What does the Employment Rights Bill mean for your business and workers?

In the biggest upgrade to workers’ rights in a generation, the proposed reforms include ending exploitative zero-hours contracts, limiting fire and rehire practices, and strengthening workers rights. This includes day-one employment rights to statutory sick pay, paternity and parental leave, as well as enhanced protection from unfair dismissal.

This article summarises some of the key proposals from the Bill, focussing specifically on the potential impact these reforms could have on businesses and workers, and identifying the steps employers can take to prepare for upcoming changes.

Unfair dismissal rights

Employees will have a new right not to be unfairly dismissed from day one of starting employment, subject to a probationary period of up to 9 months (subject to consultation). Currently, employees have limited legal rights and protection during the first two years of employment. This represents a major change to employment law, and a shift significantly in favour of the employee.

“Strengthening unfair dismissal rights will have a significant impact on some employers. Many businesses will be required to reconsider their approach to dismissals, ensuring that all employees, regardless of their length of service, are treated fairly and consistently. Employers will also need to put greater emphasis on their hiring practices, as there will be increased pressures to recruit the right person for their business on the first attempt.”

Louise Cossar, Senior Employment Law & HR Consultant

Fire and rehire possible in only very limited circumstances

Also known as dismissal and re-engagement, the Bill stipulates that it will be automatically unfair to dismiss an employee who refuses to accept a change in their terms of employment or to replace them with another employee on altered terms for a substantially similar role. A narrow exception will be allowed in instances where a company is in significant financial distress (specific details to be established through consultation). However, it is clear that the Bill will greatly restrict an employer's ability to change contractual terms without obtaining employee consent.

Zero-hours contracts

The Bill introduces new rights for workers on low hours or zero-hours contracts to be offered guaranteed hours if they work regularly over a defined reference period - it’s likely this will be calculated over a 12-week period. There is no obligation on the worker to accept the offer. Employers will need to repeatedly offer guaranteed hours at the end of each reference period.

In addition, the Bill provides that workers on zero and low hours contracts must be given ‘reasonable notice’ of changes in shifts or working time, with compensation payable for shifts cancelled, curtailed or moved at short notice.

“Employers who rely on flexible contracts will understandably be very concerned about these proposals. There will be increased administrative costs attached to having to offer relevant workers guaranteed hours at the end of each reference period. In addition, businesses will have reduced workforce flexibility and will face additional financial costs of having to compensate workers for cancelled shifts at short notice.”

Louise Cossar, Senior Employment Law & HR Consultant

Details of how these rights will operate (including the level of compensation) will be set out in separate regulations following a full consultation period. The consultation process will begin in 2025 and will also explore whether these rights should be extended to agency workers.

Family friendly rights

Parental leave rights will be strengthened under the Bill with proposals to introduce day-one rights for paternity and parental leave (currently employees need 26 weeks of continuous services to qualify for paternity leave, and one year’s service to qualify for parental leave).

The Bill also proposes to extend bereavement leave to a wider group of employees (this group is still to be defined and subject to consultation). At present, bereavement leave is only available to parents who lose a child under 18 or experience a stillbirth after 24 weeks of pregnancy. Those who have lost a child will remain entitled to two weeks' leave but the entitlement will be one week (in respect of each deceased person) in other cases.

Consideration will also be given during the consultation phase to whether paid carer’s leave should be introduced.

Statutory Sick Pay

Currently, Statutory Sick Pay (SSP) is payable from the fourth day of being unwell, and employees need to earn at least on or above the lower earnings limit (currently £123 per week) to qualify. The Bill proposes to change this, making SSP payable from day one of absence and removing the rule to earn on or above the lower earnings limit.

Analysis from the Department of Work and Pensions (DWP) suggests the additional SSP payments payable by employers will cost around £400 million per year.

“This development marks a significant shift towards improved financial security and support for employees. However, it poses a challenge for employers, who will need to prepare for the impact these changes will have on operational costs,” says Louise Cossar, Senior Employment Law & HR Consultant at Mentor.

Trade unions

The Bill includes additional provisions to strengthen unions’ rights. This includes changes designed to make it easier for trade unions to gain access to workplaces, secure statutory recognition (removing the current requirement to secure backing of at least 40% of the workforce) and take industrial action in the event of a dispute.

The legislation will also require employers to inform new employees of their right to join a trade union and to remind staff regularly of this right. Union representatives’ right to reasonable paid facility time (time off work to carry out their trade union role) will also be strengthened.

Commenting on these proposals, the government has acknowledged that strengthening trade union bargaining power could lead to employers being required to pay higher wages or having to provide better terms and conditions.

Will there be any other changes?

Yes, additional key proposed reforms from the Bill includes:

• additional third-party harassment measures
• enhanced dismissal protection for pregnant women and returners from statutory family leave
• stronger flexible working rules
• changes to collective redundancy rules
• amendments to gender pay gap reporting
• the establishment of a Fair Work Agency to ensure workers’ rights are enforced.

What happens next?

The Bill will now start its journey through parliament and may be subject to various amendments.

The good news for employers is that implementing changes will take a considerable period of time - for some proposals, this could be several years away. Indeed, the government has stated that it expects to begin consulting on these reforms in 2025, seeking input from all stakeholders, and that the majority of reforms will not happen until at least 2026. Reforms of unfair dismissal rights will not take effect until Autumn 2026 at the earliest.

Once the Bill is passed and consultation documents are published, the pace of change will accelerate significantly, leading to a busy period for businesses, HR professionals, and employment lawyers.

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