The upcoming Employment Rights Bill

Answer

This article was first published on 15 April 2025.

UK parliament is currently bustling with activity as the government’s flagship Employment Rights Bill (ERB), the most significant employment law developments in UK employment law for a generation, progresses through the legislative process. The ERB was published on 10 October 2024, just within the period of 100 days from taking office that Labour had promised it would introduce legislative changes. A new expanded version of the bill was published on 14 March 2025 to reflect the amendments voted through by the House of Commons. The bill is likely to receive royal assent later this year, once it has been approved by both houses of parliament and subject to any further agreed amendments.

While the government has already indicated that the majority of its provisions, many of which will require secondary legislation setting out the details, will not take effect until 2026, it’s crucial for employers to understand their commercial implications in preparation for their implementation.

What’s the significance of the recent amendments to the ERB?

The latest version of the ERB incorporates a number of key amendments that received government support as it proceeded through the commons. Reflecting the government’s commitment to “Make Work Pay”, the bill addresses key issues such as unfair dismissal, collective redundancy consultation and zero-hour contracts.

Day one unfair dismissal protection

One of the most significant amendments introduced under the ERB will be the right for employees not to be unfairly dismissed from day one of their employment. This is a major shift from the current position, which requires two years of service before an employee can claim unfair dismissal. The new provisions will include an "initial period of employment" that’s akin to a probationary period, during which a lighter touch procedure for dismissal will potentially be available if a new hire turns out to be unsuitable. This change is expected to come into force by autumn 2026 to give employers time to prepare and for detailed guidance on the operation of these provisions to be produced.

How does the bill seek to protect workers on zero-hour contracts?

Although the bill doesn’t eradicate zero-hour contracts, it does seek to mitigate their effects by introducing further protections for workers on zero and low-hours contracts, introducing a new right to be offered a “guaranteed hours” contract after a defined period of time (likely to be 12 weeks). The right to be offered a guaranteed hour contract will be extended to agency workers as well as zero and low-hours workers, along with the right to be given ‘reasonable notice’ of shift changes. Workers will be entitled to receive compensation if shifts are changed or cancelled at short notice.

The latest amendments to the bill ensure that these important provisions can only be opted out of under the terms of a collective agreement with a recognised trade union.

Will the bill change redundancy processes?

Collective consultation obligations apply when the employer is proposing 20 or more redundancies “at one establishment”. This means that employers have to follow a strict consultation process with “appropriate representatives”, which may be trade union or elected employee representatives.

Originally, in the initial version of the bill, the ‘one establishment’ wording was removed – which would have had the effect of applying the collective consultation obligations in circumstances when proposed redundancies across multiple sites totalled 20 or more employees. However, in a concession to businesses who raised concerns over the implications of removal, the ‘one establishment’ wording was reinstated. However, the bill now includes a provision for separate regulations to be introduced to apply a different threshold if redundancies are proposed across multiple establishments. This may be a specified number, defined by a specified percentage threshold of total employees, or a combination.  

In addition, the maximum protective award for failing to collectively consult will increase from 90 days’ (uncapped) pay to 180 days’ pay, which represents a significant financial penalty if collective consultation obligations aren’t followed by an employer.

What about ‘fire and rehire’?

The ability for employers to dismiss and reengage staff on new terms and conditions of employment (also known as ‘fire and rehire’) is significantly curtailed under the bill. The government’s intention is to “end unscrupulous fire and rehire tactics that leave working people at the mercy of bullying threats”. Dismissal for the purposes of varying an employee’s contract, or to employ another person under a varied contract of employment to do the same job, will be automatically unfair unless the employer can demonstrate that it’s in severe financial difficulty and the variation is necessary for the continuation of the business. A revised statutory code of practice will be introduced to reflect these changes once they take effect.

Statutory sick pay

The bill proposes to make statutory sick pay (SSP) payable from day one of sickness, removing the current three days’ waiting period. However, under the latest amendments the lower earnings limit for entitlement to SSP is be removed and employees will be entitled to receive SSP at either the statutory weekly rate (currently £118.75) or 80% of average weekly earnings, whichever is lower.

Trade unions and industrial action

The bill also makes significant changes to current rules relating to trade unions and industrial action. It introduces a new entitlement to a statement of trade union rights and new rights of access to the workplace for trade unions. The statutory trade union recognition process will be simplified and current voting thresholds for workforce support of trade union recognition removed. Industrial action ballots are also simplified, with the minimum period of notice to employers of industrial action reduced from 14 to 10 days. These changes are designed to support the effective operation of trade unions and ensure that industrial actions are conducted fairly and legally.

What’s the Fair Work Agency?

The Fair Work Agency (FWA) is a new state enforcement agency created by the bill, which consolidates existing enforcement functions such as minimum wage, statutory sick pay and labour exploitation enforcement, with the recent addition of holiday pay enforcement. The FWA's remit has been significantly expanded through several amendments including enforcement of the new requirement for employers to keep adequate records of holiday pay for six years.

The FWA can enforce the payment of statutory entitlements such as statutory sick pay by issuing notices of underpayment. The FWA can initiate employment tribunal proceedings on behalf of workers and provide legal assistance. It can also recover enforcement costs from non-compliant employers, with the method for calculating these costs to be detailed in future regulations. The fact that employers could face legal action initiated by the FWA will create a new incentive for compliance.

What are the major implications of these amendments for employers?

The bill is currently at the committee stage in the House of Lords, undergoing further scrutiny. Any amendments made by the lords will have to be considered by the House of Commons before the bill completes its passage through parliament and is granted royal assent.

Many of the finer details of the bill’s provisions will require further consultation and, in some cases, secondary legislation before they come into effect. Employers will therefore still have some time to prepare for these significant changes, with many not expected until 2026.

Employers are already facing rising costs due to the rise in the national minimum wage and increased national insurance contributions and these substantial legislative changes will no doubt mean additional costs, but the risks of non-compliance will also be high, making it essential to prepare well in advance to reduce the risk in an already uncertain economic climate.

Olivia Adams is a second-year trainee solicitor in employment at Birketts LLP.