Article

Published05 February 2025

Employment Essentials: Employment law changes 2025 and beyond

Jonathan Chamberlain

Partner

Anna Fletcher

Partner

Connie Cliff

PSL Principal Associate

Labour's New Deal for Working People

And it has only just begun...

On 10 October 2024, the Government published the Employment Rights Bill 2024, promised within the first 100 days of the new Parliament with reforms including measures on ‘exploitative’ zero-hours contracts and ‘fire and rehire’ practices, and establishing protection from unfair dismissal, as well as entitlement to sick pay and parental leave rights from day one of employment.

As is apparent from the Government press release, this is only the start. Despite the Bill being 158 pages long, much of the crucial detail regarding the actual implementation of the Bill's provisions and what this will mean for employers will be subject to further consultation. The majority of reforms will take effect no earlier than 2026 with the unfair dismissal reforms taking effect no sooner than autumn 2026, although some trade union reforms to come into force two months after the Bill is passed.

On 26 November 2024, the Government tabled a number of amendments to the Bill, while some of the amendments are simply technical amendments to some of the Bill's provisions others are more significant tweaks such as making it a presumption that a zero-house contract is not for a limited term. We also have some very significant whole new provisions, such as the increase in the time limits for bringing an employment tribunal claim from three to six months.

While Government tabled amendments are highly likely to make it into the final version of the Act, we also have a number of MP proposed amendments, largely by Liberal Democrat MPs. MP proposals are for the large part proposed to highlight an issue but are usually withdrawn. On occasion, the Government may accept that a particular MP has a point and adopt (usually in amended form) the proposed amendment.

Employment Rights Bill version two

The Employment Rights Bill (ERB) completed the Committee stage on 16 January 2025 and the updated version of the ERB published on 27 January – now up to 199 pages. Over the course of 20 sittings, the Committee scrutinised the text of the draft ERB and considered more than 200 amendments. All the Government amendments have been agreed by the Committee. Many of the amendments are technical in nature though some are substantial such as the increase the limitation period for employment tribunal claims from three to six months.

The ERB will now progress to its Report Stage and Third Reading. Further amendments may be considered at the Report Stage as selected by the Speaker of the House of Commons. No dates have yet been set for those stages.

Beyond the Employment Rights Bill

In November 2024, the Government published the 'Next Steps to Make Work Pay', outlining the time frame for the reforms set out in the Bill, as well as detailing additional reforms it will look to implement in the future, including:

Mandatory ethnicity and disability pay gaps.
A ‘right to switch off' Code of Practice.
A move towards a simpler two-part framework for employment status: worker or self-employed.
Reviews of the parental/carers leave systems.

In this article, we explore the Employment Rights Bill 2024 and other reforms keeping a close eye on legislative, consultation and political process and provide a continuous update on what is likely to happen and when, and what this will mean for you as an employer.

Be sure to bookmark this web page to see our regular updates on the latest developments.

Explore our latest updates:

Timeline
Beyond the Bill: coming into force in 2025
Beyond the Bill: in force July to December 2024
Beyond the Bill: Next Steps to Make Work Pay

This content is correct and up to date as of 3 February 2025.

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Timeline

27 January 2025 - Employment Rights Bill version two published
16 January 2025 - Committee Stage Completed
26 November 2024 - Committee Stage Commences
8 November 2024 - "Next Steps to Make Work Pay" published
21 October 2024 - Second Reading
10 October 2024 - First Reading - Employment Rights Bill as introduced published
17 July 2024 - King's Speech
24 May 2024 - Labour's "Plan to Make Work Pay" published

Employment Rights Bill

When will the changes come into force?

Before turning to the 'what?', we start with the 'when?'. The Bill itself is expected to be passed before the summer recess. However, as set out in the 'Next Steps to Make Work Pay', much of the detail on many of the policies in the Bill will be provided through implementing regulations, and in some cases codes of practice, which will need further consultation. The Government expects to begin consulting on these reforms in 2025. As for coming into force, a small number of the changes relating to trade union law reform, are to come into force two months after the Bill is passed. However, the majority of the changes will not be brought into force before 2026 with the changes to unfair dismissal qualifying periods not before autumn 2026.

The Government has now begun consulting on measures in the Bill requiring more detail. On the 21 October, four consultation documents were published regarding the proposed reforms: zero-hours contract, collective redundancy consultation, trade union and industrial action reform (which run until 2 December 2024), and statutory sick pay (which runs until 4 December 2024). More to follow as and when the Government responses to these consultations are published.

Zero-hour/low hour contracts and predictable working hours

Policy

A ban on 'exploitative' zero-hour contracts ensuring workers have a right to a contract that reflects the number of hours they regularly work. The policy also includes giving workers "reasonable notice" of any shift changes and compensation for any cancelled or curtailed shifts.

The Bill's provisions

The Bill when passed will insert new sections 27BA to 27BT into the Employment Rights Act 1996, resulting in complex provisions.

1. Right for qualifying workers to be offered guaranteed hours

Employers will be required to offer a guaranteed hours contract (GHC) to 'zero-hour' or 'low-hours' workers after the end of every reference period. Essentially, the new right will apply to a 'zero' or 'low' hours worker who, during a relevant reference period, worked a number of hours that satisfy certain conditions in respect of number, regularity or otherwise.

This right will apply to those employed by the same employer under one or more worker's contracts (whether or not continuously) in the relevant period.

For qualifying workers, the employer will be obliged, subject to certain exceptions, to make an offer of guaranteed hours after the end of every relevant reference period that reflects the hours they worked during that reference period.

The new provisions will allow for a 'guaranteed hours offer' to be of a limited term but only where there is a reasonable 'limiting event', for example upon completion of a task for which the worker was employed or where the employee was employed to cover another worker's leave, and the worker on leave returns, or the employer reasonably considers there is only a temporary need.

Important detail being is left to implementing regulations includes:

Who will qualify for this right - The definition of 'zero-hours' and 'low-hours' qualifying workers.
The length of the reference period (likely to be a 12-week rolling reference period).
Qualifying 'hours worked' (in terms of regularity and the number of hours worked or otherwise).
The requirements of a 'guaranteed hours offer' - how, when and in what form must it be made.
The requirements for accepting/rejecting 'guaranteed hours offer'.

2. Right to reasonable notice of a shift

What is 'reasonable' will depend on all the circumstances of a case. It is to be presumed, unless the contrary is shown, that notice of a shift will not be reasonable notice if it is given less than a specified amount of time (to be set out in subsequent implementing regulations) before the shift is due to start.

3. Right to reasonable notice of cancellation of or change to a shift

Employers must give workers reasonable notice if they cancel a shift or change the day or time.

It is to be presumed, unless the contrary is shown, that notice will not be reasonable notice if it is given less than a specified amount of time (to be set out in subsequent implementing regulations) before the shift would have started or on or after the start of the shift.

4. Right to payment for cancelled, moved and curtailed shifts

Employers will be under a duty to make a payment, of an amount to be specified in subsequent implementing regulations to a worker each time there is a cancellation, movement (i.e., a delay or bringing forward of a shift), or curtailment at short notice of a qualifying shift that the worker has agreed to work for the employer.

Important detail being left to implementing regulations includes:

What will amount to 'short notice'?
What amounts to a 'moved' shift?
The 'payment' amount. This will be subject to a cap of what the worker would have earned had they worked the hours and may be subject to a sliding scale depending on how short the 'short notice' was.

5. None of the above applies in relation to agency workers, though the Bill does give Secretary of State power to make regulations giving agency workers corresponding rights in relation to rights to guaranteed hours, notice of shifts and payment for short notice changes to shifts.

6. The Act repeals of the Workers (Predictable Terms and Conditions) Act 2023

Committee Stage accepted amendments

Having been accepted at Committee Stage the Bill now also includes:

Where an employer is not required to offer a GHC, the employer will be required to give notice to that effect stating the exception relied upon.
A rebuttable presumption that a zero hour or low hours contract is not a limited term contract (in other words it will be for the employer to prove a reasonable 'limiting event').
Impose a duty on employers to ensure workers who have the potential to qualify for a GHC are aware of and have access to 'specified information' relating to their rights.
Provide that curtailment of shifts can include hours being cut from the middle of a shift (in addition to the start and finish).
Clarify that the maximum amount of compensation for cancelled, moved and curtailed shifts is the amount that would have been earned save for the cancellation or curtailment and if moved what they would have earned for the original shift and require such payments to be treated as 'wages'.
Make the time limit for bringing a claim in relation to these new rights six months.

Comment

The above provisions are intended to end one-sided flexibility, ensuring that jobs provide a baseline of financial security and contractual predictability so workers can better plan their lives and finances. We await the consultation on important elements such as what constitutes 'low hours' contracts and what will be the requirements of a 'guaranteed hours offer', the Government has stated it will also ensure that

workers on full-time contracts who occasionally pick up overtime hours are not affected; and
where work is genuinely temporary, there will be no expectation on employers to offer permanent contracts.

The 'who' question

Just where the threshold will be set for those considered to be working on a 'low-hours' contracts will significantly shape the impact of these provisions. If a low threshold is set, for example six hours per week then many employers would simply guarantee workers three hours work. If the threshold were to be set at 18 hours per week, then the provisions will have much greater impact. Many part-time workers would be in scope and employers would have to monitor any additional hours they worked very carefully.

The 'reference period' question

What the reference period will be, is also an important issue for consultation. While the Bill is silent on the definition of the 'reference period', in the "Next Steps to Make Work Pay" the Government favours a 12-week rolling reference period. But such a reference period may make it difficult to account to for seasonal variations in workloads? This will be an important consultation. It should be remembered that zero-hours contracts are not being banned altogether. While employers will be required to make a 'guaranteed hours offer', it can be for a limited term where reasonable. Having said that, the employer will need to rebut the presumption that it is not for a limited term. Would significant seasonal variation be sufficient to rebut the presumption?

Worker's choice

The worker will not be obliged to accept the offer, thereby retaining full flexibility on the worker's part. The Government states that it appreciates that zero-hours contracts can work well for some individuals, such as students and those with caring responsibilities, so those who are offered guaranteed hours will be able to remain on zero-hours contracts should they wish.

Next steps - Consultation on agency workers

It is important to note that agency workers are not included under the provisions although the Secretary of State is being given the power to make regulations in future to extend such protections to agency workers.

On 21 October 2024, the Government opened the 'Consultation on the application of zero hours contracts measures to agency workers' which closed on 2 December 2024. We await the Government response to the consultation.

This consultation was not about whether the measures aimed at zero hours and low hours workers should be extended to agency workers. Instead, it sought views on how to apply the new proposed measures to agency workers, in particular:

Guaranteed hours - Whether the responsibility for offering workers guaranteed hours should fall to:
Option 1: the employment agency – but recognise difficulty in demand forecasting; or

Option 2: the end hirer – but risks then becoming the de facto employer altering the nature of the relationship. Also, a trigger for 'temp-to-perm' transferring fees (a common contractual fee imposed on a hirer if they directly employ a worker that the agency had initially provided).

The above will be a particularly tricky issue. The Recruitment and Employment Confederation have expressed strong concerns on this issue before a House Committee inquiry. The REC are arguing against the removal of the two-sided flexible model of engagement and pointing out that agency workers are already have protections under the Agency Workers Regulations 2010.
Reasonable notice of shifts - The Government proposes that both the end hirer and the agency should be responsible for providing reasonable notice of shifts to the extent that they are responsible for the unreasonable notice.
Payment for shifts cancelled or curtailed at short notice - The Government proposes that agencies should be responsible for the cancellation payments to agency workers and seeks views on whether recoupment of costs from end hirers (to the extend the end hirer is responsible) should be subject to legislative provisions or left to contractual arrangements between the agency and the end user.

Next steps

The consultation on the outstanding detail is awaited. The one thing that is sure, is that the legislative provisions as currently drafted are extremely complex and the Government amendments now added to the Bill only add to that complexity. As how workable these provisions will be, we await the outcome of the consultation and subsequent detailed implementing regulations.

These provisions are not expected to come into force "earlier than 2026". Given the need for extensive and significant substantive regulations with further consultation, 2026 may prove to be optimistic.

Zero-hour/low hour contracts and predictable working hours

Policy

The Bill's provisions

The Bill when passed will insert new sections 27BA to 27BT into the Employment Rights Act 1996, resulting in complex provisions.

1. Right for qualifying workers to be offered guaranteed hours

This right will apply to those employed by the same employer under one or more worker's contracts (whether or not continuously) in the relevant period.

Important detail being is left to implementing regulations includes:

Who will qualify for this right - The definition of 'zero-hours' and 'low-hours' qualifying workers.
The length of the reference period (likely to be a 12-week rolling reference period).
Qualifying 'hours worked' (in terms of regularity and the number of hours worked or otherwise).
The requirements of a 'guaranteed hours offer' - how, when and in what form must it be made.
The requirements for accepting/rejecting 'guaranteed hours offer'.

2. Right to reasonable notice of a shift

3. Right to reasonable notice of cancellation of or change to a shift

Employers must give workers reasonable notice if they cancel a shift or change the day or time.

4. Right to payment for cancelled, moved and curtailed shifts

Important detail being left to implementing regulations includes:

What will amount to 'short notice'?
What amounts to a 'moved' shift?
The 'payment' amount. This will be subject to a cap of what the worker would have earned had they worked the hours and may be subject to a sliding scale depending on how short the 'short notice' was.

6. The Act repeals of the Workers (Predictable Terms and Conditions) Act 2023

Committee Stage accepted amendments

Having been accepted at Committee Stage the Bill now also includes:

Where an employer is not required to offer a GHC, the employer will be required to give notice to that effect stating the exception relied upon.
A rebuttable presumption that a zero hour or low hours contract is not a limited term contract (in other words it will be for the employer to prove a reasonable 'limiting event').
Impose a duty on employers to ensure workers who have the potential to qualify for a GHC are aware of and have access to 'specified information' relating to their rights.
Provide that curtailment of shifts can include hours being cut from the middle of a shift (in addition to the start and finish).
Clarify that the maximum amount of compensation for cancelled, moved and curtailed shifts is the amount that would have been earned save for the cancellation or curtailment and if moved what they would have earned for the original shift and require such payments to be treated as 'wages'.
Make the time limit for bringing a claim in relation to these new rights six months.

Comment

workers on full-time contracts who occasionally pick up overtime hours are not affected; and
where work is genuinely temporary, there will be no expectation on employers to offer permanent contracts.

The 'who' question

The 'reference period' question

Worker's choice

Next steps - Consultation on agency workers

Guaranteed hours - Whether the responsibility for offering workers guaranteed hours should fall to:
Option 1: the employment agency – but recognise difficulty in demand forecasting; or

Option 2: the end hirer – but risks then becoming the de facto employer altering the nature of the relationship. Also, a trigger for 'temp-to-perm' transferring fees (a common contractual fee imposed on a hirer if they directly employ a worker that the agency had initially provided).

The above will be a particularly tricky issue. The Recruitment and Employment Confederation have expressed strong concerns on this issue before a House Committee inquiry. The REC are arguing against the removal of the two-sided flexible model of engagement and pointing out that agency workers are already have protections under the Agency Workers Regulations 2010.
Reasonable notice of shifts - The Government proposes that both the end hirer and the agency should be responsible for providing reasonable notice of shifts to the extent that they are responsible for the unreasonable notice.
Payment for shifts cancelled or curtailed at short notice - The Government proposes that agencies should be responsible for the cancellation payments to agency workers and seeks views on whether recoupment of costs from end hirers (to the extend the end hirer is responsible) should be subject to legislative provisions or left to contractual arrangements between the agency and the end user.

Next steps

Flexible working

Policy

Making flexible working the default.

The Bill's provisions

Added to the existing requirement that an employer may only reject a flexible working request based on one or more of the eight statutory reasons will be an additional requirement that "it is reasonable to refuse that application on that ground or those grounds ".
A new requirement that where a flexible working request is refused, the notification of the decision must state the ground or grounds for refusing the request and explain to the employee why the employer considers that decision is reasonable.
The Secretary of State is also given powers to introduce additional steps employers will need to take for compliance with the requirement to consult before rejecting an application.

Comment

The Bill aims to ensure that more requests are agreed. The absence of a reasonableness element for an employer considering that one of the statutory reasons applies has been seen as a loophole for some time. The need to include an explanation for a refusal takes us back to the 2014 position. Both of these changes are in accordance with current ACAS recommend best practice.

In the run up to the Bill being published, press reports warned of workers "being able to demand" compressed hours so that they can work a five-day week in four days. Requesting a compressed hours working arrangement is and has been a possibility since the right to request flexible working was first introduced over 20 years ago. The Bill does not contain provisions requiring employers to agree to compressed hours working arrangements where such a working pattern is not reasonable. Nor is there a proposal for a right to a four-day working week. What is proposed is a shift in the dynamic for flexible working requests generally so that employers consider flexible working (which can be in a variety of forms) with rejections taken on a reasonable basis. So, more of a mindset shift.

As for a possible future introduction of additional steps, this may see the statutory minimum process requirements introduced on 6 April 2024 (that an employer must consult with an employee, as a means of exploring the available options, before refusing a flexible working request) expanded. Currently there is no legislative de minimis requirement of what that 'consultation' needs to include.

Next steps

As stated in the 'Next Steps to Make Work Pay'', the Government will develop the detail of the approach in consultation.

These provisions are not expected to come into force "earlier than 2026". The new requirement that a refusal is 'reasonable' and the ground for refusal stated could be brought into force by simple implementing regulations without further consultation.

Statutory sick pay

Policy

Strengthening statutory sick pay (SSP) by removing the lower earnings limit to make it available to all workers, as well as by removing the waiting period.

The Bill's provisions

Removal of the first three days waiting qualifying period for entitlement
Removal of the lower earnings limit (LEL) requirement
The weekly rate of SSP to be the lower of:
1. £116.75 (the existing SSP statutory rate revised annual in April); and
2. A prescribed percentage of the employee’s weekly earnings.

Comment

The removal of the waiting period (the first three days of sickness) was previously done as a temporary measure during the COVID-19 pandemic to simplify the SSP system and get help to those in need more quickly.

While the policy statement referred to "all workers", this does not represent a change. SSP will continue to apply in relation to "employees" which for SSP purposes includes all those whose earnings are subject to Class 1 National Insurance contributions – so already includes many "workers".

However, the removal of the LEL (currently £123 per week) will help low-paid casual workers. While that will be the case, a concession has been added that the rate of statutory sick pay, currently £116.75 per week, will be set at a lower rate for low paid employees instead to be based on a percentage of their weekly pay. This concession is being included in light of business fears of those on low pay otherwise having an incentive to take sick leave.

Next steps - Consultation

On 21 October, the Government opened the 'Consultation on Strengthening Statutory Sick Pay' on what the percentage rate for low paid employees should be. The Consultation closed on 4 December 2024.

The proposal is to remove the LEL requirement and replace it with a system under which employees are paid a certain percentage of earnings up to the flat statutory weekly rate. This consultation seeks views on what this percentage should be and outlines illustrative examples ranging from 60% to 80% of earnings. Depending on the percentage rate set, some employees who currently earn just above the LEL may see a reduction in their weekly SSP entitlement as they would no longer qualify for the flat rate.

The current SSP rate is £116.75 and is due to rise to £118.75 on 6 April 2025.

Next steps

Following the consultation on the lower percentage rate, this change will be brought forward through a Government amendment to the Bill during its passage.

These provisions are not expected to come into force "earlier than 2026".

Allocation of tips

Policy

Strengthening the law to ensure hospitality workers receive their tips in full and workers decide how tips are allocated.

The Bill's provisions

Introduces a requirement for employers to consult with the representatives of recognised trade unions or worker representatives, or, where there are no such representatives in place, workers likely to be affected by the policy. Such consultation is to be carried out before the employers produce the first version of their written tipping policy.
Introduces a requirement for employers to review their written policy from time-to-time in consultation as above. The first review must take place at least once within three years from the date the initial version of the policy is issued, even if that date is before this provision comes into effect. Following that, reviews must take place thereafter at least once every three years.
Introduces a requirement for employers to also make available to all workers a written summary (in anonymised form) of the views expressed in the consultation

Comment

The Employment (Allocation of Tips) Act 2023 together with the statutory Code of Practice on Fair and Transparent Distribution of Tips came into force on 1 October 2024 (see below). The 2023 Act regulates how employers allocate tips among workers by introducing obligations to ensure that workers receive "tips, gratuities and service charges" in full, and that those tips are allocated in a fair and transparent way. In addition, workers will receive a new right to request more information about an employer's tipping record with employers being required to have a written policy on how tips are allocated.

However, unlike the headline policy stated in the 'Plan to Make Work Pay' the changes that came in on 1 October 2024 do not go so far as to provide that "workers decide how tips are allocated". The provisions contained in the Bill are aimed at increasing the voice of the workforce in determining the allocation of tips policy. As many employers have recently drafted their tipping policy in compliance with the 1 October 2024 changes, scheduling a review to take place before October 2027 will be needed.

Next steps

These provisions are not expected to come into force "earlier than 2026", But note, that when they are brought into force the tipping policy review provisions will apply to tipping policies which predate the Bill's implementation.

Paternity and parental leave

Bereavement leave

Duty to prevent sexual harassment

Policy

Increasing protection from sexual harassment.

The Bill's provisions

Amend the "duty to take reasonable steps to prevent sexual harassment" coming into force on 26 October 2024 (see below) to a "duty to take all reasonable steps to prevent sexual harassment".
Re-introduce employer liability for third-party harassment of workers in the course of their employment. To cover all forms of harassment not only sexual harassment, subject to an "all reasonable steps" defence.
The Secretary of State is given powers to make regulations to specify steps which an employer must take and matters to which they must have regard for the purposes of meeting the obligations set out in the Equality Act 2010 to take all reasonable steps to prevent sexual harassment.

Comment

On 26 October 2024, the Worker Protection (Amendment of Equality Act 2010) Act 2023 came into force. The Act introduces a new positive legal obligation on employers to take "reasonable steps" to protect their workers from sexual harassment. During a difficult passage through Parliament, the originally proposed provisions of the 2023 Act were very significantly diluted:

The original provisions provided for re-introducing employer liability for third-party harassment of workers in the course of their employment, which was remove: and
The potential 25% compensation uplift in sexual harassment cases, test was diluted from requiring employers to have taken "all reasonable steps" to simple "reasonable steps" (a lower bar).

These dilutions came when the 2023 Act was before the House of Lords as peers expressed concerns that those provisions would "jeopardise free speech" and "increase the regulatory burden on employers".

Next steps

We wait to see whether these provisions in the Bill fare better before the House of Lords in this Parliament than they did in the previous Parliament. More heated debate likely.

If passed, these provisions are not expected to come into force "earlier than 2026".

Whistleblowing

Non-disclosure agreements

Policy

Nothing set out in 'Make Work Pay' documents.

Bill's provisions

As introduced in Parliament on 10 October - nothing.

Proposed amendment

On 1 November 2024, an amendment to the Bill was proposed by a Liberal Democrat MP to add a provision which would render void any non-disclosure agreement insofar as it prevents the worker from making a disclosure about harassment (including sexual harassment). This amendment was rejected at the Committee stage due to the "specific" wording that was proposed. However, when before the Public Bill Committee, the Parliamentary Under Secretary of State Justin Madders, stated that the Government does "intend to look more closely at what we can do in this area". Watch this space.

Related pending legislation

Separately, back on 24 May 2024, the Victims and Prisoners Act 2024 (VPA) received Royal Assent as part of the "wash-up" before Parliament was dissolved in advance of the 4 July General Election but largely not yet implemented.

When in force, section 17 will make void any provision in an agreement that purports to preclude a disclosure of information by a victim (or a person who reasonably believes they are a victim) of a crime to:

Any person with law enforcement functions, for the purpose of those functions being exercised in relation to relevant conduct.
A qualified lawyer, for the purpose of seeking legal advice about relevant conduct.
Any individual who is entitled to practise a regulated profession, for the purpose of obtaining professional support from that service in relation to relevant conduct.
A regulator of a regulated profession for the purpose of cooperating with the regulator in relation to relevant conduct.
A person who is authorised to receive information on behalf of any of the above persons for the purposes mentioned above.
A child, parent or partner of the person making the disclosure, for the purposes of obtaining support in relation to the relevant conduct.

"Victim" includes a person who is "subjected to criminal conduct", or "where the person has seen, heard, or otherwise directly experienced the effects of, criminal conduct at the time the conduct occurred".

Comment/next steps

We wait to see if the Government amends the Bill to render void any non-disclosure agreements in relation to sexual harassment and perhaps harassment more widely.

As regards section 17 of the VPA, the Parliamentary Under Secretary of State also confirmed that "the Ministry of Justice is carefully considering plans to bring the relevant section of [the VPA] into force and will be working closely with the victim support and business sectors to ensure that the new measure is implemented and deployed effectively".

Unfair dismissal (including "initial period of employment")

Policy

Introduction of "day-one" employment rights, namely protection from unfair dismissal subject to probationary periods to assess new hires.

The Bill's provisions

Removal of the two-year qualifying service requirement for entitlement to unfair dismissal rights with the repeal of section 108 of the Employment Rights Act 1996 (ERA), which sets out the current qualifying period.
A new provision specifying that an employee cannot claim unfair dismissal unless they have started work subject to exceptions for the existing ‘automatically’ unfair reasons for dismissal.
Removal of the two-year qualifying period for the employee’s right to make a request for written reasons for dismissal. To be replaced by a requirement that the dismissal must have occurred after 'the end of the employee’s initial period of employment'.
Minor amendments to unfair dismissal rights for 'employee shareholders' to include protection where the reason for dismissal relates to the employee’s political opinions or affiliations.
The Secretary of State is given powers to make regulations to modify the operation of the test for unfair dismissal where termination falls:
1. within the 'initial period of employment'; or
2. within the three months immediately after the end of that period, if the employer has given notice of termination before the end of that period

and the reason for the dismissal must relate to one of four statutory reasons:

Capability/qualifications: A reason related to the capability or qualifications of the employee.
Conduct: A reason related to the conduct of the employee.
Statutory ban: That the employee could not continue to work in the position because their continued employment would contravene a statutory duty or restriction.
Some other substantial reason ('SOSR'): Relating to the employee.

Committee Stage accepted amendments

Having been accepted at Committee Stage the Bill now also enables regulations to be made which specify a lower compensatory award where a tribunal finds an employee was unfairly dismissed during the initial period of employment.

Comment

Although there had been previous references to ‘workers’ gaining this ‘day-one right’, it is still currently limited to ‘employees’.

While simply reducing the current two-year qualifying service itself would have been a simpler and quicker option (the Government already has the legislative power to do that via secondary legislation), this is not what the Government is proposing. Unfair dismissal will become a day-one right for employees but there will be provisions specifically dealing with dismissals within an 'initial period of employment'.

Technically, by removing the qualifying period altogether, employees who have been recruited and have a contract of employment but who have not yet started work could also qualify. The Bill contains provision to prevent this by a specific exception. However, this exception will not apply where the employee can show they were dismissed for one of the existing 'automatically' unfair reasons where the existing two-year service requirement is already disapplied, for example dismissal in connection with pregnancy, whistleblowing, acting as an employee representative, asserting a statutory right etc. Or for dismissals in relation to spent convictions, relating to an employee’s political opinions or affiliation, and membership of a reserve force. Note that a dismissal in connection with a transfer of an undertaking (a TUPE transfer) will be included within the exception (while currently an automatically unfair reason the two-year service requirement does currently still apply).

As regards the 'initial period of employment', what that 'initial period' will be is to be subject to further consultation, although the Government has stated in the 'Next Steps to Make Work Pay' that its preference is nine months. There is no reference in the Bill to the 'initial period of employment' necessarily being a contractual probationary period. Accordingly (assuming the Government's preferred choice of a nine-period being used), the same rules will apply to an employee who has no contractual probationary period or a three/six-month contractual probationary period and an employee who has a contractual nine- month probationary period.

What the 'modified test' will require and how that will compare with our understanding of the usual processes employers follow to conduct a fair dismissal is yet to be fleshed out. In the 'Next Steps to Make Work Pay', the Government suggests as a starting point that it should consist of holding a meeting with the employee to explain the concerns about their performance (at which the employee could choose to be accompanied by a trade union representative or a colleague). Furthermore, the Government will consult 'extensively', including on how it interacts with Acas’s Code of Practice on disciplinary and grievance procedures.

It will still be possible for an employee in the 'initial period of employment' to successfully claim unfair dismissal, but the test to show their dismissal was unfair will be a harder one to pass. But note:

The employer will still have to show that the reason for dismissal is related to one of four statutory reasons: capability/qualifications, conduct, statutory ban or 'SOSR related to the employee’. It is just the test for whether the employer acted reasonably in treating that reason as sufficient for dismissing the employee which is being modified.
The existing fifth statutory fair reason for dismissal (which will continue to apply to the period after the 'initial period of employment') of redundancy is not included in this list. This means that employees who are made redundant on day one can claim unfair dismissal in the same way as any employees outside of the 'initial period of employment' with the existing unmodified test of fairness applying.
The reference to 'SOSR' is also slightly different. In a normal unfair dismissal claim, the employer has to show that the reason for dismissal is “SOSR of a kind such as to justify the dismissal of an employee holding the position which the employee held”. But for a dismissal during an 'initial period of employment' the SOSR must be "related to the employee of a kind to justify dismissal" suggesting a dismissal connected with a business reorganisation would not be covered. We wait to see if this remains the case after consultation
As for compensation, the Government states that it will also consult on what a compensation regime for successful claims during the 'initial period of employment' will be, with consideration given to tribunals not being able to award the full compensatory damages currently available.

Next steps

The mechanism proposed for the removal of unfair dismissal qualifying service period will now be subject to "full consultation". Given the concerns already expressed by employers over this change, the Government has committed in the 'Next Steps to Make Work Pay' not to introduce changes to unfair dismissal before the autumn of 2026. The further detail around the 'initial period of employment' is greatly needed.

Assuming a 1 October 2026 implementation date with no additional transition provisions, essentially this amounts to an informal transition period with the effective qualifying period reducing over time. Employees recruited today will qualify for unfair dismissal in just under two years. Employees recruited this time next year will qualify after just under one year’s service and so on.

Maternity-related dismissals

Dismissal and re-engagement

Policy

Abolishing the scourge of fire and rehire.

The Bill's provisions

Adding to the list of 'automatically' unfair reasons for dismissal, a dismissal (a s401I dismissal)
1. for not agreeing to a variation to their contract; or
2. if the employer dismisses the employee to replace, or to re-engage them on varied contractual terms,
unless the employer can demonstrate they fall within an exemption.
A dismissal will not be 'automatically' unfair where an employer can show:
1. The reason for the variation was to eliminate, prevent, significantly reduce or significantly mitigate the effects of financial difficulties which, at the time of the dismissal, were affecting the employer’s ability to carry on the business as a going concern.
2. Where an employer does not operate on a going concern basis, for example certain public sector bodies, the employer would have demonstrated the reason for the variation was to eliminate, prevent, significantly reduce or significantly mitigate the effects of financial difficulties which, at the time of the dismissal, were affecting the employer's ability to carry on activities constituting the business; and
3. in all the circumstances the employer could not reasonably have avoided the need to make the variation.
Where an employer can show a s401I dismissal is not automatically unfair, when determining whether a dismissal was fair or unfair consideration must be given to:
1. whether any consultation was carried out by the employer with the employee, an independent trade union or another employee representative about the variation of the employee’s contract of employment, and
2. whether the employer offered the employee anything in return for agreeing to a variation.

The Secretary of State is also given a power to specify other factors that must be taken into account.

Comment

A Code of Practice on dismissal and re-engagement devised under the previous Conservative Government did in fact come into force post the general election on 18 July 2024. The existing Code requires employers to consult employees and explore alternative options, without raising the prospect of dismissal unreasonably early or using the threat of dismissal as a negotiating tactic to put undue pressure on employees in circumstances where the employer is not envisaging dismissal – so called 'fire & rehire' or 'fire & replace tactics'.

The Bill's provisions will significantly strengthen employee protection from unfair dismissal in these circumstances while still permitting the use of dismissal and reinstatement for employers facing financial difficulties in circumstances where the employer could not reasonably have avoided the need to make the variation. In such circumstances, the Bill includes a number of matters that must be considered when determining whether the dismissal is fair, including the degree of consultation (compliance with the Code of Practice) and whether the employer offered the employee anything in return for agreeing to the variation.

However, the Bill goes much further than the Code of Practice in that it will be automatically unfair to dismiss an employee for failing to agree to any variation of their contract, unless the employer is able to meet the high hurdle of being in financial difficulties. This is a very significant change that may have possible unintended consequences. Consider scenarios such as:

an employer is providing week-day support services and the client informs them that this needs to change to include weekends; or
a manufacturing firm invests in new machinery that will increase productivity but only if shift patterns are changed; or
a care home introduces a new contractual requirement that all employees must have a COVID vaccination to protect vulnerable residents.

None of the a would meet the test of ‘financial difficulties’ that would ‘in the immediate future’ affect the employer’s ability to operate as a going concern. What is an employer to do in those circumstances? Would a contractor have to just lose the contract and make employees redundant? But then there would be a TUPE service provision change so the incoming contractor would now have the issue. Would the manufacturer simply need to continue with its current machinery and not seek to improve productivity? Does the care home employer ignore the health and safety of its residents?

These are just some examples of unintended consequences of confining the exception to cases of ‘financial difficulties’. A sensible amendment could be to add ‘technical or organisational reasons’ to the exceptions as well as a 'health & safety' exception. This would still be a significant change as dismissal would still only be lawful when the employer ‘could not reasonably have avoided’ the need to make the variation - a test being significantly more restrictive than the current test of reasonableness in unfair dismissal cases. This would enable the policy of 'ending the scourge of fire and refire' without extensive unintended consequences. We wait to see if any movement is made in this regard.

Related Secondary Legislation

On 17 October 2024 the Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024 was made on 2 December 2024, meaning that from 20 January 2025 where a party brings a successful claim for a protective award (for failure to collectively consult on redundancies), an employment tribunal can adjust any protective award made by up to 25% if it finds that employer failed to comply with a relevant Code of Practice, for example the Code of Practice on dismissal and re-engagement.

Next steps - Consultation

On 21 October 2024 the Government opened the 'Consultation on Strengthening remedies against abuse of rules on collective redundancy and fire and rehire' which closed on 2 December 2024.

As part of this Consultation, the Government is considering expanding the list of unfair dismissal claims for which interim relief can be sought to include claims under the new s401I (variation of contract refusal). Interim relief is currently limited to unfair dismissal cases regarding union/employee rep activities/membership and whistleblowing. Interim relief enables a tribunal to make an order for the continuation of an individual's employment pending final determination of the case making this a potentially powerful tool for a claimant.

Next steps

We await the outcome of the Consultation and the content of the implementing regulations with implementation "not before 2026".

Collective redundancy consultation

Policy

Strengthen provisions on collective redundancy.

The Bill's provisions

Removal of the reference to 'at one establishment' so that the requirements to collectively consult, and to notify the Secretary of State, apply where the employer is proposing to make 20 or more employees redundant.
Specific amendments to the notification obligations in certain cases involving redundancies of ships’ crews.

Comment

This significantly extends the scope for when collective consultation will be required as the trigger of 20 or more employees will no longer be limited to the number of redundancies proposed at one workplace or unit as was extensively litigated in the 'Woolworths litigation'. Small number of redundancies at different sites taken together will trigger collective consultation requirements.

No doubt the change is aimed at closing the perceived Woolworths loophole (there was a closure of all stores nationally, but as each store a separate 'establishment' only employees at the larger stores had collective consultation rights triggered). But as currently drafted this clause has additional consequences.

For example, a nationwide company with sites across the UK:

It proposes to restructure the sales team in its Southampton branch with the result that there will be 12 redundancies.
At around the same time the company is merging two retail stores Wales with the loss of a further seven jobs.
A month later the Aberdeen head office then decides to reduce the number of its administrative staff.

If the redundancies for three genuinely different business reasons are spread over a period of no more than 90 days then the duty to consult will apply.

The problem for the employer is that each location is engaged in a completely separate redundancy exercise that may not be coordinated in any way. Does it have to carry out one single consultation exercise or can it carry out three separate ones? The issues for the employees at the different sites for different business reasons will be, well very different. If redundancies must be aggregated across different establishments in different parts of a business and spread over the whole country, then large employers will need to consider wide coordination/oversight of any redundancies across any parts of its business.

To still provide protection to a redundancy exercise in a 'Woolworths' scenario, the clause could be amended to retain the 'at one establishment' requirement but add an exception that the 'at one establishment' requirement is disapplied where there is a common underlying business reason for redundancies across the employer's business. We wait to see if any movement is made regarding this issue.

Next steps - Consultation

While not referred in the Bill, in the 'Next Steps to Make Work Pay', the Government states it is "committed to consult on lifting the cap of the protective award if an employer is found to not have properly followed the collective redundancy process as well as what role interim relief could play in protecting workers in these situations".

On 21 October 2024 the Government opened the 'Consultation on Strengthening remedies against abuse of rules on collective redundancy and fire and rehire' which runs until 2 December 2024.

The Government is proposing to increase the maximum period of the protective award that an employment tribunal can award where an employer has failed to comply with its collective redundancy consultation obligations. The two options that are being considered are:

to increase the protective award from 90 to 180 days’ pay per affected employee; or
to remove the cap on the protective award entirely leaving it to the discretion of the tribunal to decide the employer’s penalty.

While the proposal is to increase or remove the cap on the maximum protected period for calculating a protective award, it will remain the case that where a company is insolvent the 8-week cap for payment by the Insolvency Service will remain unchanged (the balance instead being an unsecured debt in the insolvency).

The Government is also seeking views on whether interim relief should be available to employees who bring claims for the protective award. The consultation does not set out how claims for protective awards for failure to collectively consult could work within the current legislative framework which only applies in relation to particular unfair dismissal claims (see 'Dismissal and re-engagement' above). Furthermore, a protective award claim can only be brought by the appropriate representatives of the affected employees (save for a very limited exception).

Next steps

More consultation to come. The Government states it also plans to consult on doubling the minimum consultation period when an employer is proposing to dismiss 100 or more employees from 45 to 90 days. We await the outcome of one consultation and await the start of another.

Public sector outsourcing

Equalities

Policy

Strengthening working women’s protections from maternity and menopause discrimination and introduce gender pay gap action plans.

The Bill's provisions

1. Equality plans

The Secretary of State is given power to make regulations which require employers with 250 or more employees and some public sector employers to:
1. develop and publish an equality action plan showing the steps that they are taking in relation to their employees with regard to matters related to gender equality; and
2. publish prescribed information relating to the plan.
Regulations may not require an employer to publish information more frequently than every 12 months.
A matter is related to gender equality if it is related to "advancing equality of opportunity between male and female employees" and include:
1. addressing the gender pay gap; and
2. supporting employees going through the menopause.

2. Outsourced workers

The Secretary of State is given power to make regulations requiring require private and voluntary sector employers with at least 250 employees in Great Britain to publish information about the service providers that they contract with for outsourced services.

Comment

Gender pay gap report

Employers who are already required to publish gender pay gap reports will also be required to develop and publish an 'equality action plan' showing the steps that they are taking with regard to gender equality, including addressing the gender pay gap and supporting employees going through the menopause.

The implementing regulations may also set out certain requirements in respect of the plan, such as its contents, frequency of publication and any requirements for board approval.

Outsourced workers information

Before the Public Bills Committee, it was made clear that the provisions of the Bill are limited to "getting large employers to disclose who they have outsourcing relationships with". In other words, large employers will only need to disclose with whom it contracts for outsourced workers. It will not extend to including pay data of outsourced workers within the end-users pay gap reports. Instead, the measure will simply link the outsourced workers' employer’s pay gap reporting to the end-user.

Next steps

We await the content of the implementing regulations with implementation sometime in 2026.

School Support Staff Negotiating Body

Fair pay agreement in the adult social care sector

Policy

A new fair pay agreement in the adult social care sector will help to establish national terms and conditions and fair pay rates.

The Bill's provisions

Introduction of sectoral agreements in the adult social care sector.
The Secretary of State is given power to establish the Adult Social Care Negotiating Body (ASCNB).
Outlines matters within the ASCNB’s remit to include the remuneration and terms and conditions applicable to social care workers, and ‘any other specified matters’ relating to their employment.
‘Social care worker’ means any person who is employed (meaning as an employee or worker) wholly or mainly in, or in connection with, the provision of adult social care as defined in the Bill.
The Secretary of State is given power make regulations regarding:
- how the ASCNB may consider matters within its remit, the procedure for reconsideration, provisions relating to disagreements and ratification, and the ability of the Secretary of State to ‘step in’ where agreement cannot be reached;
- allow for guidance and codes of practice to be issued;
- impose record keeping obligations on employers; and
- amend the National Minimum Wage Act 1998.

Comment

The Government originally committed to establishing sector-wide collective bargaining through which unions would negotiate fair pay agreements with employers across an entire industry (instead of merely a single employer or workplace). Instead, there will be the introduction of a fair pay agreement limited to the adult social care sector where the Government has identified issues relating to relatively high turnover and vacancy rates. A fair pay agreement is aimed at empowering workers, trade unions and employers to negotiate fair pay, terms and conditions, and training standards.

Next steps

The Government will launch a consultation "soon" to consider exactly how the fair pay agreement should work.

Trade unions

Policy

Strengthening trade union legislation and simplifying the process of statutory recognition.

The Bill's provisions

1. Right to statement of trade union rights

Employers will be required to provide to an employee a written statement of the worker’s right to join a trade union. This statement must be given at the same time as the employer provides the statement of their employment particulars, and at ‘other prescribed times’ that will be set out in regulations.
Details of the content and form of the statement, and the manner in which it must be provided, will also be specified in secondary legislation.
The penalties for failure to comply with this new requirement will mirror those that apply to a failure to provide a statement of employment particulars.

2. Right of trade unions to access workplaces

The Bill provides for ‘access agreements’ to be entered into between listed trade unions and employers that allow officials from those trade unions to access the workplace for the purposes of meeting, representing, recruiting or organising workers, or facilitating collective bargaining ('the accesses purposes').
The Bill sets out the access principles:
1. union officials should be able to have workplace access for any of the access purposes in any manner that does not unreasonably interfere with the employer’s business;
2. an employer should take reasonable steps to facilitate access by officials; and
3. access should be refused entirely only where this is reasonable in all the circumstances.
The Bill sets out the process:
1. the trade union submits an access request.
2. the employer provides a response notice.
3. the parties negotiate the terms on which union officials are to have access within a 'negotiating period'.
4. jointly notify the Central Arbitration Committee (CAC) of the terms.
Both the access request and the response notice will need to be in a prescribed form, containing prescribed information and given in a prescribed manner.
An application may be made to the CAC to determine a union’s workplace access where the employer has not responded to the access request or negotiations have been unsuccessful.
The Secretary of State will have power to set out in regulations:
1. The length of the 'response period' and the 'negotiating period'.
2. The form and manner of the access request and response.
3. The form and manner of notification to the CAC.
4. Exempt certain workplaces.

3. Trade union recognition

Replacing the 10% application threshold for the CAC to accept a trade union recognition application with a new 'required percentage test'.
Removal of the requirement at the application stage for a union to demonstrate that there is likely to be majority support for trade union recognition.
Removal of the 40% support threshold at the recognition ballot stage (reverting to a simple majority threshold).

4. Trade union finances

Repeal of the requirement for trade unions to opt out their members from contributions to political funds, unless they have expressly requested to opt in. This will return (in substance) to the position before the introduction of the Trade Union Act 2016, trade union members being automatically opted in to contribute to a political fund, unless they expressly opt out.
Repeal of the Trade Union Act 2016 restrictions on public sector employers from providing a check off service.
Repeal of the power to make regulations requiring public sector employers to publish information relating to time off taken by trade union representatives (facility time).

Comment

The Bill will simplify the route to statutory recognition by revising the relevant voting thresholds and will introduce rights for unions to access workplaces for recruitment and organisation purposes. It also increased protections and facilities for union representatives.

In the 'Next Steps to Make Work Pay', the Government also states it will consult on how to strengthen provisions to prevent unfair practices during the trade union recognition process.

The Government believes that the current statutory trade union recognition process makes it too difficult for unions to gain recognition and the Bill aims to simplify this process by removing requirements at the application and ballot stage, and consulting on reducing the 10% application threshold for the CAC to accept a trade union recognition case.

Next steps - Consultation

On 21 October 2024, the Government opened the 'Consultation on creating a modern framework for industrial relations' which closed on 2 December 2024.

The Government is seeking views on updating trade union legislation, including:

simplifying the union recognition process
strengthening provisions to prevent unfair practices during the trade union recognition process
removing the ten-year requirement for unions to ballot their members on the maintenance of a political fund
the enforcement mechanism for the request for access to a workplace contained in the Bill.

Next steps

We await the outcome of the Consultation. The provisions regarding the new right of access to the workforce, statements of trade union rights and facilities. These provisions are not to come into force before sometime in 2026.

The repeal of the existing financial restrictions on contributions to political funds and deduction of trade union subscriptions from wages in the public sector as well as the repeal of the public sector facility time publication provisions will come into force two months after the Bill is passed.

As stated in the October 2024 Consultation, after the Bill is passed there will be more consultation to include:

Lowering the admissibility threshold for the statutory recognition ballot process.
Ensuring union members and workers can access a union at work.
Introducing rights for trade unions to access workplaces for recruitment and organising purposes and a code of practice.
Greater rights and protections for trade unions reps to undertake their work, strengthening protections for trade union representatives against unfair dismissal and union members from intimidation, harassment, threats and blacklisting.
Introducing statutory rights for trade union equality reps in order to strengthen equality at work.

Blacklists

Industrial action – trade union protections

Policy

Strengthen the collective voice of workers.

The Bill's provisions

Removal of the provisions which introduced strike ballot minimum turnout thresholds of 50% of those entitled to vote and for key public sectors, an additional threshold of 40% of the entire membership must vote in favour of strike action.
Removal of the provisions which require certain information to be included on the ballot paper (summary of the trade dispute, specify the type of industrial action if other than a strike and the time period the industrial action is to take place).
Removal of the requirement to provide information to the employer on how many members were entitled to vote and whether the minimum thresholds have been met.
Removal of the requirement that an independent review is commission before the Secretary of State can permit electronic balloting.
The notice period a trade union must give the employer of industrial action after securing a ballot mandate to be reduced from fourteen to seven days.
Removal of the requirement for union supervision of picketing.
Repeal of the Strikes (Minimum Service Levels) Act 2023.
Miscellaneous changes to the powers of the Certification Officer.

Comment

Repeal of the power of the Secretary of State to specify minimum service levels (MSLs) during periods of strike action in the fields of health, transport, education, fire and rescue, border control, and nuclear decommissioning and radioactive waste management service has been largely trailed. Prior to the election, secondary legislation introduced MSLs for passenger rail, ambulance services, border security, and fire and rescue services. Although the ability of employers to give MSL work notices will legally continue until the legislation has been formally repealed, the Government "strongly encourages" employers to use alternative mechanisms for dispute resolution, avoiding the imposition of MSLs in the meantime.

Also as expected, the 2017 reforms introduced by The Trade Union Act 2016 are also being repealed.

The removal of the strike ballot minimum turnout thresholds of 50% of those entitled to vote and for key public sectors, an additional threshold of 40% of the entire membership must vote in favour of strike action, results in a return to the pre-March 2017 position. This means that provided the union allows all those being called upon to take action to vote, only a simple majority of those who actually vote is needed to validate the action. As such, if there is a very low turnout to vote, a strike could be called based on a small percentage of the actual membership who turned out to vote and voting in favour.

As regards the repeal of the information provisions, this will mean that the law will revert to requiring a trade union to ask its members on the ballot paper which type of industrial action they want to take part in, expressed in terms of whether it is strike action or simply action short of a strike. The type of action that a majority of members vote for will then (assuming other legal requirements are met) be protected and immune from legal action by the employers or others.

As regards electronic balloting, the Government intends to set up a working group to be launched by the end of 2024 including cyber security experts and trade unions, with full rollout implemented following the passing of the Employment Rights Bill removing the requirement for an independent review.

Not included in the Bill is the formal repeal of the provisions which purported to allow the use of agency workers to cover for striking workers. However, in the 'Next Steps to Make Work Pay' the Government stressed that these provisions have already been held by the High Court to be unlawful .

Next steps - Consultation

On 21 October 2024 the Government opened the 'Consultation on creating a modern framework for industrial relations' which runs until 2 December 2024.

The Government is seeking views on updating trade union legislation, including:

simplifying the requirements on industrial action ballots and notice to employers
securing a mandate for negotiation and dispute resolution
extending the expiry of a trade union’s mandate for industrial action from six to 12 months
reducing the industrial action notice period
updating the law on repudiation and ‘prior call’

Next steps

We await the outcome of the Consultation and any consequent amendments to the Bill or secondary legislation. These provisions will come into force two months after the Bill is passed, except for the repeal of the MSL provisions which will come into force immediately upon the passing of the Bill.

Industrial action – union member protections

Labour market enforcement

Policy

Establishing a new single enforcement body, also known as a Fair Work Agency, to strengthen enforcement of workplace rights.

The Bill's provisions

The Bill provides that the Secretary of State has the function of enforcing certain specific ‘labour market legislation’ and allows for ‘enforcement officers’ to be appointed.
The legislation in scope includes (but is not limited to) the enforcement of:
1. statutory sick pay and the national minimum wage – including entitlement to and record-keeping requirements;
2. the right to paid annual leave;
3. certain rules relating to the conduct of employment agencies and businesses;
4. the financial penalties for a failure to pay compensation awarded or settled by the employment tribunal in a COT3; and
5. some offences relating to gangmasters and modern slavery.
Detailed provisions are included in respect of the delegation of functions, the appointment of an Advisory Board, the requirement for a labour market enforcement strategy and reports, and various enforcement powers.

Comment

While not referred to by name in the Bill, in the 'Next Steps to Make Work Pay' the Government states it will establish the Fair Work Agency ('FWA') to bring together existing enforcement functions in relation to the above. The aim is to improve workforce retention by strengthening the employment rights framework to provide clarity for employers, tackling the undercutting that good employers currently face when trying to do the right thing.

Many of these areas are already covered by existing enforcement agencies which will be combined into one agency – the FWA. The Bill will combine the Employment Agency Standards Inspectorate, HMRC’s National Minimum Wage Enforcement Team, and the gangmasters and Labour Abuse Authority and abolish the Director of Labour Market Enforcement (DLME), who currently oversees the work done by these bodies.

A significant new addition is enforcement of rights to holiday pay. This is not currently subject to enforcement by a state agency, and it is also a notoriously complex area where employers may make inadvertent mistakes.

Since 2016, an employer who fails to pay a tribunal award/settlement can be subject to a penalty payable to the Secretary of State if the claimant completes an enforcement form. This is little used, indicating its inclusion is intended to bolster enforcement.

How effective of a body the FWA will be, will largely come down to a question of financial resources and priorities for enforcement.

Next steps

On 4 November, the DLME issued a call for evidence focused on what the enforcement bodies need to be doing to prepare for the transition and in particular what should be the priorities for employment rights enforcement in the run up to the establishment of the FWA and then for the FWA. The call for evidence closed on 13 December 2024.

The DLME is due to deliver the 'Labour Market Enforcement Strategy for 2025 to 2026' in March 2025. While more details of the Government plans for the FWA are expected to emerge throughout 2025, the DLME state there are no planned Government consultations specifically related to the FWA itself and the FWA will not become operational before the 2026/2027 financial year.

Employment tribunal time limits

Beyond the Bill: coming into force 2025

Neonatal Care Leave and Pay

The Neonatal Care (Leave and Pay) Act 2023 provides for a statutory right to up to 12 weeks paid neonatal care leave for eligible employed parents whose new-born baby is admitted to neonatal care. This is in addition to other leave entitlements such as maternity and paternity leave. The 2023 Act is largely an enabling Act, with much of the detail of the rights left to further regulations.

On 20 January 2025, the Government published the draft substantive implementing regulations to come into force on 6 April 2025 (The Neonatal Care Leave and Miscellaneous Amendments Regulations 2025 and The Statutory Neonatal Care Pay (General) Regulations 2025).

Neonatal Care Leave will apply:

Day one right for employed parents of children born on or after 6 April 2025.
Available to employed parents of babies who are admitted into neonatal care up to 28 days old and who have a continuous stay in hospital of seven full days or longer.
Eligible parents to take up to 12 weeks of leave on top of any other leave they may be entitled to, including maternity and paternity leave. A parent will be entitled to one week’s leave for every week their child spends in neonatal care capped at a maximum of twelve weeks. The parent can take the leave when their child is still receiving neonatal care or after any other parental leave that the parent may be eligible for, to allow time to bond with the child after leaving neonatal care.

Neonatal Care Leave Pay

Eligible employed parents will receive a payment of £187.19 per week or 90% of average earnings (whichever is the lower).
Available to those who meet continuity of service requirements (26 weeks) and a minimum earnings threshold.

National minimum wage

Policy

The Government has pledged to make the minimum wage a genuine living wage and ensuring all adults are entitled to the same minimum wage regardless of age.

1 April 2025 increases

From 1 April 2025 the rates of the national minimum wage (NMW) will be as follows:

National Living Wage (NLW) (21 and over): £12.21 (6.7% increase, currently £11.44).
18-20 year old rate: £10.00 (16.3% increase, currently £8.60).
16-17 year old rate: £7.55 (18% increase, currently £6.40).
Apprentice rate: £7.55 (18% increase, currently £6.40).
Accommodation offset: £10.66 (6.7% increase, currently £9.99).

Future remit

On 31 July 2024, the Department for Business and Trade (DBT) published the Low Pay Commission Remit 2024, stating:

The NLW rate does not drop below two-thirds of UK median earnings for workers aged 21 and over.
The NMW rate for 18-to 20-year-olds will remain from April 2025 but "to narrow the gap with the NLW taking steps year by year in order to achieve a single adult rate".
Set the under-18 rates and apprentice rates "as high as possible without damaging the employment prospects of each group".

Noting that an NLW worker working 37.5 hours per week will see their annual gross pay increase by £1,505.54, the LPC reported seeing some signs of employers finding it harder to adapt to NMW increases. Nevertheless, it anticipates consulting next year on the pathway to achieving the Government's goal of reducing the NLW age threshold from 21 to 18.

Comment

This is a slower transition to a single adult rate (for those aged 18-plus) than originally expected by many. This continues the existing move over recent years towards a single adult rate NMW (in April 2024 the age band for the NLW lowered to 21 - previously 23 having already reduced from 25 in April 2021). As expected, (and has always been the case), there are no plans to merge the youth and apprentice rates with the adult rates (despite what has been misreported in some sections of the press).

Beyond the Bill: already in force July to December 2024

Dismissal and Re-engagement Code of Practice

The statutory Code of Practice on Dismissal and Re-engagement devised under the previous Conservative Government came into force on 18 July 2024. The new Code sets out how employers should act when:

it is considering making changes to one or more of its employees’ contracts of employment; and
it envisages that, if the employee and/or representative does not agree to some or all of the changes, it might opt for dismiss and re-engagement in respect of that employee.

Employers are expected to consult employees and explore alternative options, without raising the prospect of dismissal unreasonably early or using the threat of dismissal as a negotiating tactic to put undue pressure on employees.

Notably, the Code states that "the employer should contact Acas for advice before raising the prospect of dismissal and re-engagement". Failure to follow the Code could result in a 25% uplift to compensation awards in relevant cases including unfair dismissal and discrimination. A notable omission from the list of clams to which a 25% uplift can apply are protective awards for failure to collectively consult on collective redundancies. The pre-election proposed addition of protective awards unfortunately failed to gain House of Lords' approval before the general election.

On 2 December 2024, a new The Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024 was made providing for the 25% uplift to apply to protective awards for failure to collectively consult on collective redundancies from 20 January 2025. As transitional provisions have not been included, an uplift or reduction could potentially apply in any pending claims to which the Code applies, not just new claims brought since 20 January 2025. (Note: the Code does not apply where the prospect of fire and re-hire was raised with employees or their representatives before 18 July 2024.)

See above for future reform under the Employment Rights Bill to further strengthen the Code.

Dismissal and Re-engagement Code of Practice

The statutory Code of Practice on Dismissal and Re-engagement devised under the previous Conservative Government came into force on 18 July 2024. The new Code sets out how employers should act when:

it is considering making changes to one or more of its employees’ contracts of employment; and
it envisages that, if the employee and/or representative does not agree to some or all of the changes, it might opt for dismiss and re-engagement in respect of that employee.

See above for future reform under the Employment Rights Bill to further strengthen the Code.

Allocation of tips

Duty to prevent sexual harassment

On 26 October 2024, the Worker Protection (Amendment of Equality Act 2010) Act 2023 came into force. The Act introduces a new positive legal obligation on employers to take "reasonable steps" to protect their workers from sexual harassment. If an employer breaches the preventative duty, the Equality and Human Rights Commission (EHRC) will have the power to take enforcement action against the employer. In addition, employment tribunals will have the power to increase compensation by up to 25% where an employer is found to have breached the new duty.

Under the existing provisions of the Equality Act 2010, where a person commits an act of discrimination (including harassment) in the course of their employment, their employer is ordinarily liable for that act, in the event a claim is brought, unless the employer can show that it took "all reasonable steps" to prevent the discrimination from arising. "All reasonable steps" is a high bar, and many employers find it difficult to demonstrate that they have taken all such steps.

It will remain the case that to establish the existing statutory defence in a sexual harassment claim involving harassment by a colleague, the employer will still need to show that it took "all reasonable steps" to prevent the sexual harassment. But where a claim is upheld and the employer fails to establish the statutory defence, the employer may still potentially be able to avoid a "failure to prevent claim" and the corresponding 25% uplift to compensation if the employer can show it took "reasonable steps" to prevent sexual harassment of employees – a lower threshold. Employers need to think now about what steps they currently have in place and any further measures they can put in place with a good paper trail.

In July, The EHRC's Technical Guidance: Sexual harassment and harassment at work (originally issued in January 2020) was updated to include a new chapter with information on the new preventative duty.

During a difficult passage through Parliament, the originally proposed provisions of the 2023 Act were very significantly diluted:

The original provisions provided for re-introducing employer liability for third-party harassment of workers in the course of their employment was removed; and
The potential 25% compensation uplift in sexual harassment cases, test was changed from requiring employers to have taken "all reasonable steps" to simply "reasonable steps".

The Employment Rights Bill contains provisions to revert to its original drafting, which would make employers responsible for taking 'all reasonable steps', not just "reasonable steps" to prevent sexual harassment in the workplace and also to provide protection from harassment from third parties generally. It is therefore in employers’ best interests to ensure that they have robust processes in place in this regard.

Beyond the Bill: Next Steps to Make Work Pay

Equality (Race and Disability) Bill

Policy

The 'Next Steps to Make Work Pay' confirms this Bill will:

extend pay gap reporting to ethnicity and disability for employers with more than 250 staff and measures on equal pay;
extend equal pay rights to protect workers suffering discrimination on the basis of race or disability;
ensure that outsourcing of services can no longer be used by employers to avoid paying equal pay; and
implement a regulatory and enforcement unit for equal pay with involvement from trade unions.

Next steps

The Government will begin consulting on this legislation in "due course", with a draft bill to be published during this parliamentary session for pre-legislative scrutiny.

Further consultation will also take place prior to the making of secondary legislation implementing these reforms.

Comment

As regards pay gap reporting, finding a methodology resulting in meaningful data is no easy task. Simply cutting and pasting the methodology used in gender pay gap reporting is unlikely to be suitable due to small statistical group issues and issues around classification of those of differing ethnicities/disabilities.

How comparisons for equal pay claims are to be made across a wide range of race-based identities and very different forms of disability will also be a challenging.

The consultation period and lead in time is likely to be considerable.

Right to switch off

Single 'worker' status

TUPE

Public sector equality duty

Surveillance technologies

Parental leave review

Carer's leave review

Internships

Health and safety

Collective grievances

Public procurement

Freedom of information

Tribunal procedure

Policy

The time limits within which employees are able to make an employment claim is to be increased from three to six months. It will also enable employees to collectively raise grievances through ACAS about conduct at work.

In September 2024, it was leaked that the Government is intending to:

Increase the current compensation limit for Breach of Contract claims in the Employment Tribunal from the current £25,000 to £100,000.
Enable employees to bring breach of contract claims in the employment tribunal whilst still in employment.
Allow employment tribunals to hear breach of working time limit claims.

To date draft legislation in this regard has yet to be published.

Comment

1. Time limits

See 'Employment tribunal time limits' above on late inclusion of provisions in the Employment Rights Bill.

2. Breach of contract claims

The current compensation limit for Breach of Contract claims in the Employment Tribunal is £25,000. To put the increase to £100,000 into context, the current £25,000 limit has been in place since 1994 and so arguably well overdue for an increase. Breach of contract claims seeking more than £25,000 in compensation can currently be brought in the County or High courts. Nevertheless, enabling higher value contract claims to instead be brought in a tribunal is likely to lead to an increase in breach of contract claims in light of the more informal nature of the employment tribunal process, the differing fees regime, and the significantly lower costs risks regime for claimants.

While the value of claims for breach of contract are likely to be increased, there is no announced/leaked proposal to amend or remove the list of breach of contract claims specifically excluded from employment tribunal jurisdiction. These include contractual claims relating to personal injury, living accommodation provisions, intellectual property, imposing an obligation of confidence or a restraint of trade covenant.

3. 48-hour working week claims

Currently, (broadly) employers’ obligations such as mandatory limits on working time (the 48-hour working week limit) and night working time, health assessments and transfers to day work are enforced by the Health and Safety Executive. Entitlements granted to workers by the Working Time Regulations 1998, such as to paid holiday, rest breaks, rest periods or compensatory rest, are enforceable by workers bringing complaints to employment tribunals. In light of:

the prevalence of valid 48-hour working week opt outs in use; and
given the relatively small number of claims for breach of rest break or rest period provisions over the years this change may be of limited impact. Nevertheless, employers should review opt out arrangements to ensure they are properly documented and monitor the working hours of any workers who have refused to agree to opt out or have opted back into the WTR.

How to keep up with employment law in the UK?

We expect there to be more changes coming for employment law in the next few months as the new governmental policies and legislation take shape.

Our Employment team is at the forefront of these changes, challenges and opportunities that will affect businesses, employers and employees. We will continue to provide updates on this page when new developments occur.

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Authors

Jonathan Chamberlain

Partner

Birmingham, London

Anna Fletcher

Partner

Birmingham

Connie Cliff

PSL Principal Associate

Birmingham