-averse in who they hire.
- A notable cohort will pivot to expensive professional headhunting, heavier vetting, increased agency staff, or direct headcount reductions to minimise exposure.
- Only 20% believe their current recruitment is robust enough to require no change.
This data signals an alarming trend, especially for smaller businesses. Instead of dynamically managing staff performance once in post, employers are attempting to entirely de-risk the employment relationship from the outset.
Trade union reforms
Data reveals a stark reality, in that businesses are largely unprepared for the impending October 2026 trade union reforms. A striking 70% of respondents feel not at all or not very prepared and 60% have taken no action to update workplace policies or develop working practices.
This anxiety is particularly acute for previously non-unionised organisations. 52% have zero experience with unions but now expect it to occur, while another 13% anticipate a significant increase in existing union engagement.
72% of respondents said they would introduce new engagement tools as a strategy for driving employee engagement and enhance employee / employer communications. The most popular choices included:
- employee communication forums
- feedback suggestion schemes and
- engagement surveys
These are all reflective of a desire to build direct channels with the workforce that might reduce the conditions in which union organising takes root.
Fire and rehire
When it comes to the new restrictions on dismissal and re-engagement (fire and rehire), preparation is remarkably low. Only a tiny fraction of employers described themselves as extremely confident or have already updated their policies.
The data paints a clear picture in that the vast majority of businesses have never actually used a fire and rehire strategy. However, a meaningful minority of larger, more complex organisations are either currently considering contract changes or have utilised the practice in recent years. The overarching sentiment is not resentment over past practices being banned, but rather an anxiety about losing future operational flexibility.
For those facing contract renegotiations, the biggest hurdles under the new framework are operational and evidentiary:
- Proving Financial Necessity: The new legislation effectively requires employers to meet a strict financial threshold to justify dismissal and re-engagement. Proving this level of necessity is cited as a major compliance challenge.
- Training Managers on Informal Variations: Businesses fear that line managers, accustomed to informal or verbal agreements, will inadvertently expose the company to legal risk by altering contract terms without following the strict new statutory processes.
- Maintaining Business Agility: Finding legally compliant, alternative mechanisms to restructure or adapt workforce terms quickly when business needs require.
Despite widespread uncertainty about how to navigate these changes, there is clear consensus on the solution. Almost all respondents agree that conducting a comprehensive audit of existing terms and conditions is the essential first step to understanding their exposure.
However, a major readiness gap remains with most organisations admitting they had not begun this auditing process.
Conclusion
Our analysis highlights a critical vulnerability across all surveyed businesses, which is that not enough attention is given to operational capability, thus creating a gap that leaves employers highly exposed to legal and financial risk.
Ultimately, the success of these reforms hinge on the line manager. Implementing the new legislation is not just a paperwork exercise; it is a test of how effectively an organisation embeds robust HR practices into its day-to-day management culture. To mitigate risk, businesses must focus on practical, frontline empowerment.
If you want to hear our discussions from this ERA Webinar Series, you can watch back on demand, and access a copy of the slides:
