In-depth: A look into the latest Employment Rights Bill updates

As it continues on its journey to becoming law, our team of experts take an in-depth look into the latest Employment Rights Bill updates.

The House of Lords are in the process of reviewing the bill as we speak, so we will of course provide the latest information as soon as possible in the event that anything changes.

Introduced to Parliament in October 2024, the bill forms the government’s first step to implementing its ‘Plan to Make Work Pay’.

There has been plenty of commentary since then discussing the ‘revolutionary’ proposals it contained, as well as a lot of guesswork as to when the bill would be implemented and what businesses should be doing to prepare.

Since the autumn, the bill has been making its way through Parliament to become law, with a number of changes along the way. Let’s take a look at where we are today before the summer recess, and where things are likely heading in the forthcoming months.

The ‘day-one’ right to claim unfair dismissal

Amendments have recently been made to unfair dismissal and qualifying periods. These have introduced new provisions for an initial period of employment after the qualifying period, during which a modified process and a different compensation limit would apply (to be set out in further regulations).

One of the proposed amendments to claim unfair dismissal is to add a reduced qualifying period of six months instead of it being a day-one right, with a simplified process and lower compensation cap applying once that period is over.

It is proposed that, if this amendment took effect, it would balance the need to increase protection to workers with the need of small-medium businesses (predominantly) to be able to hire with the knowledge that they can dismiss if someone has not worked out in the role for one reason or another. As part of the amendment, there was a removal of the government’s proposed inclusion to allow it to change the ‘fair’ reasons which currently apply to dismissal. These include:

• redundancy
• capability
• misconduct
• statutory restriction
• other substantial reason.

Considerable criticism has been aimed at the government for what some believe is a failure to grasp that, when businesses have flexibility, they are more likely to employ new staff, and that the day-one right to claim unfair dismissal would hamper the flexibility of a business to take risks. This could, consequently, disadvantage the very groups that the government hope to protect – such as returning parents, those returning from illness, and students – all whilst making the recruitment process riskier for businesses.

The statutory probationary period – which the government seems to have settled on – is nine months.

The provisions around what an employer can do in this time have been criticised for lacking clarity on how and when an employer can dismiss during this period. In its current form, the bill doesn’t explain how the statutory probationary period interacts with the general duty on employers to act fairly and reasonably when dismissing. It is unclear as to whether the current fair reasons would apply to this probationary period, or if another list of reasons would apply should an employer want to dismiss during those nine months.

It is also unclear as to whether an employer will be able to extend the probationary period if performance takes longer to assess. In the government’s planned roadmap for the implementation of the bill, it states that the measures around giving employees protection from unfair dismissal from day one – including the dismissal process in the statutory probationary period – will be consulted on in “summer/autumn 2025”. We will have to watch this space to see if the government accepts the changes made by the House of Lords, and whether it stays with the nine months as the new statutory probationary period.

The Fair Work Agency

The bill’s amendments surrounding the creation of a new ‘fair work agency’ have also been criticised for their lack of detail – specifically regarding the controls that will be in place to protect businesses from the acts of the new agency, which many have interpreted from the bill as being rather arbitrary in nature.

The measures relating to the Fair Work Agency being established will come into force in April 2026.

Trade unions

Another criticism has been towards the increase in trade union powers that the amended bill proposes.

The government’s rationale behind the increase in trade union powers is that it would improve trade relations between business and employees, however many see the new changes as creating unnecessary burden and risk to businesses – especially small and medium sized businesses in the private sector.

What will be consulted on this autumn involves the package of trade union measures, including electronic balloting and workplace balloting, the duty to inform workers of the right to join a trade union, and a right of access for trade unions.

The new rights and protections for trade union representatives will be covered by an ACAS Code of Practice consultation.

On the measures, a recent debate at the House of Lords remarked that – contrary to the government’s stance that granting of trade unions a statutory right of access to workplaces to promote membership would improve industrial relations – there was a risk that they could cause unnecessary friction in the employer-employee relationship, potentially escalating tensions and leading to more employment tribunal claims.

We will have to see how the consultation process goes and whether the current proposed changes will remain!

Fire & rehire

‘Fire and rehire’ will also be consulted on this autumn. This is the practice of firing an employee and re-engaging them on (usually) less favourable terms.

Given the publicity and public outrage caused by the P&O Ferries case – where approximately 800 staff were dismissed without any warning – the need for stronger protections for workers from the practice of arbitrarily firing employees was required.

The bill states that the practice of fire and rehire will amount to an automatic unfair dismissal, unless the business is in severe financial difficulty, and where changes to the contract are made for ‘restricted’ reasons. These reasons could include variations in pay, number of hours, leave entitlement and changes in shift patterns.

Following criticism that the provisions in this area didn’t allow businesses flexibility where it was genuinely required, a new amendment to the bill has been proposed. The new provision states that a dismissal of an employee caused by an employer needing to change the place of work would amount to a redundancy situation and would no longer amount to an automatic unfair dismissal. However, a word of caution – whilst changing the location where an employee works is a non-restricted variation (ie. an employer can vary a contract of employment for this reason), an employer will still need to dismiss an employee fairly, and there will be enhanced protections to ensure that employers meaningfully consult and negotiate with employees before dismissing them in a fair manner.

The practice of fire and rehire will be narrowed to cases where businesses or local authorities are in severe financial difficulty and where it is the last resort. The government stressed that businesses would still be able to restructure their businesses and replace employees with non-employees where there is a reduced business need for a particular type of work. This would assist businesses looking to move to seasonal work models where there was a business need, if it was experiencing severe financial difficulties for example.

The measures on fire and rehire are likely to come into effect in October 2026 after consultation this autumn. The government plans to issue further guidance on this area in a code of practice.

Guaranteed hours & zero-hours contracts

Another big discussion was around guaranteed hours and zero-hours contracts.

The bill includes the right for qualifying workers to be offered guaranteed hours – part of the government’s ‘Plan to Make Work Pay’ initiative to bring certainty to the workplace and workers.

A proposed amendment to the existing bill is the insertion of “if requested by an employee” at the front of the provision, placing the onus on an employee to ask for guaranteed hours instead of entirely on the employer having to provide them.

The new insertion refers to ‘employee’ and, if it was accepted, would inevitably narrow the scope so ‘workers’ wouldn’t fall within the definition. The existing provisions in the bill refer to “qualifying worker,” which is defined as ‘workers and employees’ who worked under a contract or a zero-hours arrangement.

The existing provisions in the bill do not explain or set out how the request should be made by the employee, whether it needs to be in writing or not. The current provisions allow the guaranteed hours offers to take the form of ‘an offer to enter into a limited term contract’ where it is reasonable to do so. A ‘reasonable event’ would be where a qualified worker was needed only until the end of an event or for a limited duration. This seemingly captures seasonal work and potentially remedies the wide-scale concerns about previous provisions in the bill not being business-friendly for those operating on a seasonal model.

Whistleblowing

One of the amendments which passed in a recent reading of the bill was related to the legislation on protected disclosures, commonly known as ‘whistleblowing’.

The amendment requires the government to introduce regulations within six months of the bill becoming law to ‘extend the circumstances in which an employee is considered unfairly dismissed after making a protected disclosure’ and will require ‘employers – with more than 50 employees, excess of £10 million turnover and in financial services or other “vulnerabilities in other respects to money laundering or terrorist financing” – to take reasonable steps to investigate any disclosure made to them under section 43C of the Employment Rights Act 1996’.

A further proposed amendment relates to the introduction of the ‘Office of the Whistleblower’, aiming to protect those relevant, oversee whistleblowing processes and enforce compliance with reporting standards. If this amendment proceeds, dismissed whistleblowers would be able to refer their cases to the Office of the Whistleblower for review.

The amendments also expand the definition of protected disclosures to cover various public interest concerns, including criminal offences and mismanagement of public funds. This is largely already covered by the existing legislation where a qualifying disclosure is defined as the disclosure of information that is in the reasonable belief of a worker, purporting to show that a criminal offence has been committed, is being committed or is likely to be committed.

Propositions to the whistleblowing legislation seem to be driven by the publishing of Grant Thornton’s review of the existing whistleblower framework on 14 July, which proposed the creation of a central body for whistleblowing and efforts to improve the effectiveness, as well as consideration of disincentives and incentives, to name a few of the suggestions for change published in the review. It will be interesting to see how many of these amendments become law!

AI in the workplace

With the threat of AI potentially replacing between one and three million UK jobs, as well as the current lack of AI education, the government are considering regulating the use of AI in the workplace.

Organisations including the Trades Union Congress and Future of Work have called for the need for regulation to help avoid certain events, such as the performance of AI recruitment algorithms that results in race and sex discrimination – an example that has already taken place.

A new insertion was recommended to stress the importance for more regulation of the use of AI in the workplace, which will require – if implemented – the completion of workplace AI risk and impact assessments (WAIRIA). Businesses would have to complete these before the implementation or development of AI systems, if those systems would pose a potential significant risk or impact on:

• the identification or exercise of any rights
• recruitment
• work access or allocation
• remuneration or benefits
• contractual status
• terms or conditions
• mental, physical or psychosocial health.

A process for the business to establish these potential risks would also need to be introduced.

If these measures are implemented, employers will need to review WAIRIAs every year, whenever substantial changes are made to the AI system or when evidence emerges of unforeseen risks or impacts.

The government will require the Fair Work Agency to issue guidance on the conduct of disclosure and enforcement of WAIRIAS’s within six months of this measure being implemented.

In terms of regulation, there was discussion on having an employment/recruitment regulator and/or AI officers across various industries that would be held responsible for the deployment and development of AI in their sector. Whilst the government want a domain-specific approach to AI, there was call for a consistent approach to the treatment of the challenges and opportunities of using artificial intelligence and potentially seeking informed consent from workers before their data can be used by the technology.

The area of non-compete agreements was raised and their impact on innovation, competition and the free flow of ideas that exist in fast-growing AI enterprises. These discussions could lead to some potentially interesting amendments if these were implemented by the government.

Other discussion points included:

• an amendment to allow employees to opt out of collective agreements
• an amendment to require the government to conduct and publish a review of the impact of pay inequality in large enterprises
• the exclusion of small businesses with less than 50 employees from the requirement to provide employees with a written statement that the worker has the right to join a trade union, and the exclusion of small business with less than 50 employees from access by trade unions.

These are just some of the most newsworthy points. As previously stated, it is possible that changes can occur given that discussions continue in the House of Lords – we will update where necessary as soon as we possibly can if required.

Stay tuned for more updates as and when we have them in the next few weeks/months when consultation on the key provisions will commence.

If you and your business require expert guidance on anything discussed in this article, please do not hesitate to get in touch with our team – we will be happy to help.

Our Legal 500-rated employment law & business immigration team are experts in guiding businesses of all sizes and backgrounds through a range of issues that may arise.