Introduction to the Employment Rights Bill

The Employment Rights Bill (ERB) was introduced on 10 October 2024 and makes provision for wide-ranging changes to be made to employment law.  

The specific changes explained below will not become law until 2026, but SMEs need to plan now for the potential impact of the changes on their businesses.

The top five most important changes for SMEs to be aware of

Some changes in the ERB are less likely to have a material impact on SMEs (for example, trade union law changes and provisions relating to seafarers), but SMEs need to be particularly aware of the following.

1. The existing two-year qualifying period for unfair dismissal will be removed

The Federation of Small Businesses (FSB) published the results of a membership survey on 6 January 2025 suggesting that day one unfair dismissal rights are smaller employers’ main concern about the ERB. 

There has been concern expressed by bodies representing employers that the removal of the qualifying period could result in significant increases in unfair dismissal claims. There may be a reduction in weak or speculative whistleblowing and discrimination claims that are brought in dismissal scenarios to circumvent the current two-year qualifying period for an unfair dismissal claim. 

The reforms seem likely to increase risk when recruiting and may lead to procedures becoming more robust, in order to ensure that new hires are right for the job. Some employers may, for example, undertake more comprehensive pre-employment screening, ask more questions about unexplained gaps in CVs and follow up on references more diligently. The change may also encourage some employers to consider using temporary agency workers or consultants to fill staffing gaps as opposed to permanent hires.

Importantly, however, the Employment Rights Bill provides for an “initial period of employment” – essentially a probationary period – during which a modified process would give businesses greater flexibility to dismiss on grounds of capability, conduct, statutory contravention or “some other substantial reason” (but not redundancy). The Government has indicated a preference for a 9-month probationary period.

Reform of unfair dismissal law is not anticipated to take effect any sooner than Autumn 2026. 

2. Protection from harassment

  • Sexual harassment – Employers are required to take ALL reasonable steps

A new duty to take reasonable steps to prevent sexual harassment of employees came into force last October.  

Under the ERB, this protection will be strengthened to require employers to take all reasonable steps. Further detail will be provided on what steps will be deemed “reasonable”. 

Whistleblowing legislation will also be amended to make clear that a disclosure of sexual harassment will be a protected disclosure.

  • Third-party harassment – New Protection

Employers will also have to take all reasonable steps to prevent third-party harassment linked to all protected characteristics, not just sexual harassment. This may prove to be a threshold that even the most proactive and diligent of employers find challenging to demonstrate has been met.

3. A number of changes to pregnancy, ‘family friendly’ and sick pay rights

  • Enhanced protection for mothers, including protection from dismissal (subject to certain exceptions) whilst pregnant, on maternity leave and within six months of returning to work

This adds to new rules which came into force in April last year, whereby women selected for redundancy had the right to be offered a suitable available vacancy (in priority to other impacted employees) extended from the date they told their employer about their pregnancy up to 18 months after the baby is born.

  • More robust right to request flexible work – but no absolute right to do so

Changes made by the ERB will mean that an employer can only refuse a request if it considers that a specified ground (as currently contained in the Employment Rights Act) applies AND it is reasonable to refuse the request on that ground(s). 

Employers will be required to notify the employee of the ground(s) for refusal and explain why their decision was reasonable. 

  • Statutory paternity leave and statutory parental leave will both become day-one rights
  • An expanded right to bereavement leave

There is currently an entitlement to two weeks’ parental bereavement leave. The new right will apply to a wider category of relationships, presumably other close family or similar relationships. The expanded right will be to one week of leave (or two for the death of a child as provided for now). 

  • Statutory sick pay (SSP)

The ERB provides for SSP to be payable from day one of sickness absence (removing the current three-day waiting period) and also removes the lower earnings limit for eligibility. Employers will therefore face increased liability for payment of SSP.

The percentage rate will be set at 80% of normal weekly earnings, where 80% of an employee’s normal weekly earnings is less than the flat weekly rate. This means that all employees will be entitled to the flat weekly rate or 80% of their normal weekly earnings, whichever is lower

Farringford Legal’s HR services team can help ensure your employee handbook and all your policies are up to date.

4. It will be harder to ‘fire and rehire’ employees to force through changes to terms and conditions of employment

The ERB doesn’t ban fire and rehire altogether, but it does make it more difficult to do so lawfully.

Dismissals will be unfair where the reason (or principal reason) is that the individual did not agree to an employer’s requested variation of contract. There is, however, a limited exception where the dismissals were intended to mitigate financial difficulties that could impact the employer’s ability to carry on the business.

There is concern that the new rules could apply to any contractual change and that the financial difficulties exception could be a high bar for employers to satisfy. The Employment Lawyers’ Association suggests that a lower bar may be appropriate to support small and medium-sized businesses in times of economic uncertainty.  Alternatively, the exception could be widened to allow for legal, technical or organisational reasons necessitating a change in terms. 

Restrictions on fire and rehire may mean that employers look for other ways to reduce costs, such as holding back on salary increases or making benefits non-contractual. There have also been warnings that employers’ inability to make contractual changes where necessary and appropriate could impact growth and lead to increased redundancies or even business closures.

Farringford Legal’s employment lawyers can assist with drafting employment contracts.

5. New rights in relation to Zero-Hour contracts

Zero-hours contracts will not be banned, but the Government has consulted on the framework for the right to guaranteed hours, subject to a qualifying reference period.  

This will impact many employers, particularly those which operate in sectors that face fluctuations in demand and therefore rely on zero-hours arrangements. The details of which workers will benefit from this right (although these rights will now also extend to agency workers), the reference period to be used and the duration of the guaranteed hours contract are all to be determined.

There is also a new right for individuals on zero-hours contracts to be given reasonable notice of shifts and changes affecting shifts, as well as a right to pay in certain circumstances for cancelled shifts.  

If you’ve read this article check out our Employment Rights Bill – Checklist for SMEs to see what you should be doing to ensure your business is compliant when the rules change. 

Our employment law and HR teams are highly experienced at supporting SMEs to ensure they stay compliant with all new and existing employment legislation. Get in touch to find out how we can help.