UK EOR operations face significantly increased liability exposure from 2027 when unfair dismissal protection begins at six months with uncapped compensation.
The UK’s Employment Rights Act 2025 came into force in April 2025, marking the most significant employment law overhaul in a generation. The changes took effect immediately, fundamentally altering the employment landscape for UK operations.
From April 2026, statutory sick pay becomes payable from day one of any sickness absence with no waiting period or lower earnings threshold. Paternity leave and unpaid parental leave also become day-one rights with no qualifying service period required.
The most significant changes arrive in 2027. The qualifying period for unfair dismissal protection drops from two years to just six months, and the compensation cap for unfair dismissal claims will be removed entirely. This creates uncapped liability for employers from month seven of employment onwards. Additionally, the UK is establishing a new Fair Work Agency that consolidates HMRC’s minimum wage team, the Labour Abuse Authority, and the Employment Agency Standards Inspectorate into a single enforcement body.
For EOR providers operating in the UK, these changes significantly increase compliance complexity and financial exposure, particularly around unfair dismissal liability. How are providers preparing for the uncapped compensation risk starting in 2027?
source: Papaya Global