In October 2024, the UK government introduced the Employment Rights Bill, which includes 28 reforms to many areas of employment law including unfair dismissal, flexible working, statutory sick pay, family leave, protections against harassment, fire and rehire, collective bargaining, trade union law, and enforcement of labour market rules.
On March 14, 2025, the UK government published an amended version of the Bill, outlining significant changes in response to consultations on key aspects. Overall, the Bill represents the biggest employment law reform in decades. The Bill is expected to pass this summer and take effect in 2026. With so many impactful changes taking place, employers would be wise to ensure compliance efforts begin without delay.
Key measures and updates include:
Zero Hours Contracts: A “zero-hour” contract is an employment contract under which the employer is not obligated to provide any minimum number of working hours to the worker, although the worker may be obligated to be available for work as and when required. The Bill would end zero-hour contracts by introducing rights for workers to guaranteed hours, reasonable notice of shifts, and payments for short-notice cancellation of shifts. Under the Bill, these rights apply to agency workers as well.
‘Fire and Rehire’ Dismissals Automatically “Unfair:” ‘Fire and rehire’ refers to an employer dismissing employees and then immediately offering re-employment on new, often less favorable, terms and conditions. Under the Bill, ‘fire and rehire,’ and ‘fire and replace’ dismissals for failing to agree to a change in contract would be automatically considered unfair, except in limited circumstances where businesses genuinely have no alternative.
Dismissal and Redundancy Procedures: The Bill removes the two-year qualifying period of employment for the right to claim unfair dismissal, making it a ‘Day 1’ right. A new statutory probation period (an “initial period”) will be established during which employers may have a “light touch” process for addressing employee performance or conduct issues. The government is consulting on the length of the “initial period,” with a preference for nine months.
Collective Redundancies: New Thresholds, Higher Penalties
- Under current law, employers must consult collectively when proposing to dismiss 20 or more employees within 90 days at one “establishment.” Failure to comply can result in a maximum protective award of 90 days pay.
- The Bill introduces a new threshold for collective redundancy obligations to consult and notify, potentially triggering them if (a) employers propose 20 or more redundancies at one establishment or; (b) a different threshold is met, which has yet to be established. Employers are not required to consult all employee representatives together or try to reach the same agreement with all of the representatives.
- The maximum protective award for failing to comply with redundancy rules will double to 180 days from 90 days. This is a significant change, increasing the cost to employers for not following the new process correctly.
- Maritime Redundancies. The Bill will close the maritime redundancy notification loophole, requiring operators providing regular services to British ports to follow collective redundancy notification rules.
Enforcement:
- Tribunal Claims: The time limit to make an employment tribunal claim will increase from 3 months to 6 months for all types of claims including discrimination and unfair dismissal.
- Regulation of Umbrella Companies: An umbrella company is a business often used by recruitment agencies to pay temporary workers. The Bill would bring umbrella companies within scope of the Employment Agencies Act 1973, allowing for their regulation and state enforcement.
- Creation of the Fair Work Agency (FWA):
- The FWA will bring together the enforcement of domestic agency rules, the National Minimum Wage (NMW), licensing of gangmasters, and actions against modern slavery, among other powers, many of which are already covered by existing enforcement agencies. The FWA replaces the existing separate bodies that deal with these issues such as the Gangmasters and Labour Abuse Authority (GLAA).
- Holiday Pay. FWA will take on enforcement of holiday pay, which is not currently subject to enforcement by a state agency. This is a complex area that applies to all workers, where it’s easy for employers to make mistakes and incur penalties.
- The FWA will have a wide range of powers, allowing it to investigate, inspect and take action against noncompliant employers, issue penalties, and bring cases to the employment tribunal on the behalf of workers.
Trade Unions: The Bill aims to modernize trade union legislation, giving trade unions greater freedom to organize, represent and negotiate on behalf of their workers. Under the Bill:
- Employers have a duty to inform workers of their right to join a trade union and to provide a written statement of this right
- Unions have greater right of access to the workplace, including digital access
- The trade union recognition process will be simplified
- Trade union representatives will have new rights and protections
Fair Pay Initiatives Impacting Certain Industries: The Bill aims to improve pay and conditions for school support staff, the adult social care sector, tipped workers, private sector employees working on outsourced public sector contracts, and seafarers aboard ships.
Additional Protections from Sexual Harassment: In addition to the duty under the Worker Protection (Amendment of Equality Act 2010) Act 2023 for employers to take “reasonable steps” to prevent sexual harassment of employees, the Bill goes even further:
- Employers must take “all reasonable steps” rather than just “reasonable steps” to prevent sexual harassment of employees
- Employers will be liable for harassment of employees by third parties
- Reporting sexual harassment can be the basis for a protected whistleblower disclosure
Statutory Sick Pay: The Bill grants greater access to Statutory Sick Pay (SSP) by removing the Lower Earnings Limit and 3-Day waiting period.
Family Friendly Rights:
- Existing Paternity Leave and Unpaid Parental leave entitlements will be available from ‘Day 1’ of employment, removing the current requirement of 26 weeks’ service. Parents will be able to take their paternity leave and pay after their shared parental leave and pay
- A new right to unpaid bereavement leave
- New protections against dismissal for pregnant women, mothers on maternity leave, and mothers who return to work for a six-month period after their return
- Flexible working rights. In addition to the existing ‘Day 1’ right to request flexible working, the Bill requires employers to explain the grounds for a denial and requires that a rejection of a request be reasonable
For more information, please see the UK Government’s Fact Sheet here.
