The Employment Rights Act (ERA) is set to reshape the UK’s employment landscape. It will bring in some of the biggest workplace reforms we have seen in decades.
So, if you’re a contractor, recruiter or business that works with umbrella companies, you’re probably wondering what the Employment Rights Act changes mean in practice. The good news? There’s no need to panic.
While the Act officially became law at the end of 2025, most of the changes haven’t even happened yet. Instead, they’re being introduced gradually throughout 2026 and 2027, giving businesses plenty of time to prepare.
Here at Danbro Umbrella, we’ve been helping contractors and recruitment agencies navigate legislative change for more than 25 years. We’ve seen the introduction of IR35 reforms, new off-payroll working rules, and too many compliance updates to count. The Employment Rights Act 2025 is another significant milestone. And we’re here to help you understand what it means and how to prepare.
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What is the Employment Rights Act 2025?
So, what is the Employment Rights Act? The Employment Rights Act 2025 is a major package of reforms designed to strengthen workers’ rights and modernise employment law across the UK.
Its objective is to improve workplace protections, enhance job security and introduce new rights. Its broad scope covers everything from Statutory Sick Pay and family leave to flexible working and unfair dismissal.
Rather than introducing every change all at once, the Government is rolling the legislation out in phases. Some reforms are already in place, while others will follow throughout 2026 and 2027 as additional regulations are introduced.
For those in the contractor market, now is the perfect time to understand what’s changing – before those changes begin affecting day-to-day operations.
Employment Rights Act Timeline
One of the most important things to understand is that the ERA isn’t a single event. Instead, it’s an ongoing programme of reform. Here’s a simplified overview of what’s happening and when.
December 2025: Act Became Law
The Employment Rights Act 2025 received Royal Assent, making it official legislation. While some trade union reforms took effect straight away, most of the changes are being introduced in stages.
April 2026: First Major Changes
This is where many businesses, agencies and umbrella companies began to notice practical changes. Key developments include:
- Statutory Sick Pay available from the first day of sickness.
- More workers becoming eligible for Statutory Sick Pay.
- Day one rights to Paternity Leave.
- Day one rights to unpaid Parental Leave.
- The launch of the Fair Work Agency to strengthen employment rights enforcement.
- New obligations around holiday pay record keeping.
April 2026 also brought separate PAYE liability reforms affecting labour supply chains where umbrella companies are used. Although these changes sit outside the ERA itself, they have a significant impact on compliance across the recruitment sector.
October 2026: Greater Protection for Workers
Further reforms strengthen workplace rights, including:
- New restrictions around changing employment terms through dismissal and re-engagement.
- Stronger responsibilities on employers to prevent workplace harassment.
- Longer time limits to bring Employment Tribunal claims.
January 2027: Changes to Unfair Dismissal
Protection from unfair dismissal is expanding. The qualifying period before employees gain these rights will reduce and the potential financial consequences will increase for claims that are successful.
2027 Onwards: More Reforms
Further changes in 2027 are expected to include:
- Guaranteed hours for qualifying workers.
- Additional protections for workers on variable-hours contracts.
- Greater regulation of umbrella companies.
- Enhanced pregnancy and family rights.
- Improvements to flexible working arrangements.
- Further employment protections across the workforce.
Some of these measures still require supporting legislation, so we’ll continue to monitor developments as more detail becomes available.
Employment Rights Act for Contractors
The Employment Rights Act introduces several important changes for contractors working through umbrella companies. For many contractors working through a compliant umbrella company, the Employment Rights Act reinforces the value of being employed while introducing additional protections over time. Some of the more relevant changes include:
Better access to statutory benefits
Broader eligibility and earlier access to Statutory Sick Pay could provide additional financial support when contractors need it most.
Stronger family-friendly rights
Day one access to certain types of family leave gives umbrella employees greater flexibility from the beginning of their employment.
Increased employment protection
Further reforms are expected to strengthen workplace rights, offering greater confidence and security for employed contractors.
Guaranteed hours
One of the most talked-about areas of ERA is the proposed introduction of guaranteed hours for qualifying workers on variable working patterns.
While further guidance is still expected, these changes could influence how contractors choose to work with agencies and umbrella companies in the future.
Employment Rights Act for Umbrella Companies
The Employment Rights Act is changing the landscape for umbrella companies.
For compliant umbrella companies, many of the principles behind the legislation already reflect established best practice/s. However, the reforms place even greater emphasis on transparency, governance and worker protection.
Areas likely to receive increased attention include:
- Accurate payroll processing.
- Statutory payments.
- Holiday pay administration.
- Employment documentation.
- Record keeping.
- Worker communication.
- Ongoing compliance monitoring.
Later reforms are also expected to bring umbrella companies under greater regulatory oversight, raising standards across the industry. Choosing a compliant PAYE umbrella company will become increasingly important as employment legislation evolves.
For organisations like Danbro Umbrella, that’s something we welcome. Raising standards helps build confidence across the contractor market and supports those providers who are committed to doing things properly.
Employment Rights Act for Recruitment Agencies
If you’re a recruitment agency, the Employment Rights Act isn’t just another employment law update. ERA is as good an opportunity as any to review how your workforce is engaged and whether your supply chain is fit for the future.
As legislation evolves, agencies will need to be confident that every part of their contractor engagement model is compliant. This includes:
- Choosing a trusted umbrella partner.
- Reviewing PAYE engagement models.
- Understanding changing worker rights.
- Ensuring payroll processes remain compliant.
- Keeping up with new employment legislation.
It’s also prompting many agencies to look at wider workforce solutions, including outsourced PAYE and Professional Employer Organisation (PEO) models that can help simplify employment responsibilities while maintaining flexibility.
Preparing for ERA Changes
Although many reforms won’t take effect until later in 2026 and throughout 2027, there are steps agencies can take NOW. The questions you ought to be asking are:
- Do you understand how the upcoming changes could affect your workforce?
- Are your contractors engaged through a compliant employment model?
- Have you reviewed your labour supply chain?
- Are you working with partners who actively monitor legislative change?
If the answer to any of those questions is ‘not yet’, it’s time to start the conversation.
Danbro Umbrella & the Employment Rights Act 2025
Umbrella company legislation is continuing to evolve alongside wider employment law, and it can be confusing. Fortunately, you don’t have to navigate it alone.
At Danbro Umbrella, we’ve spent more than a quarter of a century helping contractors, recruiters and businesses adapt to changing legislation while remaining compliant, efficient and focused on what they do best.
Whether you’re reviewing your current umbrella arrangements, exploring PAYE or PEO solutions, or simply looking to understand how the Employment Rights Act could impact you, we’re here to help.
We’ll continue to share updates as the legislation develops, giving you practical guidance to help you make informed decisions with confidence.
When legislation changes, having the right partner makes all the difference.
Keep an eye on our website and social channels for webinar registration details. Or get in touch with Danbro Umbrella if you’d like to discuss what the Employment Rights Act could mean for you and your business.
Employment Rights Act FAQs
What is the Employment Rights Act 2025?
The Employment Rights Act 2025 is a major reform of UK employment law designed to strengthen workers’ rights and improve job security. Introduced in phases throughout 2026 and 2027, the legislation covers areas including Statutory Sick Pay, family leave, unfair dismissal, workplace harassment and guaranteed hours. For contractors, recruitment agencies and umbrella companies, understanding these changes early will help ensure compliance and prepare for the future.
When do the Employment Rights Act changes come into effect?
The Employment Rights Act changes are being introduced gradually rather than all at once. Some provisions became law in December 2025, with major reforms taking effect throughout 2026 and 2027. Key milestones include changes to Statutory Sick Pay and family leave in April 2026, enhanced workplace protections from October 2026, and further reforms around unfair dismissal, guaranteed hours and umbrella company regulation during 2027. Some measures remain subject to further legislation.
How does the Employment Rights Act affect contractors?
For contractors working through a compliant umbrella company, the Employment Rights Act introduces stronger workplace protections and improved statutory rights. Changes include earlier access to Statutory Sick Pay, enhanced family leave rights and future reforms around guaranteed hours for qualifying workers. While not every change will affect every contractor, understanding the new legislation can help you make informed decisions about how you work and who you choose as your employment partner.
How does the Employment Rights Act affect umbrella companies?
The Employment Rights Act places greater emphasis on compliance, transparency and worker protection across the umbrella sector. Future reforms are expected to bring umbrella companies under increased regulatory oversight, while separate PAYE liability changes also strengthen compliance expectations throughout labour supply chains. For compliant PAYE umbrella companies like Danbro, these reforms help raise standards across the industry and reinforce the importance of robust payroll and employment practices.
How does the Employment Rights Act affect recruitment agencies?
The Employment Rights Act encourages recruitment agencies to review their contractor engagement models and labour supply chains. As employment legislation evolves, agencies should ensure they’re working with compliant umbrella companies, understand changing agency worker rights and keep pace with new employment obligations. Many businesses are also reviewing PAYE and Professional Employer Organisation (PEO) solutions to help simplify workforce management while maintaining compliance and protecting contractors.
Is Danbro prepared for the Employment Rights Act?
Yes. At Danbro Umbrella, we’ve spent more than 25 years helping contractors, recruitment agencies and businesses navigate changing employment legislation. We’re closely monitoring the rollout of the Employment Rights Act 2025 and continue to provide practical guidance, compliant PAYE umbrella solutions and expert support as the legislation develops. Whether you’re a contractor or recruiter, our team is here to help you understand the changes and prepare with confidence.
