Employment Law Changes Following the Autumn Budget 2025: What Employers & Employees Need to Know

Updated guidance for the 2026 tax year

The Autumn Budget 2025 brought in a series of employment law changes that will affect UK employers and workers alike in the coming tax year. Whether you run a small business in Manchester or work in retail, education, hospitality or tech, these updates could impact your rights, responsibilities, or take-home pay.

At MAR Legal, we’ve broken down the key points you need to know, so you can confidently prepare for the changes coming in April 2026.

What is unfair dismissal?What’s Changed? Overview of Employment Law Reforms

The Autumn Budget confirmed a number of important updates to employment laws and workplace regulations, including:

• A new six-month qualifying period for unfair dismissal claims (replacing the proposed day-one right)
• A shake-up in how holiday pay is calculated and paid
• Changes to Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP)
• New obligations around flexible working requests
• Stronger protections for “atypical” workers (e.g. zero-hours, casual or gig workers)

These changes are part of the Employment Rights Act 2025, passed earlier in the year, but clarified and confirmed in the Chancellor’s Autumn Statement. (Gov.uk Autumn Statement Newsroom)

Let’s walk through the main changes and what they mean in practice.

Unfair Dismissal: New Six-Month Rule Confirmed

From 1 January 2027, the qualifying period for standard unfair dismissal claims will be reduced to six months of continuous employment.

Previously, employees had to work for two years before they could challenge their dismissal. The Budget confirmed this shorter threshold, offering earlier protection for workers, though not from day one, as originally proposed.

>> Employers should review their probation policies and ensure dismissal processes are documented properly, even within the first year.
>> Employees now have more scope to challenge unfair treatment earlier in their job.

More details: Read our full breakdown of the six-month rule here

Holiday Pay Reform: Rolled-Up Holiday Pay Returns (For Some)

The Budget reintroduced rolled-up holiday pay for workers with irregular hours, such as agency or gig workers. This means:

• Employers can pay holiday entitlement in real time, as part of regular pay (instead of paid time off later).
• The amount must be shown separately on payslips and calculated at 12.07% of earnings.

This change aims to simplify payroll for sectors with flexible or seasonal staff, but it only applies to certain categories of workers.

>> Employers must check contracts and update payroll systems accordingly.

>> Official GOV.UK guidance on holiday pay and entitlements

Statutory Sick Pay (SSP) & Maternity Pay Increases

From April 2026, the following statutory rates will increase:

• Statutory Sick Pay (SSP): Up to £123.45 per week
• Statutory Maternity Pay (SMP): Up to £191.25 per week

This change is in line with inflation and rising living costs.

Employers need to budget for higher payroll liabilities.
Employees going on leave will receive slightly more financial support.

For the full rates and thresholds, see: GOV.UK – Statutory Payments from April 2026

Flexible Working: New Day-One Right Comes into Force

From 6 April 2026, all employees will have the legal right to request flexible working from their first day on the job.

Previously, you had to wait 26 weeks before requesting remote working, part-time hours, or compressed schedules. Now:

• Two requests can be made per year (instead of one)
  
• Employers must respond within two months
  
• Reasons for rejection must be clearly explained
  

Employers: Review your flexible working policy, and train managers to handle requests fairly and consistently.
Employees: Be clear and realistic when making requests, MAR Legal can advise if your request is refused unfairly.

More on this topic: Acas Guide on Flexible Working Requests

Fairer Treatment for Casual, Zero-Hours & Agency Workers

The Budget followed up on earlier proposals to close the gap in protections for workers in non-traditional roles, including:

• Clearer rules on predictable work patterns
  
• Right to request a fixed working pattern after 12 months in a role
  
• Stronger penalties for employers who penalise staff for refusing last-minute shifts
  

This move is especially relevant in hospitality, retail, and logistics, sectors with a high number of casual workers.

• Employers must ensure their contracts are up to date and compliant.
• Workers on variable contracts now have more legal tools to challenge unfair practices.

Further reading: GOV.UK – Changes to zero-hours and casual worker rules

Tax and Payroll Changes Affecting Employment

In addition to legal reforms, the Autumn Budget also confirmed some tax and payroll adjustments:

• National Insurance threshold increase for employees to £13,200 per year
  
• National Living Wage rises to £11.44/hour from April 2026
  
• Employers to report certain benefits (e.g. electric company cars, hybrid working allowances) under updated P11D rules
  

Businesses should speak to their accountant or payroll provider about these changes, or contact us if contract reviews are needed to reflect new pay or benefit structures.
Keep clear records of performance reviews, probation conversations and warnings. Tribunals will look closely at these when considering fairness.

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How MAR Legal Can Help

Whether you’re an employee unsure of your rights, or a business owner trying to stay compliant, the post-budget landscape can feel overwhelming.

At MAR Legal, we’re here to help you:

• Understand how the Employment Rights Act 2025 affects your situation
  
• Review or update employment contracts and handbooks
  
• Advise on flexible working policies and dismissal procedures
  
• Assist with unfair dismissal, holiday pay disputes, or contract queries
  
• Keep your business ahead of regulatory and tax changes in 2026
  

We offer clear, affordable advice with no hidden fees, and we speak in plain English.

Contact us today: info@marlegal.co.uk
Call: +44 (0)161 491 3933
Based in Manchester | Serving clients across the UK and UAE

Summary: Employment Law & Budget 2025 Highlights

Change	Comes Into Effect	Who It Affects
Unfair dismissal rule reduced to 6 months	Jan 2027	Employers & employees
Rolled-up holiday pay allowed (limited)	April 2026	Casual/agency workers
Sick & maternity pay rates increased	April 2026	All employees
Day-one flexible working rights	April 2026	All employees
Rights for zero-hours/casual staff	April 2026	Retail/hospitality/logistics
National Living Wage increase	April 2026	All workers
NI threshold update	April 2026	Employees & employers

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