Employment Rights Act 2025: What charities need to do now

The changes introduced by the Act, particularly those relating to unfair dismissal rights and compensation, mean employment practices that worked in the past could now expose organisations to greater risk.

For charities, this is not simply another piece of legislation to note. It has real implications for how staff are recruited, supported and, where necessary, managed.

Over the coming months, many charities will want to take a careful look at how they recruit, manage and support their employees. For charity leaders, trustees and managers, this is an opportunity to review existing approaches to people management and ensure they are fit for the future.

A changing landscape
The overall aim of the Employment Rights Act 2025 is to strengthen employment protections. For charities that employ staff, this represents a notable shift in the regulatory landscape.

The legislation introduces reforms including earlier access to unfair dismissal protection, expanded family-friendly rights, stronger harassment protection and changes to the rules around union recognition.

While many charities already aim to follow good practice in managing employees, the Act raises baseline expectations for employers. Charities will therefore want to ensure their internal processes are robust, transparent and consistently applied. This is particularly important in the charitable sector, where organisations are expected to demonstrate high standards of governance and accountability.

As a result, this is a good moment for charities to consider whether their current policies, procedures and management practices remain sufficiently robust.

Reviewing employment practices
One of the most immediate implications is the need to review existing employment practices. Policies that were previously sufficient may no longer meet the expectations created by the new legislation.

Charities may want to review several key areas, including:

• Recruitment and onboarding processes
• Probationary period procedures
• Performance management systems
• Disciplinary and dismissal processes
• Family-friendly policies and leave arrangements
• Workplace conduct and anti-harassment measures

A thorough review will help ensure policies remain legally compliant and aligned with best practice.

Alongside reviewing policies, it is equally important to consider whether managers feel confident applying them. In many charities, line managers are not HR specialists and may welcome clearer guidance and support.

Refreshing policies and ensuring managers understand how they should be applied will be key to managing these changes effectively.

Managing new employees
One of the most notable changes introduced by the Act is the reduction in the qualifying period for unfair dismissal from two years to six months. This is due to come into effect on 1st January 2027 and will apply retrospectively to employees starting work after 1 July.

In practical terms, this means charities will need to place greater emphasis on the early stages of employment. Recruitment decisions, onboarding and probationary periods will all become more important in managing risk.

Charities will want to ensure that:

• Recruitment processes are thorough and evidence-based
• Job expectations and performance standards are clearly defined from the outset
• Probationary periods include structured review points
• Managers provide regular feedback and support to new employees

This is particularly important where new employees are not performing as expected. If concerns are not identified and addressed early, it becomes much harder to deal with issues later.

Charities may, therefore, want to look closely at how probationary periods are currently managed. Questions worth asking include:

• Are expectations clearly explained from the outset?
• Are probationary review meetings scheduled and documented?
• Do managers feel confident addressing performance concerns early?

Regular check-ins, clear feedback and proper documentation will become increasingly important.

Removal of the unfair dismissal compensation cap
Another significant change introduced by the Act is the removal of the compensation cap for unfair dismissal.

Previously, compensation awards were subject to a statutory maximum of one year’s salary or £118,223, whichever was lower. Removing that cap increases the potential financial exposure associated with unfair dismissal claims. Where employees suffer substantial financial loss, compensation awards could be significantly higher.

For charities, this is particularly relevant. Many organisations operate with limited financial reserves and funds are intended to support charitable activities. Significant tribunal awards could, therefore, affect an organisation’s ability to deliver its mission.

With this in mind, charities may want to review their organisational risk registers to ensure employment risks are properly reflected. The potential impact of employment disputes may need to be reassessed, particularly where financial consequences could be higher.

Trustees may also wish to take a closer interest in this area to ensure appropriate governance and oversight arrangements are in place.

Strengthening performance management
The reforms also highlight the importance of effective performance management.

Clear expectations, regular feedback and well-documented discussions help prevent problems escalating. Where concerns arise, charities should be able to demonstrate that employees were informed and given a reasonable opportunity to improve.

For many organisations, this is less about introducing new systems and more about ensuring existing processes are used consistently.

Managers may need additional support or training to feel comfortable having early and constructive conversations about performance. These conversations are often key to maintaining positive and productive working relationships.

Why documentation matters
As employment protections strengthen, good documentation becomes even more important.

Being able to demonstrate that decisions were fair, reasonable and properly considered can make a significant difference if disputes arise. This applies across the employment lifecycle, from recruitment decisions through to performance management and dismissal processes.

Supporting managers
Policies alone are rarely enough. The way managers apply those policies in practice is what really matters.

Line managers in charities often balance many responsibilities, and people management is only one part of their role. Providing them with the right guidance, tools and training helps ensure employment issues are handled fairly and confidently.

Charities may, therefore, want to invest in training focused on conducting effective probationary reviews, managing performance issues fairly and maintaining appropriate records.

Simple steps such as clearer templates for probationary reviews, guidance on documenting performance conversations and refresher training on employment processes can all help.

If your charity would like support reviewing policies, preparing managers or understanding the practical implications of the Employment Rights Act 2025, Action Planning can help. We work with charities to strengthen people management practices and prepare organisations for the changes ahead.

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