The Employment Rights Bill

This briefing note outlines the key provisions of the Employment Rights Bill (the Bill), which will introduce far-reaching reforms of employment law in the UK trailed in the Labour Party election manifesto (reported in issue 7 and issue 9 of the Edit).

The Bill was published on 10 October 2024, together with a policy paper ‘Next Steps to Make Work Pay’ (the Policy Paper), to coincide with the government’s own deadline to publish it within 100 days of the General Election of 2024. The Bill sets out the framework of the proposed legislation, although further detail relating to several new provisions will be set out in subsequent regulations. Following detailed examination and consultation in Parliament a revised draft of the Bill was published on 27 January 2025.

In the first week of March 2025, the Government published a series of further significant amendments to the Bill prior to further debates in Parliament scheduled for 11 and 12 March 2025, and its responses to consultations on five specific aspects of the Bill (statutory sick pay, collective redundancy and fire and rehire, the industrial relations framework, the applications of measures around zero hours contracts to agency workers, and non-compliance in the umbrella company market). The Government also announced that it has dropped its proposal to give employees a ‘Right to Switch Off.’

The legislative process is expected to continue throughout 2025, with the majority of its reforms expected to take effect no earlier than 2026. 

The following is a summary of the key proposals as they currently stand, which will affect private sector employers:

Removing the qualifying period for unfair dismissal

The Bill will remove the current two-year qualifying period of service needed to bring a claim of unfair dismissal. There will be an exception for employees who have accepted an offer of employment but have not yet started work, who will not be able to bring a claim for unfair dismissal unless the dismissal is automatically unfair (for example, where the dismissal is because the employee is a whistleblower).

While the proposed reforms to unfair dismissal law were originally styled as ensuring ‘day one rights’, the legislation will extend the circumstances in which employers may fairly dismiss employees who are in a probationary period (which will be called an ‘initial period of employment’). The length of the probationary period to which these provisions will apply has not yet been fixed but the Government has indicated that it favours a period of nine months.

In broad outline, during the probationary period, and any subsequent notice period of up to three months, employers will be permitted to dismiss an employee fairly if the reason for the dismissal is the employee’s suitability for the role (including the employee’s conduct, capability, or qualifications). The current proposal is that the employer will be able to dismiss the employee fairly in these circumstances by following a procedure which will be simpler than the process which an employer is currently expected to follow for conduct or capability dismissals.

Consultation on this proposed probationary period structure will consider:

• how this simplified dismissal process will interact with the Acas Code of Practice on Disciplinary and Grievance Procedures (which details the process which employers should follow when dealing with employee performance issues); and
• whether compensation should be reduced for successful unfair dismissal claims which relate to dismissal during or at the end of a probationary period.

This simplified process will not apply where the dismissal is for reasons unrelated to the individual, such as redundancy. In such cases employers will presumably need to follow the same fair redundancy process applicable to employees who have two years’ service or more.

Increasing the time limits for bringing Employment Tribunal claims

The time limit for bringing the majority of claims in an Employment Tribunal will be increased from three to six months. There has long been criticism that the three-month time limit can be too short, for example where an employee is on maternity leave or unwell. The Government’s stated intention with this amendment is to reduce pressure on the Employment Tribunal system by giving employees (and employers) more time to resolve a dispute before employees have to commence Tribunal proceedings. Conversely, this proposal will create a longer period of potential uncertainty for employers with regard to whether an employee is going to bring a claim.

Protection from dismissal following a period of family leave

It will be unlawful to dismiss employees who are pregnant or on maternity leave or who have taken other types of family related leave during a ‘protected period’ covering their leave and the period of six months after they return to work. The proposal is that such dismissals will be unlawful except in specific circumstances yet to be specified.

This amendment will significantly expand the right introduced in April 2024 that such employees who are at risk of redundancy during the protected period have the right to be offered an available suitable alternative vacancy.

Flexible working

The Bill will introduce a new requirement that an employer may only refuse a request for flexible working where it is reasonable to do so and must explain its reasons for doing so to the employee. The employer will still need to identify one of the eight specified grounds on which it can refuse a request for flexible working (e.g. the burden of additional costs or detrimental impact on quality or performance). The Bill contains a power for the Government to issue further regulations specifying the steps which an employer must take to consult the employee before rejecting an application for flexible working.

Currently an employer is only required to deal with a flexible working request ‘in a reasonable manner.’ The changes will make it more difficult for employers to refuse a flexible working request by introducing the concept of reasonableness into the employer’s decision on a flexible working request, although the penalty for employers who do not follow the flexible working request process properly remains relatively limited at eight weeks’ pay capped at the statutory rate, currently £5,600 (£700 per week).

Statutory Sick pay

The Statutory Sick Pay (SSP) rules will be amended so that SSP is payable from day one of incapacity and the ‘lower earnings limit’ will be removed so that all employees will be entitled to SSP. Those earning below the lower earnings limit will be entitled to sick pay at the rate of 80% of their average weekly earnings. Currently, SSP is only payable after a three-day waiting period, and only to employees who earn above the lower earnings limit.

Entitlement to family related leave

Various changes will be made to family related leave entitlements as follows:

• Qualifying periods of employment will be removed from the rights to take unpaid parental leave up to a child’s 18th birthday, and to take paternity leave following a child’s birth or adoption. These will become ‘day one’ rights. Currently, employees must have a year’s service to take parental leave and 26 weeks’ service to take paternity leave.
• Parental Bereavement Leave will become ‘Bereavement Leave’ available to all employees who have suffered bereavement. However it appears that the current entitlement to parental bereavement leave pay will remain unchanged i.e. only available to bereaved parents.
• The current prohibition on employees taking paternity leave and receiving statutory paternity pay after a period of shared parental leave will be removed.
• A new entitlement to two weeks of Miscarriage Bereavement Leave for parents who suffer a pregnancy loss before 24 weeks is proposed.

The Government will consider a full review of the ‘parental leave’ system generally (which it does not believe supports working families) and the right to take carer’s leave (currently one week of unpaid leave per year, which was introduced in April 2024).

Protection from harassment

The Bill contains provisions which will strengthen the duty on employers to take reasonable steps to prevent sexual harassment of their staff in the workplace which came into force on 26 October 2024 by:

• requiring employers to take all reasonable steps to prevent sexual harassment – a provision which was in the original draft of the legislation introducing this duty, but the word ‘all’ was removed during the legislative process; and
• introducing a power for the Government to specify the steps an employer must take to comply with the new duty (e.g. specifying the content of risk assessments or procedures for handling complaints); and
• extending whistleblower protection to cover disclosures about sexual harassment.

In addition, there will be a new provision making employers liable for harassment by third parties (such as clients or suppliers). This will cover all types of harassment not just sexual harassment and replaces a provision repealed in 2013.

Ending fire and rehire/ fire and replace

The Bill contains provisions to address the issue of ‘fire and rehire’ or ‘fire and replace’ by making an employee’s dismissal automatically unfair where the principal reason for the dismissal is that:

• the employer was seeking to vary the employee’s contract, and the employee did not agree to the variation; or
• the employer wants to dismiss the employee and rehire someone else to do their job on different terms.

There will be a limited exception where the employer can show that:

• it is in financial difficulties; and
• the purpose of the proposed changes to the employee’s contract was to address those financial difficulties; and
• the need to make the changes was unavoidable.

If the employer falls within this ‘financial difficulties’ exception, in deciding whether a dismissal is fair, an Employment Tribunal will assess the extent to which the employer consulted with the employee, trade union or other employee representatives, and whether the employer offered the employee anything in return for agreeing to the variation to their contract.

The maximum protective award which can be made against employers who fail to conduct collective redundancy consultation will double from 90 to 180 days. This will have significant financial consequences for employers who fail to follow the correct process.

The statutory Code of practice on dismissal and re-engagement (the Code) which came into force on 18 July 2024 will continue to apply but will be amended. Where an employer does not follow the provisions of the Code, an Employment Tribunal may apply an uplift to a protective award of up to 25% if the employer’s failure to comply with Code was unreasonable and it considers it just and equitable in all the circumstances to do so. Again, this will have significant financial implications for non-compliant employers as the uplift will now be 25% of 180 days’ pay.

Thresholds for collective redundancies

Currently, collective redundancy obligations are triggered where an employer proposes to make 20 or more employees redundant ‘at one establishment,’ meaning that employees in different geographical locations can be considered separately. Under the most recent Government amendments to the Bill, this threshold remains. However, the Government proposes a major change in this area. It will introduce an additional threshold for collective redundancy obligations based on the number of redundancies across an employing entity as a whole, even where the employees are based at different establishments. The level of the threshold will be detailed in future regulations but will not be less than 20. It is however proposed that employers will be able to consult with representatives at different sites separately – it will not be necessary to bring representatives from different sites together for the consultation process. Employers will also be permitted to reach different agreements with representatives at different sites.

The proposals do not however appear to change the position that for the purposes of collective redundancy thresholds, employers can generally consider employees employed by different group companies separately.

Equality Action plans

The Bill allows the Government to make regulations requiring large employers (with 250 or more employees) to produce ‘equality action plans’ showing the steps that they are taking in relation to their employees with regard to gender equality, and in particular how they are addressing gender pay gaps and how they will support employees through the menopause.

Currently, employers that are required to report on their gender pay gap may adopt equality action plans, but this is not mandatory, and there is no requirement to support employees through menopause.

Working Time – keeping holiday records

The revised proposals include a new obligation on employers to keep records which are adequate to show that they have complied with holiday entitlements (both in relation to leave taken and pay). The records can be kept in such format as the employer thinks fit and must be kept for six years. Failure to comply will be a criminal offence punishable by a fine.

Enforcing Rights at Work - Fair Work Agency

The Government proposes to establish a Fair Work Agency (FWA) which will bring together existing enforcement functions covering different aspects of the labour market including payment of holiday pay under the Working Time Regulations, statutory sick pay, modern slavery, and the national minimum wage. The Government’s objective is to have one body to uphold workers’ rights, support employers to comply with the law and issue penalties to employers who do not comply.

The Bill’s updated proposals significantly increase the proposed remit of the FWA, giving it powers in particular:

• to enforce certain obligations against employers such as the new obligation to keep records on holiday entitlement, and SSP.
• to provide legal assistance to individuals bringing employment related claims.
• to bring Employment Tribunal proceedings on behalf of an individual if the individual has a right to bring a claim but it appears that they are not going to do so.
• to provide legal assistance for employment-related proceedings.
• to recover costs incurred in enforcement action against employers.

Zero Hours Contracts

The Bill sets out a new framework for the regulation of zero hours contracts. Many aspects of the proposed new system will be set out in future regulations. In broad terms however, employers of workers on zero hours or low hours contracts will be required to make offers of permanent employment to such workers at set intervals, based on the number of hours the individual has worked over a specified reference period. It appears that there will be limited exceptions, for example for seasonal work or one-off events. Zero hours workers will also be entitled to compensation payments if shifts are cancelled or significantly reduced at short notice.

The most recent Government amendments confirm that this new framework will also apply to agency workers - to prevent employers avoiding the new framework by using agency staff.

These new provisions will replace the Workers (Predictable Terms and Conditions) Act 2023 which was introduced by the previous Government, and intended to give zero hours workers the right to request a more predictable working pattern, but was never brought into force.

Trade Union laws and industrial action

The Bill contains extensive proposals to reform the legislative framework relating to trade unions. In particular, the Bill provides that the statement of employment particulars (which an employer is required to give to employees at the start of employment) must include a statement that the employee is entitled to join a trade union.

Unions will be given a new right to request access (including virtual access) to workplaces for the purposes of a potential application for trade union recognition, and union recognition rules generally will be simplified. The balloting process for lawful industrial action will also be reformed and simplified.

Regulation of Umbrella Companies

The Bill will regulate ‘umbrella companies,’ used to employ individuals whose services are then provided to an end user client. These companies will be brought within the existing regulatory framework for employment businesses with the aim of protecting individual rights, such as to holiday and sick pay.

Future reforms

The Policy Paper sets out a number of longer-term proposals for further significant reform of employment law in the UK including:

• Introducing an Equality (Race and Disability) Bill, which is intended to extend the right to equal pay to individuals who are from an ethnic minority or are disabled. Currently, employees may only bring equal pay claims on the basis of gender. Currently, a claim that a person is being paid less than a colleague doing the same or similar work because of their race or disability would have to be brought by way of a claim for direct or indirect discrimination.
• Requiring large employers (i.e. those with more than 250 staff) to report on their ethnicity and disability pay gaps. Collecting data and calculating pay gaps in relation to ethnicity and disability will be potentially significantly more complex than calculating pay gaps between men and women. It would, for example, entail analysis of the different categories of ethnicity and disability and be reliant on employees sharing sensitive personal data.
• Creating a single status of worker so that there would be two categories of employment status – worker and self-employed, rather than the current three categories of employee, worker and self-employed.
• Reviewing the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) including a review of how they work in practice.
• Modernising health and safety guidance and regulations to reflect diversity in the workplace, and to deal with issues such as neurodiversity awareness, extreme temperatures and supporting and protecting workers with long Covid.
• Consulting with Acas on proposals to enable employees to bring collective grievances about conduct in their place of work.

Takeaway: This is the most significant programme of employment law reform in the UK for many years and all employers will be impacted. Although the changes set out in the Bill are not due to come into force until 2026 at the earliest, and much of the detail remains to be decided and drafted, employers need to keep on top of the proposals as they develop to ensure they are prepared for the changes – whether by updating contracts, policies or working practices.