Skip to main content What’s in the Employment Rights Bill? A guided tour for employers
The government has called it “the biggest upgrade to workers’ rights in a generation”. The Federation of Small Businesses has called it a “rushed job” which could leave small business employers “scrambling to make sense of it all”. But you don’t need to scramble, because we’re here to guide you through the Employment Rights Bill and help you understand what it’ll mean for employers.
The changes we outline below are unlikely to take effect earlier than April 2026. The Bill is in the committee stage, so it will take some time before it is enacted in law. While amendments are being proposed and details ironed out, you can get to grips with the new rules and prepare your business.
Protection from unfair dismissal
Where are we now?
Employees who have worked for an employer for at least two years can take legal action through an employment tribunal if they believe they have been unfairly dismissed.
What’s changing?
The Bill will remove the two-year qualifying period, meaning employees could claim unfair dismissal from day one. There will also be additional protections against dismissal for pregnant women and new mothers (within the first six months of their return to work).
Fair and unfair reasons for dismissal
As an employer, you must have a fair reason for dismissing an employee and act “reasonably” during the dismissal process. Generally, something that stops them from being able to do their job properly is considered fair, whether this is their conduct, a legal limitation, long-term illness (which is not a disability) or other substantial reasons. The government has more information on dismissing staff.
One reason that will no longer be considered fair when the new bill becomes law is if your employee fails to agree to a change in their contract - your business would have to prove that it had no alternative to changing their contract in this way.
Despite these stricter rules, a “lighter touch” dismissal process will be considered fair during the new statutory probation period. The government’s preference is to have a nine-month statutory probation period, but this will be confirmed in the final reading of the Bill.
There will also be a change to collective redundancy. Employers will be required to consult on and report redundancies if 20 or more are affected across their whole workforce (previously, you only needed to follow these procedures if 20 or more redundancies were proposed at a single establishment).
Zero-hours contracts
Where are we now?
Employers have no minimum number of hours that they can contract employees for, meaning some hire employees on ‘zero-hours’ or ‘low-hours’ contracts to maximise business flexibility.
What’s changing?
Employers will have to offer all employees contracts with guaranteed hours. If you have existing employees on zero- or low-hour contracts, you can either offer them a new contract, or offer amended terms and conditions to their existing contract to add their guaranteed hours. Any changes should result in a contract that is “no less favourable” than the worker’s previous contract.
Your employees can choose whether to accept the new guaranteed hours or to remain on a zero hours contract. If they remain on a zero hours contract, it is likely that you, as an employer, would have to offer them a guaranteed hours contract at the end of each reference period, in case their decision changes.
How do you calculate guaranteed hours?
Each contract should reflect the number of hours that the employee worked during a “reference period” (a set period of time to be decided before the third reading of the Bill), which should make sure the contract accurately represents the reality of the employee’s usual pattern of working hours.
Employers will need to plan ahead, assessing the amount of hours they usually need staff for -including seasonal fluctuations - to make sure they don’t have more staff on the books than they can guarantee hours for. It may be worth starting conversations with employees on zero-hours or low-hours about whether they would like to move to guaranteed-hours contracts or enjoy the flexibility offered by zero-hours.
Flexible working
Where are we now?
Employees already have the legal right to request flexible working, which employers must deal with in a “reasonable manner” but they can refuse an application if they have a good business reason. They do not have to disclose this reason.
What’s changing?
The government aims to make flexible working the “default where practical”. Employers will have to have valid grounds when refusing a flexible working request and will also have to explain these to the employee. Some examples of the grounds considered valid include:
- it would result in additional costs to the employer
- it would harm the business’s ability to meet customer demand
- it would make the employer unable to reorganise work among existing staff or unable to recruit additional staff
- it would negatively impact quality or performance
- there is not enough work available during periods the employee proposes to work
Employers will need to prepare themselves to have these conversations with employees and consider whether their business can accommodate requests or have valid grounds to refuse.
Statutory Sick Pay
Where are we now?
Employers must pay Statutory Sick Pay (SSP) to an employee who has been sick for more than three days in a row and earns at least £123 per week. You do not pay SSP for the first three working days that the employee is off sick. After that, the rate is £116.75 per week for up to 28 weeks.
What’s changing?
All employees will be entitled to SSP from the first day of their sickness absence. This removes both the three-day waiting period and £123 earnings requirement.
You may want to check your sickness policy to see if you will need to make any changes.
Parental and Paternity Leave
Where are we now?
Employees are entitled to Statutory Paternity Leave or Shared Parental Leave as long as they have been continuously employed by their employer for at least 26 weeks by the 15th week before the due date.
What’s changing?
Employees will be entitled to Statutory Paternity Leave or Shared Parental Leave from day one of their employment.
Bereavement Leave
Where are we now?
Parental Bereavement Leave applies to employees who lose a child under 18 or experience a stillbirth after 24 weeks. Parents are entitled to two weeks leave and Statutory Parental Bereavement Pay.
What’s changing?
Parental Bereavement Leave is being renamed Bereavement Leave as it is being extended to apply to other loved ones. The relationships entitled to this leave will be laid out in the final reading. For all relations other than parents, this leave will be unpaid.
Allocating tips
Where are we now?
The Employment (Allocation of Tips Act) came into effect on 1st October 2024 and requires employers to pass all tips, gratuities, and service charges on to workers, without deductions. Employers must provide a clear written tipping policy to their workers.
What’s changing?
Employers will have to ensure their tipping policies are reviewed at least once every three years. When creating or revising these policies, employers must consult with their employees (or representatives of an independent trade union), summarise and anonymise the result of consultation on their tipping policy, and make this available to all their workers.
Other changes worth noting
- Employers must take “all reasonable steps” to prevent sexual harassment by third parties
- Gender pay gap reporting must include outsourced workers
- Trade union rights will be strengthened
For more detail on these, you can read the current version of the Employment Rights Bill on the government’s website.
All-in-one payroll and accounting with FreeAgent
With new rules and regulations to follow, you want to make your admin feel as effortless as possible. FreeAgent can help you - letting you send invoices, manage expenses, check your cashflow and complete monthly payroll all in one place.
Start a 30-day free trial today and nail your daily admin.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
