UK Government Publishes Flagship Employment Rights Bill
At a Glance
Today, the UK Government published its much-anticipated Employment Rights Bill, claiming that it has set out a “significant and ambitious agenda to ensure workplace rights are fit for a modern economy, empower working people, and contribute to economic growth.”
The legislation seeks to create a new partnership between business, trade unions and working people—something which the Government has described as fundamental to achieving its economic growth mission.
The Bill contains measures to ban exploitative zero-hour contracts, to end “Fire and Rehire,” and to extend certain day one protections for workers. The measures have been scaled back considerably compared to the original “New Deal for Workers’ Rights,” published by the Labour Party in November 2021.
As its flagship policy, the Government spoke openly about its commitment to introduce the Bill within the first 100 days in office. This means many important questions about how and when individual provisions will be implemented will be dealt with through further consultation, such as during the initial statutory probation period.
A “pro-business and pro-worker approach”
Growing the economy is the Labour Government’s number one mission, as the Prime Minister and Chancellor have told us repeatedly.
They see the Employment Rights Bill as pivotal to achieving this goal and describe it as helping to “deliver economic security and growth to businesses, workers and communities across the UK.” They believe they will create a more productive economy that will drive sustained growth.
But even more than the economic benefits they hope will flow from these measures, Labour politicians see these as landmark reforms to rebalance the workplace. “We’re the LABOUR party, aren’t we?” a Labour MP texted EGA. They think the plans will boost both wages and productivity, proving the party is “pro-business and pro-worker.” In Opposition, senior politicians spent huge amounts of time working with business leaders to build confidence in the party’s plans. They felt they had got to a position where “good employers” were already meeting the standards they would set in the proposals.
The road to this moment has not been without its bumps. The journey from the ambitious language of the original “New Deal for Working People” in November 2021 to this bill has been long. Labour politicians are trade unionists, and it is in the DNA of the party to put working people at the heart of its policymaking. But engagement with business left many of their senior politicians with a very clear understanding of what would happen if the original proposals were enacted. So, over time in Opposition, the tensions between those working most closely with colleagues in the union movement and those who were focused on business and economic policy played out behind the scenes and sometimes in the media.
The revised proposals that went into the manifesto still left strategic ambiguity on key issues like the balance between “Day 1 Rights” and probationary periods. These have been negotiated heavily once in government. Jonathan Reynolds, the Business Secretary, said the Government favored a nine-month probation period but that this would be subject to further consultation. And the so-called “Right to Switch Off” survived only as a code for further consultation. With much engagement still to be done, many of the proposals will not come into force until Autumn 2026.
In the Written Ministerial Statement accompanying the publication of the Bill, the Business Secretary was evidently eager to assure businesses that the Government will continue to “work hand in hand on these changes…in the spirit of partnership.”
This reflects the political tightrope the Government is walking between the desires of trade unions on the one hand and the business community on the other. The Government believes that the Bill strikes the right balance, but this engagement and consultation process means there is still much to be discussed between all stakeholders and policymakers in the coming months. This is no tablet of stone.
What's in the bill?
The bill brings forward 28 individual employment reforms. The key reforms that all businesses should be aware of include:
Day 1 Rights of Employment: The Bill will extend the number of rights that workers have from day 1 of their employment. This includes the right to request to flexible working; extending entitlement to paternity leave, and unpaid parental leave; and extending protection from unfair dismissal, meaning that employers will only be able to dismiss employees if the reason for dismissal is one of the five potentially fair reasons (conduct, capability, redundancy, statutory restriction, or some other substantial reason) and the dismissal for that reason is fair.
Banning Exploitative Zero-Hour Contracts: The Bill will ensure that workers have a right to a contract that reflects the number of hours they regularly work over a defined period. It will also establish a right to a reasonable notice of shifts and payment for shift cancellation and curtailment at short notice for those workers on zero and low hours contracts.
Ending “Fire and Rehire”: The Bill will restrict employers’ ability to use fire and rehire by amending the law on unfair dismissal so that in circumstances where employees are dismissed for failing to agree to a change in their contract of employment, those dismissals will be treated as automatically unfair. This is unless the employer can show evidence of financial difficulty, and that the decision was unavoidable.
Fair Work Agency: A new Single Enforcement Body, known as the Fair Work Agency, will be established to bring together different government enforcement bodies, enforce holiday pay and strengthen statutory sick pay.
Right to Bereavement Leave: The Bill establishes a new right to bereavement leave, enabling employees to take leave from work.
Protection for Pregnant Women and New Mothers: The Bill will amend existing powers so that regulations can be made to ban dismissals of women who are pregnant, on maternity leave, and during a six-month return-to-work period, except in specific circumstances. It will also expand existing powers in relation to adoption leave, shared parental leave, neonatal care leave and bereaved partners’ paternity leave.
Strengthening Statutory Sick Pay: The Bill will remove the lower earnings limit of £123 per week for Statutory Sick Pay.
Trade Union Legislation: The Bill will repeal previous items of trade union legislation, including the Minimum Service Levels (Strikes) Act.
Equality at Work: The Bill will require organizations with 250 or more employees, who are currently required to publish specific gender pay gap data annually, to also publish an equality action plan alongside the disclosure.
What isn't in the bill and next steps
One civil servant who helped draft the Employment Rights Bill described it in conversation with EGA as “a skeleton waiting for the rest of the body to be added in due course.” This was largely due to the need to ensure the Bill was introduced into Parliament within the 100-day deadline the Government imposed upon itself in its election manifesto.
Reforming employment rights is a key tenet of this Government’s agenda, and Ministers have been clear that delivering on the “Make Work Pay Plan” does not stop with the Bill as it is published.
The Government has been clear that the Bill as published sets the direction of travel and that much of the detail will be established via secondary legislation and regulation following further consultation with businesses, trade unions and others.
These consultations will be introduced in two waves. The first will be focused on informing a series of amendments that the Government intends to make to the Bill as it progresses through its legislative journey. These include consultations on the percentage replacement rate for those earning below the current flat rate of Statutory Sick Pay and to ensure provisions on zero-hour contracts are effectively and appropriately applied to agency workers. This first wave is expected to be published imminently, but no date has yet been set.
The second wave, which the Government has suggested will be launched sometime in the second half of 2025, will focus on guiding the secondary legislation and regulations which will be introduced after the Bill has received Royal Assent. This includes consultation on moving towards a single status of worker, what constitutes “low hours,” and how to modernize the legislative framework which underpins our trade unions.
This second wave will also include a consultation on the length of the initial statutory probation period for new hires and how this interacts with the changes being made to unfair dismissal. The Government stated that their preference is nine months but has sought to reassure businesses that they will “consult extensively” on this measure.
The Government has noted that due to the desire to receive “significant input from all stakeholders” through the various consultations, they do not anticipate that the majority of the reforms will take effect until at least 2026, and that the specific changes to unfair dismissal will take effect no sooner than Autumn 2026.
The Second Reading of the Bill has been confirmed for Monday, October 21, so we can expect the Government to provide more information on when businesses can expect the first wave of consultations to be launched.
Reaction
Paul Nowak, TUC General Secretary:
Whether it’s tackling the scourge of zero-hours contracts and fire and rehire, improving access to sick pay and parental leave, or clamping down on exploitation—this Bill highlights the Government’s commitment to upgrade rights and protections for millions.
Driving up employment standards is good for workers, good for business and good for growth. While there is still detail to be worked through, it is time to write a positive new chapter for working people in this country.
Tina McKenzie, Policy Chair, Federation of Small Businesses:
A rushed job, clumsy, chaotic and poorly planned… [day-one rights] will inevitably deter small employers from taking on new people, for fear of facing an employment tribunal simply because a new recruit turns out to be unsuited to the role.
Rain Newton-Smith, Chief Executive, Confederation of British Industry:
The government deserves credit for its willingness to engage with businesses and unions on how to make a success of the Plan to Make Work Pay.
It’s that willingness to work together that can ensure we find the right landing zone and improve living standards by avoiding the unintended consequences that businesses have warned against.
With a number of critical details still subject to consultation, it’s important the government builds on the good engagement to date to ensure we get the detail right on this decisive piece of legislation.
Helen Dickinson, Chief Executive, British Retail Consortium:
Many of the expected provisions, including stopping exploitative contracts and offering flexibility in employment, are things that responsible retailers already do. Introducing these standards for everyone means good employers should be competing on a level playing field. We look forward to engaging the government on the details, including around seasonal hiring and the use of probation periods.
Kate Nicholls, Chief Executive, UKHospitality:
I’m pleased the Government has recognized the importance of flexibility to both workers and businesses. This is crucial for hospitality, which employs 3.5m people and provides countless flexible roles for working parents, students, carers and many more.
We look forward to continuing our engagement and consultation with the Government on its plans, which are not without cost, to get the details right for all parties.
Materials presented by Edelman Global Advisory London. For additional information, reach out to Mohammed.Hussein@EdelmanEGA.com
