The UK's Employment Rights Act 2025: A New Driver of South Africa Hiring

Most UK companies weigh up South African hiring on two factors: cost and talent quality. Since late 2026, a third factor has entered the conversation, and it has nothing to do with South Africa at all. It is the UK's own Employment Rights Act 2025, which is steadily raising the cost and risk of UK employment itself.

Here is what the Act actually changes, and why it is quietly reshaping where UK companies choose to put headcount.

What the Act changes, and when

The Employment Rights Act 2025 rolls out in stages rather than all at once. The first wave took effect in October 2026, with the largest changes for employers landing in 2027:

• Unfair dismissal protection arrives much sooner. The qualifying period drops from two years' service to six months, so employees are protected against unfair dismissal far earlier in the relationship. This change takes effect from January 2027.

• Fire-and-rehire becomes automatically unfair in most cases. Dismissing an employee because they will not accept a variation to core terms - pay, hours, holiday, or pension entitlement - will no longer be a viable route to restructuring a contract, other than in narrow cases of genuine financial distress. Also from January 2027.

• Statutory sick pay becomes a day-one right. The lower earnings limit and waiting period are removed, so SSP is payable from the first day of sickness rather than after a qualifying threshold.

• Paternity leave and unpaid parental leave become day-one rights, removing the 26-week and one-year qualifying periods that previously applied.

• Zero-hours and low-hours workers gain a right to guaranteed hours, based on hours actually worked over a reference period, plus a right to reasonable notice of shifts and compensation for late cancellation. Expected in 2027.

• A new Fair Work Agency centralises enforcement, replacing a patchwork of separate bodies.

The government's own impact assessment puts the direct cost to employers at around £1 billion a year - reduced from an earlier £5 billion estimate - though that figure excludes the cost of new trade union access rights, which independent analysis puts as high as £680 million a year for SMEs alone.

Why this changes the hiring calculus

None of this makes UK employment untenable. It does make it materially less forgiving of a wrong hire, and heavier to administer from day one.

A UK hire that does not work out now carries real dismissal risk from six months in, not two years. Restructuring a role by changing its terms is harder to do unilaterally. Sick pay and parental leave administration starts immediately rather than after a qualifying period. None of this is dramatic on its own, but it compounds, particularly for functions that scale up and down with demand - customer support, sales development, back-office operations - where UK companies have historically used flexible or shorter-tenure arrangements to manage that variability.

Where South Africa fits

This is prompting more UK companies to think explicitly about which roles need to sit inside the UK employment framework and which do not. Hiring in South Africa through an Employer of Record does not remove employment protections - it moves the relationship into South African law, with its own statutory framework under the BCEA and its own dismissal process through the CCMA. It is a different, well-established compliance regime, not an absence of one.

What it does change is the shape of the risk. A South African EOR hire is a genuine, properly compliant local employment relationship from day one, run under a framework UK companies are not trying to build in-house expertise on. For companies scaling functions like CX, sales support, or back-office operations, that combination - real compliance, without adding to an increasingly complex UK headcount - is a large part of what is driving the current wave of interest.

Where Cape Resources fits

As Employer of Record, Cape Resources handles the actual compliance obligations of a South African hire - contracts, statutory leave, UIF and PAYE, and the CCMA process if it is ever needed - so a UK company gets a properly employed team member in South Africa without having to build that expertise internally, at a moment when UK employment compliance is already getting more demanding.

If the Employment Rights Act 2025 has you thinking differently about where new roles should sit, contact Cape Resources