FCA authorised · FRN 724952 0117 325 0027Quote & buy →
The Employment Rights Act 2025 received Royal Assent on 18 December 2025 and is being brought into force in phases through 2026 and 2027. Several measures already apply. Since 6 April 2026, statutory sick pay has been payable from the first day of sickness with the lower earnings limit removed, and paternity leave and unpaid parental leave have been day-one rights. The Fair Work Agency, a new state enforcement body for employment rights, was established on 7 April 2026.
The measures with the biggest insurance consequences come next. From 1 October 2026 the time limit for bringing most employment tribunal claims rises from three months to six, for claims where the act complained of happens on or after that date. The government expects the duty to take “all reasonable steps” to prevent sexual harassment, and the duty not to permit harassment of staff by third parties such as customers, to take effect on 30 October 2026. The centrepiece follows: for dismissals from 1 January 2027, the qualifying period for ordinary unfair dismissal claims falls from two years to six months and the statutory cap on the compensatory award is removed. Protections against “fire and rehire” are also scheduled for January 2027, 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.
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.
Employers already carry a duty to take reasonable steps to prevent sexual harassment. The Employment Rights Act 2025 raises that to “all reasonable steps” and adds a duty not to permit harassment of staff by third parties — customers, clients, patients, site visitors. The government expects both changes to take effect on 30 October 2026. 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.
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.
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.
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.
No. Early proposals were for a day-one right, but the Employment Rights Act 2025 as passed reduces the qualifying period from two years to six months, for dismissals from 1 January 2027, when the cap on the compensatory award is also removed. Commencement regulations made in May 2026 fix that date; other dates can still move, so check the current position before relying on one.
From 6 April 2026: statutory sick pay from the first day of sickness with the lower earnings limit removed, and day-one paternity leave and unpaid parental leave. From 7 April 2026: the Fair Work Agency. Next come the six-month tribunal time limit on 1 October 2026, the harassment duties (expected 30 October 2026) and the unfair dismissal changes for dismissals from 1 January 2027.
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.
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.
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.
