Employment Rights Bill – Key Amendments and Implications for UK Businesses

The Employment Rights Bill (ERB) has reached a critical stage, with significant amendments debated and voted upon in the House of Commons on 11 and 12 March 2025. Initially introduced in October 2024 as part of the Labour government’s promise to ‘make work pay,’ the Bill has undergone extensive modifications through consultations and parliamentary scrutiny. With over 250 amendments, the ERB represents the most extensive shift in UK employment law in a generation.

This article breaks down the key changes, their implications for employers and employees, and the wider impact on the UK labour market.

1. Tribunal claims extended time limits and rising costs

One of the most notable amendments is the extension of the time limit for employment tribunal claims from three months to six months. This change is designed to improve access to justice by giving employees more time to prepare their cases.

However, businesses must brace for an increase in litigation. The Department for Business and Trade (DBT) estimates that this extension could lead to a 5% rise in claims, costing UK businesses an additional £13.6 million annually in legal fees and compliance costs. While the government expects that extended timeframes will encourage more internal dispute resolution, businesses should prepare for an increase in claims.

2. Unfair dismissal day-one rights confirmed

The government has confirmed that the qualifying period for protection against unfair dismissal will be reduced from two years to nine months. This is a major change that strengthens employee rights but raises concerns among business groups about potential challenges in performance management and probationary dismissals.

3. Collective consultation and fire-and-rehire rules for employers

The ERB initially proposed removing the ‘at one establishment’ rule for collective redundancies, meaning that employers would have had to assess redundancy thresholds across their entire workforce. Following employer backlash, a compromise has been reached: collective consultation remains mandatory for 20 or more redundancies at one site, but a yet-to-be-defined threshold will apply for multi-site redundancies.

Additionally, the maximum protective award for failing to consult on redundancies is set to double from 90 to 180 days’ pay, significantly increasing financial risk for non-compliant businesses. The Code of Practice on Dismissal and Re-engagement (‘fire and rehire’) will also be updated, with employment tribunals empowered to apply a 25% compensation uplift for breaches.

4. Zero-hours contracts ban extended to agency workers

The government has officially confirmed a ban on exploitative zero-hours contracts, extending protections to agency workers for the first time.

Under the revised Bill, agency workers will now be entitled to:

• Guaranteed hours contracts, ensuring their working hours reflect past work patterns.
• Reasonable notice of shifts, with penalties for last-minute cancellations.
• Compensation for cancelled or curtailed shifts, with responsibility for payment falling on the employment agency (who can pass costs to the end hirer in certain cases).

While these measures provide greater job security for workers, they present operational challenges for employers that rely on flexible staffing, particularly in sectors like retail, hospitality, and healthcare.

5. Strengthening statutory sick pay

The ERB will make Statutory Sick Pay (SSP) payable from day one rather than after three days and will extend eligibility to lower earners. For those earning below the Lower Earnings Limit (LEL) of £123 per week, SSP will be calculated at 80% of their normal earnings, rather than the standard flat rate of £118.75 per week (from April 2025).

The government argues that these changes will reduce presenteeism (employees working while ill), but some small businesses have raised concerns about affordability.

6. Trade union reforms and strengthening worker representation

New amendments seek to modernise industrial relations by:

• Reducing strike notice periods from 14 to 10 days.
• Extending industrial action mandates from 6 to 12 months.
• Simplifying ballot procedures and introducing e-balloting for union votes.
• Expanding trade union access rights to include digital access to workplaces.

These changes, championed by UNISON and the Trades Union Congress (TUC), are designed to empower workers, but business groups warn they may increase the frequency and impact of industrial action.

7. The Fair Work Agency and new regulatory oversight

A new Fair Work Agency (FWA) will be established to enforce:

• Minimum wage compliance.
• Holiday pay rights.
• Statutory sick pay enforcement.
• Modern slavery and labour exploitation laws.

For the first time, the FWA will be able to bring tribunal claims on behalf of workers who may not have the resources to do so. This could increase scrutiny on businesses that fall short of compliance.

8. Additional provisions on carers’ rights, pregnancy loss leave, and more

Non-government amendments also propose several progressive reforms, though their passage is uncertain:

• 10 days’ statutory leave for domestic abuse victims.
• Carers’ leave as a protected right.
• Bereavement leave for pregnancy loss.
• Stronger employer duties to prevent gender-based harassment.
• A new Working Time Council to explore a four-day work week.

While not all of these provisions will survive the final bill, they indicate the broader direction of future employment law.

What happens next

The Employment Rights Bill has passed its Report Stage and is now awaiting a final vote in the House of Commons on 12 March 2025. If approved, it will proceed to the House of Lords for further consideration before becoming law.

The scale of reform is substantial, and the transition period will challenge businesses that have operated under more flexible employment regulations. Large firms with established HR teams may adapt quickly, but SMEs will face higher compliance burdens. Employment tribunals are expected to experience a surge in cases due to increased claims eligibility and heightened enforcement through the Fair Work Agency.

Employers will need to reassess workforce planning strategies, particularly those reliant on agency workers or flexible contracts. Proactive investment in employment law compliance, policy updates, and legal support will be necessary to mitigate risks. The government has indicated further consultation on secondary legislation, which will determine how some of the more complex provisions—such as multi-site redundancies—will be implemented.

HRD Connect Curators of the New Business Landscape. HRD Connect produces industry-recognized content for senior HR leaders. Through articles, case studies, Q&As, podcasts, events, and more, we offer truly progressive and cutting-edge insights designed to help people leaders address core HR challenges and add greater value to their business.

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