Employment Rights Bill Update

The UK’s employment landscape is set for a major overhaul. Labour’s Employment Rights Bill, part of its “Make Work Pay” agenda, has now passed its third reading in the House of Commons and is under review in the House of Lords and, while most reforms are expected to take effect in 2026, employers should begin preparing now for the significant changes ahead.

Unfair Dismissal and Probationary Periods

Currently, employees must complete two years of service before gaining protection from unfair dismissal. Under the new bill, this will become a day-one right.

To balance this shift, the government proposes an Initial Period of Employment (IPE)—likely to be nine months—during which a modified dismissal process will apply. Employers will still need to demonstrate a valid reason for dismissal (e.g., conduct, capability, statutory restriction, or another substantial reason), but redundancy will no longer be exempt, meaning employees made redundant during the IPE could claim unfair dismissal from day one.

Family Leave and Bereavement Rights

Bereavement Leave

• Current law: Limited to child loss from 24 weeks’ gestation to age 18.
• Proposed change: Day-one right to bereavement leave for all employees, regardless of the relationship.

Paternity and Parental Leave

• Current law: 26 weeks’ service required for paternity leave; 1 year for unpaid parental leave.
• Proposed change: Both will become day-one rights, though 15 weeks’ notice will still be required for parental leave. Additionally, employees will no longer lose paternity leave entitlements if they take shared parental leave.

Collective Redundancy Reforms

Currently, employers must consult employee representatives and notify the Secretary of State when making 20 or more redundancies at a single site within 90 days.

The bill proposes:

• Extending consultation requirements to multi-site redundancies once a national threshold is met.
• Doubling maximum tribunal compensation from 90 to 180 days’ pay.
• Enhanced protections for seafarers, particularly those working internationally.

Equality, Menopause, and Pay Transparency

• Employers with 250+ employees will be required to publish gender pay gap data and outline action plans to address disparities.
• The bill acknowledges the lack of workplace support for menopausal women, with 1 in 10 leaving their jobs due to symptoms. New measures aim to improve support and retention.

Fair Work Agency

A new Fair Work Agency will consolidate enforcement functions currently spread across multiple bodies, including:

• National Minimum Wage enforcement
• Agency worker protections
• Holiday pay compliance

This agency will replace the Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement, streamlining oversight and improving access to justice.

Fire and Rehire Practices

The bill seeks to restrict the controversial practice of “fire and rehire.” Under the proposed changes, dismissals made to enforce contractual changes will be automatically unfair unless the employer can demonstrate:

• Genuine financial hardship or risk
• That the proposed changes were necessary to mitigate that hardship
• That no reasonable alternative existed

Flexible Working

While employees already have the right to request flexible working from day one, the bill will require employers to:

• Provide a formal explanation when rejecting a request
• Follow a structured process for handling applications

This change reflects growing evidence that flexible work arrangements can boost productivity, with 38% of employers reporting efficiency gains.

Pregnancy and Maternity Protections

Despite existing protections, many women still face discrimination during and after maternity leave. The bill proposes:

• Enhanced dismissal protection for six months following return from maternity leave
• Further consultation to finalise the scope and enforcement of these protections

Statutory Sick Pay (SSP)

The current SSP system excludes many low-paid workers and delays payment until the fourth day of absence. Proposed reforms include:

• Removing the earnings threshold
• Paying SSP from day one
• Setting SSP at 80% of normal weekly earnings, capped at £118.75

These changes aim to reduce presenteeism and improve public health outcomes.

Whistleblower Protections

The bill expands whistleblower protections to explicitly include sexual harassment, removing the need to prove criminality. This change reflects growing awareness of workplace harassment, with 26% of victims reporting incidents at work.

What Employers Should Do Now

With implementation expected in 2026, now is the time to:

• Review and update employment contracts and HR policies
• Prepare for changes to dismissal procedures and leave entitlements
• Train managers on new compliance requirements
• Monitor ongoing consultations and legislative updates