Overview of ERA 2025

The Employment Rights Act 2025 is the most significant reform to UK employment law in a generation. Its provisions are being implemented in stages between 2025 and 2027. The most impactful changes for most employers came into force on 6 April 2026.

SSP from day one — 6 April 2026

From 6 April 2026, Statutory Sick Pay (SSP) is payable from the first day of absence. The three waiting days that previously applied have been abolished.

This means that for every day an employee is sick from their first day, you must pay SSP. A two-day illness that previously cost you nothing now costs you two days of SSP. Budget accordingly and ensure your payroll is updated.

Day-one family leave rights — 6 April 2026

From 6 April 2026, the following are day-one rights — no qualifying period applies:

• Paternity leave — previously required 26 weeks' continuous employment. Now a day-one right.
• Unpaid parental leave — previously required one year's continuous employment. Now a day-one right.
• Bereavement leave for bereaved partners — new right, up to 52 weeks, day-one right.

Maternity leave and adoption leave remain day-one rights as before. The change means that an employee who starts work on Monday and whose partner gives birth on Friday is immediately entitled to paternity leave.

Unfair dismissal qualifying period — from January 2027

Currently, employees need two years' continuous employment before they can claim unfair dismissal. From 1 January 2027, this drops to six months.

This is one of the most significant changes for employers. From January 2027, you are effectively exposed to unfair dismissal claims from an employee's seventh month of employment. Implications:

• Probation periods and performance management processes become more important from day one
• Document all performance concerns, warnings, and disciplinary steps from the start of employment
• Any dismissal within the first two years that might previously have been straightforward now needs to follow a fair process
• Compensatory award cap is also being removed from January 2027 — currently £123,543

National Minimum Wage 2026

Ensure all employment contracts, offer letters, and payroll systems reflect the April 2026 rates. Paying below NMW is a criminal offence with penalties of up to £20,000 per worker.

What you must update in employment contracts

• Remove any reference to three SSP waiting days
• Remove any reference to the Lower Earnings Limit for SSP eligibility
• Update paternity leave to reflect day-one right (no qualifying period)
• Update parental leave to reflect day-one right
• Add bereavement partner leave provisions
• Update NMW rates if referenced in the contract
• Review and update probation period terms given the January 2027 unfair dismissal changes
• Trade union notification requirement — add to written statement from October 2026

Company formation

The most common structures are sole trader (simplest, unlimited liability), limited company (separate legal entity, limited liability), and partnership (shared liability). Most businesses serious about growth should register as a limited company at Companies House — it costs £12 online and takes 24 hours.

Once registered, you need a registered office address (can be your home), a Memorandum and Articles of Association (auto-generated at formation for most), and if you have co-founders, a Shareholders' Agreement.

Contracts you need from day one

Client or customer contract

Your terms of business — what you're providing, the price, payment terms, what happens if the client doesn't pay, and limitation of liability. Trading without terms means disputes are governed by default law, which is rarely in your favour.

NDA (Non-Disclosure Agreement)

Before sharing any confidential information with potential partners, investors, suppliers, or customers, get an NDA signed. Verbal confidentiality agreements are almost impossible to enforce.

Freelancer or contractor agreement

If you engage freelancers, a written contract makes clear they are not employees, sets out deliverables, payment, IP ownership, and confidentiality. Without a written contract, there's no clarity on who owns the work product.

Website legal requirements

• Privacy Policy — required if you collect any personal data (contact forms, email signups, analytics)
• Cookie Policy and compliant cookie banner — required under PECR
• Terms and Conditions — not legally required but essential for limiting your liability
• ICO registration — required for most businesses that process personal data (£40/year for small organisations)
• If selling to consumers: distance selling information, cancellation rights, complaints procedure

Employment — if you hire staff

• Written employment contract — required from day one under ERA 2025
• Employer's Liability Insurance — legally required once you have employees (minimum £5 million cover)
• Enrol eligible employees in a pension scheme (auto-enrolment)
• Register as an employer with HMRC and set up PAYE
• Right to Work checks — must be done before the employee starts

Tax registration

• Self Assessment — register as sole trader or director by 5 October after your first tax year
• VAT — register once turnover exceeds £90,000 in 12 months (or voluntarily earlier)
• Corporation Tax — register within 3 months of starting to trade as a limited company
• Making Tax Digital — VAT-registered businesses must file digitally from April 2026

Intellectual property

Your business name, logo, and brand can be trademarked at the UK Intellectual Property Office. A UK trademark in one class costs £170 online. Without a trademark, someone else can register it and force you to rebrand.

Copyright in original work (written content, designs, software) exists automatically in the UK — no registration needed. But proving you created it first requires evidence — date-stamped files, version history, email threads.

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