On 12 March, the Employment Rights Bill (“the Bill”) completed its third reading in the House of Commons and now moves to the House of Lords for debate. The Bill is likely to receive Royal Assent by July, which means that some parts of the Employment Rights Act 2025 may come into force in October 2025. This could mean significant changes for employers, so it is important to stay on top of developments.
Following responses to five consultations as well as a report from the Business and Trade Committee, the Government has put forward several amendments to the Bill. The Government is not only pressing ahead with reforms announced in October 2024 but is strengthening them, with very few concessions to employers in the tabled amendments. This will be disappointing for employers already coping with the rising costs of the changes to NICs and the National Minimum wage, who are now having to get to grips with complex changes to employment rights and trying to stay on top of continued amendments.
The new day one right not to be unfairly dismissed will proceed but be subject to an ‘initial period’ of employment, during which a lighter-touch procedure can be followed. The period is not yet confirmed, but the Government has indicated a preference of nine months. This is to be consulted on before being set.
SSP will become payable to all from day one of sickness, removing waiting days. A new amendment and regulations will give those earning below the lower earnings limit (currently £123 but increasing to £125 in April) a right to sick pay at the lower of 80% of the SSP flat rate or 80% of average normal weekly earnings.
It looks likely that a new provision for leave after miscarriage will be introduced so that mothers and their partners will be given the right to two weeks of bereavement leave if they have suffered a pregnancy loss before 24 weeks.
A new amendment specifies that regulations will set out specific notices that will need to be given to dismiss employees who are pregnant, on maternity leave or during a six month return period, the evidence the employer will need to produce and “other procedures” that will need to be followed. The explanatory notes confirm the intention to ban such dismissals except in specific circumstances. We will need to await the regulations for the precise detail of what this will require in practice.
The Government has dropped plans to make interim relief available as a remedy to employees affected by “fire and rehire” but is pressing ahead with the severe restrictions on this practice.
The Bill makes the practice of fire and rehire automatically unfair except in situations where the business is in extreme financial distress. In those (narrow) situations, an employer would need to comply with the Code of Practice on dismissal and re-engagement, which the Government has promised to update.
The right to disconnect or ‘switch-off’ has not been added to the Bill, and press reports have quoted a government source as saying it is “dead” – which suggests it will not now be taken forward at all.
In a major change, collective consultation will now be required if there are 20 or more redundancies at one establishment OR a different threshold is met, with details of that threshold to be set out in further regulations. The alternative threshold is likely to be based on redundancies across the employing entity as a whole and could be a percentage or a higher number (e.g. the lower of 10% or 100 employees across the business as a whole).
This marks a significant (and possibly the only material) concession from the Government in favour of employers. The original plan to scrap the ‘one establishment’ test altogether and require collective consultation for 20 redundancies across the employing entity could have put large multi-site employers in near-constant collective consultation.
A concern raised by many employers that the Bill would require representatives to be brought together and consulted as a central group over batches of unconnected local redundancies has been addressed by an amendment to state that, in carrying out collective consultation, the employer does not need to consult all employee representatives together or try to reach the same agreement with all of the representatives.
Another major amendment (this time, not in favour of employers) is a doubling of the maximum protective award for failure to collectively consult on redundancies, from 90 to 180 days. This will materially increase the risks for employers associated with not handling collective redundancy processes correctly.
Plans to make interim relief available as a remedy to employees dismissed in breach of collective consultation requirements have been dropped, but the Government says it will consult on other ways to strengthen the regime. The Government has also promised further guidance on the legal requirements.
In the Bill, the Government has made complex proposals to introduce a right for qualifying zero or low-hours workers to:
A lot of the detail as to how exactly these measures will work will be subject to secondary legislation which has not yet been published and the Government intends to consult further on (for example, we still don’t know what hours will qualify as low hours or what “short notice” means).
The biggest change is that the Government has confirmed the inclusion of agency workers in these measures. This is believed to be in response to trade unions who had been campaigning for this to prevent employers from avoiding the new rule by hiring agency workers.
The amendments also introduce a new potential claim which applies when an employer has tried to manipulate or avoid their obligations, save as agreed in a collective agreement.
In response to concerns about seasonal or temporary work, the Government says that businesses will be able to offer a temporary contract where there is a genuine temporary work need. It will consult before setting out the details of what constitutes a temporary need in secondary legislation. It also says it is keen to discuss other ways in which it believes the legislation can cater to temporary work.
The Government has confirmed that it will develop guidance on the new measures to help agency workers, agencies and hirers understand the new rights before they come into force.
There are a number of amendments which significantly increase the remit of the new state enforcement agency, the Fair Work Agency (“the FWA”). The FWA will be able to:
The Government is taking action to regulate the use of umbrella companies (companies that employ individuals as part of a chain in which their labour is supplied for the benefit of an end client). This is based on concerns expressed in the government’s response to the consultation on this issue, which is that umbrella companies can deprive workers of employment rights, distort competition in the labour market, and cause significant tax loss.
An amendment to the Bill will define umbrella companies and bring them within the definition of employment businesses. This means that they will be regulated by the Employment Agency Standards Inspectorate (which will eventually be taken over by the Fair Work Agency once that is up and running), with this regulatory oversight aiming to address concerns about exploitation and non-compliance.
Umbrella companies will need to adapt their business models to comply with the new regulations and look likely to face increased scrutiny and due diligence requirements.
The Bill makes some significant changes to the trade union recognition framework and the ability of unions to take industrial action. Following consultation, the Government has put forward several additional amendments. Some of the key provisions are:
The amendments do not, however, cover the membership requirement for an application for union recognition. This is currently 10% of the bargaining unit. The Bill gives the Government the power to reduce the required threshold for union membership to as low as 2% of the proposed bargaining unit through future secondary legislation, but the consultation response does not provide any more information.
It is extremely important to keep on top of these developments as the Bill progresses. Hopefully, things will become clearer once the Bill is passed. However, this will also continue to evolve as regulations are passed with clarification, which employers should be aware, may require immediate attention.
As a lot of the detail remains to be dealt with in secondary legislation and will be subject to further consultation, these changes are not expected to be imminent and are unlikely to be in force before 2026 but, as above, some changes could come in rom as early as October 2025.
Overlook these developments at your peril as missing the detail and the need to make changes could result in costly tribunal cases with increased compensation payouts which may in turn impact your business and its reputation.
We will keep you update as matters develop so ensure you return to our website and keep viewing our socials on this subject.
To book an appointment or to discuss this further, please contact Louise Brenlund at [email protected] at 01732 375325.
This article is for general information only and does not constitute legal or professional advice. Please note the law may have changed since this article was published. We do not accept responsibility or liability for any actions taken based on the information in this article.
