Employment rights changes: what they mean for EPL insurance

What is actually changing — and when

The new framework became law in 2025 but commences in phases stretching into 2027 and beyond. By mid-2026, several measures are already in force: statutory sick pay now runs from the first day of sickness rather than the fourth, the lower earnings limit for sick pay has gone, and paternity and ordinary parental leave have become day-one rights. A new state enforcement body for employment rights has also been established.

The measures with the biggest insurance consequences are scheduled next. Strengthened harassment duties — including employer liability for harassment of staff by third parties such as customers — and an extension of employment tribunal claim deadlines from three months to six are timetabled for late 2026. The centrepiece follows: the qualifying period for ordinary unfair dismissal claims is due to fall from two years to six months for dismissals taking effect from the start of 2027. Restrictions on dismissal-and-re-engagement (“fire and rehire”) are scheduled around the same point, with guaranteed-hours rights for zero-hours workers and further measures to follow later.

Two cautions. First, early proposals were for a day-one unfair dismissal right; the framework as finally passed settled on a six-month qualifying period instead, so treat older commentary with care. Second, the timetable has already moved once and could move again — before acting on any specific date, check the current commencement position.

Why this widens the claims window

Today, an employee generally needs two years’ service before they can bring an ordinary unfair dismissal claim. That two-year buffer is where a great deal of informal employment practice quietly lives: probation failures, early conduct dismissals, “not working out” conversations handled quickly and without much process. Discrimination and whistleblowing claims have never needed qualifying service — but the ordinary dismissal claim, the commonest tribunal claim of all, has.

Cut the qualifying period to six months and the arithmetic changes. A dismissal at month seven becomes claimable. Every probation decision, restructure and early exit moves inside the claimable window, and the dismissals most likely to be challenged are precisely the early ones, where process tends to be thinnest. Add a doubled limitation period and claims can also arrive later, when memories have faded and the manager involved may have left. And because tribunal issue fees were abolished in 2017, bringing a claim costs an employee nothing but time.

The harassment duty deserves separate attention

Employers already carry a duty to take reasonable steps to prevent sexual harassment. The new framework strengthens that standard and extends employer liability to harassment of staff by third parties — customers, clients, patients, site visitors. For customer-facing sectors this is a genuinely new exposure: the trigger for a claim need not be anything a colleague did. Complaint handling, training and incident records become the evidence on which such claims are defended.

What this does to EPL insurance

EPL insurance exists for exactly this territory. It pays the defence costs of employment claims — unfair dismissal, constructive dismissal, discrimination on any protected characteristic, harassment and victimisation, whistleblowing detriment — and, where a claim succeeds or is settled, the awards and settlements, subject to the limit and retention. Cover usually extends to managers and directors named personally alongside the company.

The economics are dominated by defence costs. In the employment tribunal each side generally bears its own costs whatever the outcome, so an employer that fights a weak claim and wins has still paid its own lawyers in full. More claimable dismissals and a longer claims window mean more occasions on which that defence spend can be triggered — which is why we think the honest description of EPL is changing from “useful” to something much closer to core cover for any employer of scale, and especially for SMEs where a single defended claim is a material hit to the year.

What EPL does not do

It is not a licence for poor practice. EPL will not pay wages owed, notice or redundancy entitlements the business simply chose not to pay, and policies carry conditions that reward good process — most commonly a requirement to take advice before dismissing and to notify claims promptly. Nor does it make the underlying law an insurance question: how you run a disciplinary process is a matter for HR and legal advice, not for us. Our angle is narrower and practical — the risk of defending employment claims is growing, and it is insurable.

What to do before renewal

Three things are worth doing now rather than after the main changes land. First, if you do not carry EPL, price it — terms are generally easier to obtain before a rush than after one. Second, if you carry it inside a management liability package, check the limit and whether it is aggregated with the directors’ cover, because a heavier claims environment draws down a shared pot faster. Third, expect underwriters to ask more — about headcount, dismissal processes, HR support and any planned restructuring — and answer well: under the fair presentation duty, the quality of those answers frames the cover.

Frequently asked questions

Do the changes mean day-one unfair dismissal rights?

No. Early proposals were for a day-one right, but the framework as passed reduces the qualifying period from two years to six months instead, scheduled to apply to dismissals taking effect from the start of 2027. Timetables have already shifted once, so check the current commencement position before relying on a date.

Which changes are already in force?

By mid-2026: statutory sick pay from the first day of sickness with the lower earnings limit removed, day-one paternity and ordinary parental leave, and a new state enforcement body, among others. The dismissal, harassment and tribunal time-limit changes are scheduled but not yet in force at the time of writing.

Will EPL premiums rise because of the new framework?

Nobody can promise either way. A larger pool of claimable dismissals and a longer limitation period point towards more claims, and insurers price claims. What an employer controls is how the risk presents: documented processes, HR advice around dismissals and a clean claims record all support better terms, whatever the market does.

We already have legal expenses insurance. Is that enough?

Commercial legal expenses policies often include employment disputes cover, but usually with prospects-of-success conditions, lower limits and less scope for awards and settlements. EPL is the dedicated form. Some businesses sensibly carry both; the important thing is knowing which policy would respond to a tribunal claim, and how, before one arrives.

Does EPL cover harassment claims involving customers or other third parties?

The claim EPL responds to is the employee's claim against the employer — for example, that the business failed to prevent harassment by a third party. That is employment practices territory and is typically within scope, but wordings differ, and this is exactly the kind of point to have checked against your policy rather than assumed.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.