21st March 2025

The Government set out its plans for reforming the labour market by publishing the Employment Rights Bill on 10 October 2024.

Since then, elements of the Bill have been subject to various public consultations whilst progressing through the House of Commons.  The Bill completed the final stages in the House of Commons last week and is now progressing through the House of Lords.

While some of the detail will be set out in regulations, we expect the legislation to be passed fundamentally as set out below.

It is anticipated that the Bill will be passed by Parliament before Autumn 2025, with key measures coming into force in 2026. The Bill includes numerous significant changes to existing employment rights – in what is rightly described as the biggest change to employment law in a generation – including doubling the limitation period for Employment Tribunal claims from 3 to 6 months. There is a lot to digest!

In this article, we set out the key changes businesses should be aware of ahead of the legislation coming into effect. If you would like further advice on how you can prepare for these changes, please register your interest in attending our related talk this September.

Unfair Dismissal a ‘Day One’ Right

One of the Bill’s most significant changes is the removal of the qualifying period of service for unfair dismissal rights. In essence, protection from unfair dismissal will become a ‘day one’ right rather than requiring 2 years’ service.

This will mean that employers may only dismiss employees for one of the potentially fair reasons (redundancy, capability, conduct, contravention of statute, some other substantial reason) and must act reasonably when relying on that reason.

However, a statutory “initial period of employment” (IPE) will be introduced which will last between three and nine months (the duration has not yet been decided).  During the IPE, a “lighter touch” process will apply (with the exception of redundancy dismissals) providing some relief for employers who need to carry out dismissals early in employment.

Collective Consultation

Collective consultation requirements are triggered when proposing to make 20 or more employees “at one establishment” redundant in a period of 90 days or less. This will still be the case, however, a new threshold test will be introduced (the details of which will be set out in regulations) that will include employees across the business as a whole; across all sites.  This will almost certainly mean businesses having to collectively consult in many more cases.  Alongside this change the legislation also doubles the already hefty penalty for failing to consult from 90 to 180 days’ pay per employee.

Fire and Rehire

Currently, employers can ‘fire and rehire’ where they have a sound business reason for seeking to change an employee’s contract of employment. If employees do not agree to some or all the contractual changes proposed by employers, they may be lawfully dismissed. The employer may then offer to re-engage them on the new terms.

Once the Bill is enacted, dismissals will be automatically unfair where the reason (or if more than one, the principal reason) for dismissal is an employee’s refusal to accept a variation in their terms, sought by the employer, where the employee will be re-engaged to carry out the same or substantially the same duties. This means use of fire and rehire will be automatically unfair unless the employer can show:

• evidence of financial difficulties that were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or constituting the business; and
• the changes were to eliminate, prevent, significantly reduce or significantly mitigate the effects of those financial difficulties; and
• in all the circumstances the employer could not reasonably have avoided the need to make the variation.

Employers will find it very hard to meet this test, accordingly, employers are likely to need to consider carrying out a redundancy exercise, and complying with any obligation to collectively consult, in order to effect changes to contracts of employment.

Zero Hours Contracts

It is currently lawful to engage individuals with no obligation on the employer to provide, and no obligation on the worker to accept, work. Despite proposals from the Government to ban zero-hours contracts altogether, this working arrangement will remain lawful. However, the Bill will introduce new rights for these workers to guaranteed hours and reasonable notice of shift changes.

Employers who engage workers (including agency workers) on zero-hours or “low-hours” contracts will be required to offer individuals guaranteed hours where they work regularly over a specified period. The reference period is likely to be 12 weeks, but this, including information on how frequently the hours must be worked in order to be considered “regular” will be confirmed in regulations following further consultation.

Workers will be entitled to reasonable notice of shift changes and compensation will be payable where an employer cancels a shift at short notice.

Bereavement Leave

Employees currently have a right to take two paid weeks off work if their child dies under the age of 18 or is stillborn after 24 weeks of pregnancy. The Bill includes proposals to introduce a broader protected time off for all bereaved employees, not just those who have lost a child. Employees would be entitled to leave for at least one week, to be taken 56 weeks within the death. Regulations will be published to determine the qualifying relationships for the leave.

A separate amendment was introduced before the Report stage to include pregnancies lost before 24 weeks. Whilst this amendment was not carried forward, the Government has stated its support for this provision. It is therefore likely that an amendment to this effect will be introduced in the House of Lords.

Changes to family leave entitlement and protected periods

In April 2024, the ‘protected period’ in redundancy for employees returning from maternity leave, adoption or shared parental leave was extended. During this time, employers must offer any suitable alternative vacancy to these individuals, as a priority. The Bill introduces powers to extend this protection effectively banning dismissals of women who are pregnant, on maternity leave, and during a six month return to work period, except in specific circumstances.

A separate provision makes paternity and unpaid parental leave a ‘day one’ right removing the existing qualifying periods of continuous employment of 26 weeks and one year for paternity and unpaid parental leave respectively.

Protection from third party harassment extended

In October 2024 a new duty was introduced requiring employers to take “reasonable steps” to protect employees from sexual harassment perpetrated by third parties. The Bill significantly expands this requiring employers to take “all reasonable steps” to prevent not just sexual harassment by third parties, but all types of harassment.

Regulations will be introduced to specify what would be considered as “reasonable steps” for the prevention of sexual harassment, and may include:

• carrying out assessments;
• publishing plans or policies;
• steps relating to the reporting of sexual harassment;
• steps relating to the handling of complaints.

Third party harassment of employees will be treated as being permitted by the employer if it is carried out during the victim’s employment and the employer failed to take all reasonable steps.

In addition, raising concerns that “sexual harassment has occurred, is occurring or is likely to occur” will be specifically protected as a qualifying disclosure under whistleblowing legislation and signing a confidential settlement agreement will not prevent individuals from blowing the whistle on sexual harassment.

Annual Leave Records

The Bill imposes a new obligation on all employers to keep annual leave records. There is no set format for the record-keeping, but they must demonstrate the amount of leave taken and the holiday pay received by all workers. Records must be retained for six years, and failure to comply will be a criminal offence punishable with (potentially unlimited) fines.

Changes to Statutory Sick Pay

Currently, statutory sick pay (SSP) is not payable for the first three qualifying days in any period, and employees must earn £123pw on average to qualify for SSP. Proposals in the Bill would remove the waiting period and lower-earnings limit, meaning employees would receive SSP from the first day of incapacity. The weekly rate that an employer must pay is the lower of £118.75 or 80% of the employee’s normal weekly earnings.

Fair Work Agency

The Bill abolishes two current public bodies – the Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement. The responsibilities managed by these agencies (including other new obligations) will be carried out by a new public authority which is likely to be called the “Fair Work Agency”.

The Fair Work Agency will be responsible for enforcing holiday record-keeping requirements, failure to pay correct SSP or holiday pay, and will also provide advice to employees for their employment-related claims. The Bill sets out a range of enforcement powers for the agency, including the ability to enter business premises to obtain documents and inspect electronic records for employer compliance.

Significantly, the agency will also have a power, which does not currently exist in the UK, to bring proceedings in the Employment Tribunal on behalf of an individual.

Flexible Work Reform

Since April 2024, all employees have been entitled from their first day of work to make up to two statutory flexible working requests in any 12-month period. Employers must respond to the request within two months (formerly three) and may refuse the request on specified grounds.

Employers must explain the grounds for refusal when responding to the request: once the Bill becomes law, they will have to go further and explain why they consider it reasonable to refuse on those specified grounds adding further protection to those making requests.

Please contact Danielle and Ellie if you have any questions arising out of this article.

September seminar at L&T – Register now!

We are expecting the Employment Rights Bill to be passed in the coming months bringing into force all these changes from 2026. In anticipation, we will be hosting a seminar explaining the key changes and their practical implications for employers in September 2025. Please click here to register your interest in attending and we will be sure to send you an invite.