What the Employment Rights Act 2025 means for employers

The UK government has made major changes to employment law through the Employment Rights Act 2025. This means the rules around employing people are becoming stricter - and it will now be easier for employees to bring claims against their employer.

For business owners, the risk of employment-related claims is increasing. For those arranging Management Liability insurance, this makes Employment Practices Liability (EPL) cover more important than ever.

What has actually changed?

Some of the new rules won’t kick in straight away - they’ll be introduced over the next couple of years. But the overall picture is employees are getting more rights, and employers will have more responsibility to manage things properly.

Here’s a simple breakdown of the main changes:

Employees can claim unfair dismissal sooner

    →    Previously, employees usually needed two years of service to claim unfair dismissal.
    →    Now, they will only need six months.
    →    That means many more employees can bring a claim if they feel they’ve been treated                          unfairly.

Compensation could be much higher

     →   The limit on how much someone can be awarded for unfair dismissal is being removed.
     →    Simply, claims could become much more expensive.

Employees have more time to ring a claim

     →    Time limits for bringing tribunal claims are being extended to six months in many cases.
     →    This increases the window for claims to come to light - even after someone has left the                       business.

More ‘day one’ rights

     →    Some employee rights will apply from the very first day of employment, including changes               around sick pay and family leave
     →    This increases the risk of accidentally breaching the rules, especially for growing businesses                without dedicated HR teams.

Stronger rules around harassment

    →    Employers must now take stronger steps to prevent harassment - including harassment f                    from  customers or third parties.
    →    Even if an employer didn’t directly cause the issue, they could still face a claim if they didn’t              do enough to prevent it.

What does this mean for businesses?

Put simply:

    →     More employees can claim
    →     Claims could cost more
    →     There is more time to bring claims
    →     There are more ways to accidentally get it wrong

Even well-run businesses with good intentions can find themselves facing an employment tribunal. Defending these claims can be expensive - even if the employer wins. Legal fees alone can quickly run into tens of thousands of pounds.

Why EPL cover matters

Employment Practices Liability (EPL) insurance is designed to cover claims made by employees for issues such as:

     →      Unfair dismissal
     →      Discrimination
     →      Harassment 
     →      Wrongful dismissal
     →      Breach of employment rights

Many businesses assume these risks are covered under standard insurance policies. But often they are not - or they are only partially covered. EPL is usually included within broader Management Liability, rather than purchased as a standalone policy, although limits and cover levels can vary.

With the Employment Rights Act 2025 increasing the likelihood and potential cost of claims, having the right level of EPL cover is becoming more important now than ever.

Speak to us about your EPL cover

If you’re unsure whether your current policy would respond to an employment claim under the new rules, now is the time to check.

At Capsule, we can review your existing Management Liability policy, explain what is - and isn’t- covered, and make sure your EPL limits are suitable for the changing employment landscape.

Don’t wait until a claim lands on your desk - Get in touch today to review your EPL cover and make sure your business is properly protected