The Employment Rights Act gives HR the business case for prevention

Why legal risk gets attention too late

Employment law risk is cheapest to deal with before something goes wrong, and most expensive after. Yet it tends to get the most attention once it can no longer be prevented: when a claim or formal complaint has already been made.

At that point, time has to be found and legal support paid for. Senior people often get pulled in, HR and managers can spend weeks piecing together what was said and done, and external lawyers, where needed, are often instructed at short notice and at significant cost. For the people involved, it is rarely just a legal matter. Relationships are strained, teams go quiet or take sides, and managers are left wondering what they could have done differently.

What the Employment Rights Act 2025 changes

The Employment Rights Act 2025 makes leaving it that late harder to sustain:

• More people can bring claims. From 1 January 2027, unfair dismissal needs six months’ service, not two years.

• Claims can be worth more. From the same date, the cap on unfair dismissal compensation is removed.

• Employees have longer to bring them. Since 1 October 2026, most tribunal claims can be brought within six months, not three.

• The harassment duty is higher. From 30 October 2026, employers must take “all reasonable steps”, not “reasonable steps”, to prevent sexual harassment.

• Third parties are covered. This clearly includes harassment by clients and suppliers.

The regulatory layer for financial services

For FCA-regulated firms, there is a second layer of risk. Since 1 September 2026, serious bullying, harassment and violence with a work-related link can breach the Conduct Rules, and non-financial misconduct feeds more clearly into fitness and propriety assessments. The FCA says its policy work is complete and its focus is on how firms tackle this in practice. Firms are also expected to make sure staff understand the rules, so training is part of the obligation as well as good practice.

Employment tribunal claims are rising

A tribunal claim can hang over a team for months, if not years, and backlogs are already pushing some hearings into 2029. Single claims reached 42,000 in 2024/25, up 23% on the year before, and the open caseload of single claims hit a record 70,000 by June 2026. Those figures pre-date most of the changes above.

How AI is speeding up workplace grievances

Escalation is getting faster too. We are seeing small issues escalate more quickly, partly because people ask AI tools whether their experience counts as bullying or harassment and are handed a draft grievance in response. Conversations that once happened between a manager and an employee now start in writing. Managers who can have those conversations earlier and teams where people feel safe raising concerns, are far less likely to end up there.

Why prevention is the better investment

The harassment duty makes the case directly. From 30 October 2026, employers must take all reasonable steps to prevent sexual harassment, so prevention is what you will need to show if a claim is brought. Failing to do so can add up to 25% to compensation in a successful claim. Detailed regulations on what counts as reasonable steps are not expected until 2027 or later, so employers can’t wait for the guidance.

Prevention is also the cheaper route. Complex claims can cost upwards of £30,000 in legal fees alone, before barristers’ fees, any award, management time, lost productivity and the toll on the people involved. Set against that, training people well looks modest.

For many of the HR leaders we speak to, this is the business case they have been looking for. Preventative work is often hard to fund because the risk feels abstract. Higher exposure and a higher standard of prevention make it harder to defer, and easier to put to the board.

Why tick-box training isn’t enough

Training helps, with one caveat: it only works if people remember it. A tick-box course that is completed and forgotten does little when a manager hears a comment that doesn’t sit right, or an employee isn’t sure whether to speak up. That is why impactful, tailored material and refreshers matter. Knowledge fades and expectations keep changing, so a one-off induction session won’t hold. The test is practical: does everyone know what to do in that moment, and do they feel able to do it?

The question for leaders

If a manager heard a comment tomorrow that didn’t sit right, would they step in? Would the person on the receiving end feel able to say something? If you aren’t sure, that is the gap to close first.

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