Employment Rights Bill Update

As part of a follow up to our hugely successful HR round table event with Cunningham Legal, we wanted to provide you with an update, as we thought you might appreciate this informative outline on Employment Law. The below has been drawn up by Amy Cunningham, Partner at Cunningham Legal, and we extend our thanks for her help on this.

Just recently, MPs in the House of Commons again debated the Employment Rights Bill, looking particularly at amendments proposed by the House of Lords that would have narrowed the scope of the Bill. Most of the proposed amendments were rejected. For example, the House of Lords had sought to include a 6 month qualifying period for unfair dismissal claims, but the House of Commons has rejected this, meaning that (subject to limited exceptions) unfair dismissal will become a day 1 right, as anticipated.

We are now in the final stages of the legislative process. Next, the Bill will go back to the House of Lords, after which it is expected to receive Royal Assent.

Since the Bill was first published in October 2024, some of the proposed reforms have been changed or removed altogether, so we set out below an up to date summary of what we know, together with likely timings (based on the Government’s Roadmap).

Key Changes:

Unfair dismissal:

The 2 year qualifying period for unfair dismissal claims will be removed, and there will be a new legal concept of the “initial period of employment”, during which dismissals must follow a new, lighter touch, framework. The Government’s preferred length of this initial period is 9 months. This new framework will likely include a meeting with the employee to explain concerns (at which the employee could be accompanied). Importantly, redundancies will not benefit from this lower test, meaning dismissing for redundancy during the probationary period will be fully challengeable. The Government intends to consult further on the details of this significant reform. There will be a special compensation regime for employees dismissed during the “initial period”. Next: Regulations will be drafted and the Government have said they will extensively consult on matters such as the length of the initial period, the compensation regime and the process required to dismiss somebody during this time. The changes are likely to take effect in 2027.

Fire and Re-hire:

It will be automatically unfair to dismiss an employee for refusing to agree to a change in a key term of their contract (including pay, working hours, pension, shift arrangements, and potentially benefits). There is a very limited exception where an employer has a genuine need to avoid serious financial issues that may threaten the business, provided that there has been extensive consultation first. This means that employers will no longer be able to dismiss employees and re-engage them on less favourable terms, or use this process to bring about changes in employment contracts, which has been possible up to now. Next: The Government will be consulting on updating the Code of Practice on Dismissal and Re-engagement. The changes are likely to take effect in October 2026.

Zero hours contracts:

New protections include a guaranteed hours provision, the right to reasonable notice of a shift and payment for cancellation of shifts at short notice. The Government has also proposed amendments to the Bill to include a framework for the extension of the application of each of these measures to agency workers. New requirements have been introduced to ensure that the pay offered to agency workers under a guaranteed hours offer is no less favourable than the agency terms they’d been working under or those of comparable workers. Also, when an agency worker accepts a guaranteed hours offer from an end-hirer, they will become a worker (rather than an employee).

Next: Consultation in 2025 with measures likely to take effect in 2027.

Maternity/family leave returners:

Since April 2024, where a redundancy situation arises during the protected period of pregnancy, maternity leave and on return to work (up to 18 months after birth), an employee has priority over suitable alternative employment. Similar provisions apply to protect employees during and after shared parental/adoption leave. The Bill will extend this protection further by covering other types of dismissals (i.e. for non-redundancy reasons) which take place during pregnancy, maternity leave and after return to work. Protection is also expected to be extended to employees on or returning from other types of family leave.

Next: Consultation expected in 2025 with changes likely to take effect in 2027.

Flexible working:

Whilst the changes fall short of making flexible working the default, as had been described previously, the Bill will require that any refusal of a flexible working request has to be reasonable, and from a list of specified grounds for refusal. These are similar to the previous grounds, although the reasonableness requirement is new.

There is also a requirement for the employer to explain why their refusal is reasonable in writing to the employee. There is no change to the penalty for breach (which is 8 weeks’ pay).

Next: Consultation in 2025 with measures likely to take effect in 2027.

Paternity leave:

The Bill will remove the requirement for an employee to have 26 weeks’ service in order to take a period of paternity leave.

Next: Likely to take effect in April 2026.

Parental leave:

The Bill will remove the requirement for an employee to have 1 year’s service in order to take a period of parental leave.

Next: Likely to take effect in April 2026.

Statutory sick pay:

The waiting period will be removed, so pay will start from day 1 of sick leave. The Bill will also remove the requirement that an employee must earn above the lower earnings limit in order to be eligible for SSP.

Next: Likely to take effect in April 2026.

Bereavement leave:

The Bill will introduce a new day 1 right to at least one week of bereavement leave for employees – not just for parents. This will also include pregnancy loss prior to 24 weeks of pregnancy.

Next: Consultation in 2025 with measures likely to take effect in 2027.

Harassment:

Employers will have full liability for third party harassment.

Next: Likely to take effect in October 2026.

Sexual harassment:

As of 26 October 2024, employers must take “reasonable steps” to prevent sexual harassment of employees and workers in the course of their employment. The Bill will strengthen this and require employers to take “all” reasonable steps to prevent workplace harassment. The Government will then set out what amounts to “reasonable steps” in regulations.

Next: Likely to take effect in October 2026.

Holiday records:

The Bill imposes a new specific obligation on all employers to keep records demonstrating compliance with holiday entitlement (including the amount of leave and pay). There’s no set format for these records, but they must be kept for 6 years and a failure to comply will be a criminal offence punishable with (potentially unlimited) fines.

Next: Not known when this will take effect.

Collective redundancy consultation:

It will be necessary to count redundancies across the whole business, rather than just at one establishment when assessing whether collective consultation obligations are triggered. In addition, we are expecting the Bill to introduce a business-wide threshold, likely based on either a percentage of the workforce or a set number of redundancies. This means that collective redundancy consultation will be triggered in far more situations. In addition, the cap on protective awards in collective redundancy situations will be increased from 90 days to 180 days to encourage employer compliance.

Next: The Government will be consulting this year on these measures. The new threshold test will likely take effect in 2027. The new protective awards will apply from 2026.

Gender pay action plans:

Regulations will require employers with over 250 employees to produce action plans on gender pay gap. There will be penalties for non-compliance. New regulations will also require employers with over 250 employees to produce and publish menopause action plans as part of this.

Next: Likely to be introduced on a voluntary basis in April 2026, before taking effect in 2027.

Menopause action plans:

New regulations will require employers with 250 or more employees to produce and publish menopause action plans as part of an Equality Action Plan. The regulations will include specific penalties for not doing so.

Next: To be introduced on a voluntary basis in April 2026, and likely to take effect in 2027.

Trade Unions:

There are a raft of changes relating to the laws on Trade Unions in the Bill. These include provisions for enhancing Trade Union access to workplaces, making Trade Union recognition easier and introducing sector wide collective bargaining for adult social care workers.

Next: The Government will consult on these measures in 2025, and are likely to take effect in October 2026.

Fair Work Agency:

Under the latest amendments to the Bill, a new single enforcement body for workers’ rights will be established, called the Fair Work Agency. This body will be able to bring Employment Tribunal claims on behalf of workers, even where the worker chooses not to, and will have the power to offer legal assistance for employment cases, with the Fair Work Agency’s costs potentially recoverable from employers if the claim succeeds.

Next: To be established in April 2026.

Extended Tribunal Claims Period:

The Bill will also extend the time limit for bringing tribunal claims from 3 to 6 months.

Next: Likely to take effect in October 2026.

If you’d like further specialist legal advice on any of the above or the wider area of employment law then please do get in touch with Amy at Cunningham Legal: amy@cunninghamlegal.co.uk