Employment Law Coffee Break: Employment law reforms 2026/2027, two new consultations, and an incentives update

Getting ready for the Employment Rights Act reforms in 2026 and January 2027

The next wave of reforms under the Employment Rights Act 2025 (ERA) come into force in October 2026 and January 2027. The fact that a number of the reforms are still subject to consultation and/or awaiting further detailed regulations means the task in hand is not straightforward. 

This week we focus on a number of the reforms including harassment, unfair dismissal, restrictions on contractual variations and the extension to Employment Tribunal limitation periods.

Osborne Clarke's practical tracker, setting out actions to take in the run up to the reforms coming into force, guides you through the associated actions and considerations; please speak to your Osborne Clarke contact for further details. Our microsite looks at each reform in detail including the impact and actions for consideration. 

October will also see new rights around trade unions, including a requirement for an employer to provide specific information on the right to join a trade union in the section one statement (the outcome of a consultation is awaited to provide further detail) and also new rights for trade unions to access workplaces (digitally and physical attendance). Read our Insight for a closer look at what this means for employers. 

New harassment obligations - strengthened preventative duty and third party harassment: October 2026

Strengthened obligation to prevent sexual harassment

October 2026 sees the enhanced duty to take "all reasonable steps" to prevent sexual harassment of employees come into force, strengthening the existing "reasonable steps" requirement which has applied since October 2024. 

The shift in language to "all" means employers should anticipate greater scrutiny from the Equality and Human Rights Commission (EHRC) and tribunals. An employment tribunal will consider an employer's compliance with the preventative duty when considering a compensation uplift on a successful sexual harassment claim. 

The latest government roadmap for implementing the ERA provides that regulations setting out what will count as all reasonable steps will be published in 2027. There is likely to be some form of public consultation on the detail and there have been previous indications that reasonable steps may include a requirement for large employers to publish action plans. 

Liability for third party harassment

October also sees new third-party harassment protections in force, placing a new statutory obligation on employers not to permit the harassment of their employees by third parties. The test for liability mirrors the existing tests that apply where harassment is carried out by an employer or a work colleague. 

This is a significant development: while many employers have been assessing the risk of third parties committing sexual harassment in light of the preventative duty in force since October 2024, these new third-party obligations cover not only sexual harassment but harassment related to other protected characteristics including age, disability, gender reassignment, race, religion or belief, sex and sexual orientation. 

Employees will be able to bring claims in the Employment Tribunal for breach of this new obligation in the same way that they can currently bring a claim in respect of harassment by a colleague or their employer. An employer will need to demonstrate that it took "all reasonable steps" to prevent the harassment to successfully defend a claim. 

Preparing for the new obligations 

Actions employers can take to prepare for these new obligations include: 

Updating and extending risk assessments

The EHRC has recommended that employers undertake a risk assessment in the context of the preventative duty, suggesting that the framework of a health and safety risk assessment may be an appropriate model. 

A formal assessment is also advisable for assessing the wider risks of harassment, including third-party harassment, across all applicable protected characteristics. The risk assessment should extend not only to day-to-day operations and interactions with third parties but also the organisation's internal culture and processes and how complaints and allegations of harassment and discrimination are dealt with.

Reviewing and updating harassment policies

While many policies will already address the preventative duty and third party harassment, these should be reviewed to ensure that they effectively address the new legal obligations and staff are aware of what they can do should they or another individual feel that they are being harassed; and the expectations regarding their own behaviours with other staff and third parties. 

Delivering regular refreshed training

Employers should ensure that refreshed training is delivered to managers and staff covering both the preventative standard and third-party scenarios, as well as the existing obligations under the Equality Act 2010. 

Addressing third-party specific risks

Employers should identify which roles, environments and relationships carry an increased risk of third-party harassment. Appropriate measures should be taken, for example ensuring contractors on site are aware of the organisation's policies in this respect and including contractual protection regarding the standards expected in commercial contracts. 

Where measures such as surveillance or other electronic monitoring (for example, recording telephone calls) are identified as appropriate, ensure they are implemented in accordance with existing legal and regulatory requirements.

Revisiting speaking-up and reporting mechanisms

Employers should ensure that all staff know how to raise concerns about third-party conduct. Reporting channels should be accessible, well understood and properly resourced.

Seeking external support

There are already a number of existing resources published by the EHRC to support employers in complying with their Equality Act duties, including technical guidance on sexual harassment and harassment at work, an eight-step guide to preventing sexual harassment in the workplace, and a checklist, action plan and monitoring logs. Employers should keep a close eye on further guidance from regulators and developments in the case law.

Osborne Clarke is working closely with clients on preparing for these new obligations, alongside our health and safety team, together with providing training for HR and managers on the new legal framework and training across the business on harassment and discriminatory behaviours and expectations.

Consultation on misuse of non-disclosure agreements

The government has also published a consultation on a new statutory obligation in the ERA restricting the use of non-disclosure agreements in respect of harassment and discrimination in the workplace, which closes on 8 July 2026. The revised implementation roadmap confirms the government's intention for the new measures to come into force in 2027. Once there is further detail, employers will need to review confidentiality and non-disclosure provisions in employment contracts, settlement agreements and other documentation to ensure that they comply with the new requirements and provide appropriate training for managers.

Six months' qualifying service and uncapped compensation on unfair dismissal: 1 January 2027

Although the reduction in the qualifying period for unfair dismissal claims from two years to six months does not take effect until 1 January 2027, it will capture employees who meet the new qualifying service requirement from that date. That is, existing employees (including recent joiners) who may at present not benefit from unfair dismissal protection as they have less than two years' service. 

Employers should ensure that managers are proactively engaging with any staffing issues and taking appropriate steps to manage any potential dismissal to avoid the risk of an unfair dismissal claim (and the potential for unlimited compensation), while ensuring that a fair process is followed. Employers must remain aware of the risk of circumstances which may give rise to automatic unfair dismissal claims and discrimination claims, which do not have a qualifying service requirement.

Many employers have been prioritising tightening up their probationary periods, to ensure an efficient and effective review of the employee's performance can be carried out before ordinary unfair dismissal protection kicks in, as well as focusing on performance and other relevant processes, to ensure that, so far as possible, the employer is in the best possible position procedurally should a claim be brought. Particular care will need to be taken in managing dismissals close to an employee obtaining the six month service requirement as statutory rules provide for a minimum period of notice, which may extend the date of termination for unfair dismissal purposes to later than the actual dismissal date. 

The removal of the cap on compensation continues to raise concerns over the potential awards that employers may face for high earners on complex remuneration packages. These individuals may not otherwise have pursued a claim, given the cap on awards in the tribunal and the costs implications and complexity in High Court proceedings.

The government's summary of stakeholder roundtables on the unfair dismissal changes indicates that guidance will be provided on the changes to unfair dismissal, to help employers and employees with the practical implications. The summary of responses includes suggestions for guidance on how to manage performance and dismissal in executive roles, as well as to support tribunals, employers and employees to understand how the changes could affect compensation calculations. 

Restrictions on contractual variations: 1 January 2027

The outcome of the recent consultation on variation of contractual terms, which restricts the extent to which employers can vary certain "restricted" contractual provisions, is awaited. The consultation focused on changes to expenses, benefits and shift patterns.

Under the new statutory provisions, any dismissal where there is a restricted variation will be automatically unfair unless an employer can show that the variation was due to "financial difficulties" affecting its ability to carry on business that could not have been "reasonably avoided". A dismissal will also come under greater scrutiny (although it will not be automatically unfair on account of the variation) where an employer seeks to make contractual variations which are not restricted. 

These new rules are due to come into force on 1 January 2027 and employers should look to ensure that they have a clear picture of what terms are contractual, while remembering that even terms which are stated to be non-contractual may well have acquired that status through custom and practice. 

From 1 January, it will also be a "restricted variation" to change an existing employment contract to include a contractual term allowing an employer to make restricted variations. Employers should therefore ensure now that any appropriate variation provisions are in place and include a provision in contracts for new joiners from now on. However, these clauses come with their own legal and practical limitations and legal advice should be sought before relying on them for all but the most minor of changes. 

Employers should also remember that the ERA reforms also provide protection for employees where an employer replaces an employee with another individual (such as an agency worker, self-employed contractor). The dismissal of the employee for that reason will be automatically unfair unless the dismissal is wholly or mainly attributable to the fact that the requirements of the employer's business for those activities to be carried out have ceased or diminished or are expected to do so or the employer can rely on the statutory financial circumstances exception (which will be a high bar to meet). Employers will need to consider carefully the impact of these rules on any proposals where there may be a change in personnel.

Extension to tribunal limitation periods: October 2026

October 2026 will also see the limitation period for an employee to bring a tribunal claim increased from 3 months to 6 months. This is against the backdrop of the doubling of the Acas conciliation period from 6 weeks to 12 weeks since 1 December 2025.

Employers will need to factor in this additional time in understanding the risk to the business where a potential claim may be made; as well as the delays employers are already facing in the tribunal system, increasingly careful management will be needed in respect of future witness evidence and document retention. 

Two new consultations published: zero/low hours workers and rights for those with caring responsibilities

Engaging zero hours, low hour and agency workers: new obligations from 2027

The government has published a consultation, "Ending one-sided flexibility – reforms of zero hours and similar contracts". It sets out the government's current thinking on the secondary legislation needed to give effect to the zero and low hours reforms under the ERA, covering three principal areas: a right to guaranteed hours, a right to reasonable notice of shifts, and a right to compensation where shifts are cancelled, moved or curtailed at short notice. The outcome of this consultation will shape the secondary legislation. 

Given the significance of these reforms to the way employers and hirers use staff on these contractual arrangements, businesses should ensure that they are auditing how they are currently using staff who may benefit from these changes and tracking the outcome of this consultation to understand what measures will need to be adopted. 

The measures in the ERA apply differently to agency workers compared to directly engaged workers, reflecting the nature of agency work and the relationship between agency worker, agency and hirer. Osborne Clarke's contingent workforce team looks in more detail at the consultation in relation to agency workers.

The government has confirmed that following the consultation it will develop regulations that will provide the further, much-needed, detail on the new requirements.

The consultation closes on 25 August 2026.