Overview of the Employment Rights Bill: The Employment Rights Bill continues to make its way through Parliament, having now completed its Third Reading in the House of Commons. It is scheduled for its Second Reading in the House of Lords on 27 March. Assuming smooth progress, the bill is expected to receive Royal Assent before Parliament breaks for summer recess in July 2025. Key provisions of the Employment Rights Act 2025 are likely to come into force in October 2025, with others rolling out thereafter. Employers should be preparing for significant changes in employment law that will impact everyday HR practices.
The bill introduces a wide range of changes to employment law, including several landmark developments aimed at improving employment protections for workers and providing for follow on regulations. Below, we outline the most significant updates:
1. Expansion of Unfair Dismissal Protection: A major change under the bill is the expansion of unfair dismissal protections. These protections, which currently apply after two years of service, will be extended to all employees from the moment they begin employment. The bill introduces an ‘initial period of employment’ (the government’s preferred timing is nine months), during which dismissals for performance or conduct may be subject to a lower threshold for unfair dismissal. However, this will not apply to redundancy dismissals. This change won’t take effect until Autumn 2026, but every new hire from now on will gain unfair dismissal rights sooner than before. As a result, employers must be especially vigilant during the probation period to ensure their performance management and dismissal practices are robust.
2. Time Limits for Employment Tribunal claims: The bill will extend the time limit for bringing tribunal claims from the current three months (which applies to most claims) to six months for all claims. This is a significant change and likely to result in an increase in the number of cases pursued.
3. Collective Consultation Rules Overhaul: The bill proposes changes to collective consultation requirements for redundancies. Previously, employers could avoid triggering collective consultation if fewer than 20 redundancies were made at each site. The bill will remove this exception and introduce a new, business-wide threshold for triggering collective consultation, likely based on a percentage of the workforce or a specific number of redundancies. This will increase the scope of employers’ obligations to consult collectively, especially in larger organisations or those with multiple sites. This change could also increase the risk of legal challenges around redundancy processes.
4. Sick Pay and Statutory Sick Pay (SSP) Reform: Under the bill, there will be a significant reform to Statutory Sick Pay (SSP). Notably, the bill removes the requirement that employees must earn above the Lower Earnings Limit (currently £123 per week) to qualify for SSP. The government has responded to consultation by determining that SSP will be calculated at 80% of the flat rate for those earning less than the current threshold. These changes will ensure broader access to SSP but may require adjustments in payroll and benefits administration for employers.
5. Harassment: Since October 2024, employers have been obliged to take reasonable steps to prevent sexual harassment in the workplace. The bill will amend this to make it a requirement to take “all” reasonable steps. It is expected that regulations will follow to set out what “reasonable steps” are required. In addition, employers will be liable for third party harassment unless they took all reasonable steps to prevent this. Sexual harassment will also count as a qualifying disclosure for the purposes of whistleblowing protection.
6. Zero Hours Contracts and Agency Workers: The bill introduces greater protections for zero-hours and low-hours workers. Specifically, it will provide:
The application of these rights to agency workers introduces additional compliance obligations, particularly for businesses heavily reliant on agency labour.
7. Fire and Rehire Protections: The bill responds to concerns about “fire and rehire” practices, particularly in cases of collective redundancies and will severely restrict an employer’s ability to use this to change terms and conditions. The protective award for workers affected by collective redundancy breaches will be doubled from 90 to 180 days, significantly increasing the financial risk for employers who fail to follow proper consultation procedures. Government has also confirmed that interim relief in fire and rehire cases will not be introduced, following feedback that such a measure would place undue burden on employers.
Employers should also be aware that further guidance on the consultation process will be issued to help businesses ensure compliance.
8. Outsourcing of Public Services: In response to challenges faced by ex-public sector employees being on different terms and conditions to private sector employees, the bill proposes regulations to require public sector outsourcing contracts to ensure that workers transferring under TUPE are treated no less favourably after transfer.
9. Trade Union Involvement: The bill gives trade union officials greater rights to access the workplace, which includes digital or virtual access, and makes it easier for unions to gain recognition. Employers will also be required to tell workers that they have the right to join a trade union. This is expected to increase trade union involvement.
10. The Fair Work Agency: The bill also introduces the Fair Work Agency, which will have the power to bring Employment Tribunal claims on behalf of workers – without the worker’s consent. This shift will fundamentally alter risk assessments for employers. Claims that previously might not have been pursued by employees could now be initiated by a well-funded government body. Employers will need to reassess their risk exposure.
11. Gender Pay Action: Employers with more than 250 employees will be required to publish equality action plans, including gender pay gap action plans. This will require the government to issue regulations setting out the detailed requirements.
As the bill moves to the House of Lords for debate on 27 March 2025, further amendments may be proposed, but it is anticipated that these will be minor. If all goes according to plan, the bill should receive Royal Assent before Parliament rises for the summer recess in July 2025. Key provisions, including the abolition of dismissal and re-engagement, are expected to come into force by October 2025.
Contact:
Vanessa Latham - Partner
Natalie Larnder - Head of Market Affairs
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