Employment Rights Act 2025 – your questions answered

In our recent webinar series on the Employment Rights Act 2025 (ERA 2025), we received a number of questions on the practical implications of the new reforms.

We have already addressed many of your questions in our earlier blogs on the effective management of probationary periods and fixed-term contracts. In this final blog in the series, we respond to the remaining questions we were asked.

Harassment reforms

What baseline controls should employers have in place for the October 2026 harassment reforms?

Since October 2024, employers have been under a proactive duty to take reasonable steps to prevent sexual harassment in the workplace. From October 2026, this duty will be strengthened, and employers will be required to take 'all reasonable steps' to prevent sexual harassment. Employers will also be liable for harassment by third parties, unless they can show they took 'all reasonable steps' to prevent it.

While detailed guidance on what constitutes reasonable steps is not expected until 2027, as a minimum, by October 2026 employers should ensure they have in place:

• Clear policies: including clear and practical examples of prohibited conduct.
• Risk assessments: identify where harassment risks arise (for example, where there is a power imbalance, lone or late working, third-party interactions, events, travel etc). This should be treated as an ongoing exercise and kept under regular review. Where employers currently have a single, central risk assessment, consider introducing more granular assessments at a department or team level to capture localised risks and enable more tailored action.
• Training: delivered regularly and tailored to the audience (eg employees, managers and senior leaders etc), with a focus on bystander intervention and escalation routes.
• Reporting mechanisms: including several reporting routes to ensure accessibility (eg line managers, HR etc). Investigation processes should be clearly set out, including how issues involving third parties will be handled.
• Third-party controls: communicate clear expectations of behaviour to third parties, for example, via contractual terms or behaviour standards and clearly identify steps to address known risks.
• Governance: put in place systems to track complaints (including lower-level concerns) and analyse trends over time to identify potential risks. Ensure there is clear senior accountability. In larger organisations, this is likely to include oversight at board or senior leadership level.

In practice, many employers will already have these measures in place. The focus now should be on how effectively they operate, particularly the proactive identification and management of risk, supported by regular reviews. It will no longer be enough to have policies and processes in place; employers need to be able to demonstrate, with evidence and a clear audit trail, that those measures are working.

Are there any sector-specific expectations or higher standards for client-facing environments?

The legal test on both the preventative duty and third party harassment applies equally across all organisations, regardless of sector. While the Equality and Human Rights Commission produced a checklist on the preventative duty for the hospitality sector, this does not impose any additional legal requirements on that sector, and is intended to be adaptable across different workplaces.

However, what constitutes 'all reasonable steps' will vary, depending on the nature of the business, including the extent to which employees interact with clients or other third parties.

In higher-risk, client-facing environments, what is considered 'reasonable' is likely to involve more extensive preventative measures, and will require a more proactive approach to managing third party behaviour. In practice, that may mean setting clear expectations with clients, ensuring employees feel able to raise concerns and, in some cases, being prepared to challenge or, where necessary, step back from problematic third-party relationships.

Non-disclosure agreements (NDAs)

Is it just the specific clause in NDAs that will be void, not the whole agreement?

Yes, where an NDA seeks to prevent a worker from speaking about harassment or discrimination, or the employer’s response to it, that provision alone will be void. The remainder of the agreement will generally remain enforceable, provided it can operate independently.

The intention of these reforms is not to prevent the use of confidentiality provisions altogether, but to ensure they are not used to restrict allegations of discrimination or harassment. Employers will still be able to rely on confidentiality provisions in the usual way to protect commercially sensitive information, trade secrets and other legitimate interests.

It will also be possible to prevent disclosures about discrimination or harassment in 'excepted agreements' where prescribed conditions are met. However, the detail of what will qualify as an excepted agreement is still subject to consultation, as we explain here: Government consultation on workplace NDAs and harassment

Fire and rehire

If an employer needs to change an employee's role due to wellbeing concerns, can this justify dismissal and re-engagement (particularly where this involves a reduction in pay)?

This is likely to be difficult once changes to fire and rehire come into effect in January 2027.

The ERA 2025 will significantly limit an employer's ability to impose contractual changes, by providing that dismissals connected to the imposition of 'restricted variations' (including pay reductions) will be automatically unfair. The only exception is where an employer can show that the changes were necessary to address severe financial difficulties; this is expected to be a very high bar. As a reminder, unlike ordinary unfair dismissal (which requires two years' service, reducing to six months in January 2027), no qualifying service will be needed for automatic unfair dismissal claims linked to restricted variations.

There is no scope within the new rules to justify imposing contractual changes on the basis of wellbeing concerns. Where a proposed change is driven by wellbeing considerations, employers should instead explore reasonable adjustments, including redeployment, and seek to agree any changes with the employee. Alternatively, where performance concerns are at play, it may be necessary to approach the situation as a capability issue. From January, seeking to impose changes unilaterally, particularly where this involves a reduction in pay, is likely to carry significant risk.

For more information on fire and rehire reforms, see: Employment Rights Act 2025: changes to the law on fire and rehire

Should we update variation clauses in all existing contracts or just new contracts?

A variation clause allows an employer to change contractual terms without employee consent, either through specific or general flexibility provisions. In practice, courts are cautious about their use, particularly for fundamental changes such as pay. Such clauses need to be very clearly and tightly drafted, and even then, employers are required to act reasonably in how they exercise flexibility.

It is nevertheless advisable to include carefully drafted clauses in new contracts. First, once the new legislation takes effect, employers will not be able to introduce unilateral variation clauses without agreement. Second, even if their legal scope is limited, they can help set expectations about the potential for change.

For existing staff, the position is more nuanced and will depend on the likelihood of employees agreeing to the introduction of new clauses and whether it is proportionate to undertake the disruption of changing contracts in light of the uncertain practical benefit. Where employers decide to do so, this is best done alongside a benefit for the employee (for example, a pay rise or promotion) and with a clear strategy if employees refuse.

More broadly, even where included, variation clauses should be used with caution. The reforms signal a clear shift away from the unilateral imposition of changes, so such clauses should not be seen as a substitute for meaningful engagement with employees.

For more on variation clauses, see: Navigating fire and rehire reforms: a practical guide to variations in employment contracts

Final thoughts

Finally, a question of our own: what might the upcoming change in Labour leadership mean for the remaining ERA reforms?

While a change in Labour leadership introduces some uncertainty, it is unlikely to fundamentally shift the government's overall approach to employment law. The ERA 2025 has already been passed into law, and many of the most significant reforms (such as unfair dismissal reform) are well advanced.

That said, secondary legislation is still needed for a number of upcoming changes, and with a new leader potentially not in place until September, there may be some slippage in the timetable for implementation, even if the substance remains the same.

There may also be scope for adjustments to the substance of later reforms, especially those expected in 2027. In particular, proposed changes to zero-hours contracts remain complex and are still subject to consultation. They have also attracted criticism, including concerns about their potential impact on hiring in the context of youth unemployment. A change in leadership could therefore lead to some refinement of these proposals, as well as delay to implementation.

This is, however, speculative. For now, employers should continue to prepare on the basis that the ERA 2025 reforms will proceed broadly as planned, while keeping a close eye on developments.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances. 

© Farrer & Co LLP, June 2026