The government has introduced its landmark Employment Rights Bill to parliament in a bid to “upgrade” what deputy prime minister Angela Rayner called “the UK’s out-of-date employment laws”.
Most of the reforms in the bill were trailed beforehand in Labour’s Make Work Pay mini manifesto, and commentators have frequently said that the devil will be in the detail as the government plans to consult widely.
Stakeholder consultations are expected to begin in 2025, and the government anticipates that the majority of reforms will take effect no earlier than 2026.
What’s in the bill?
Unfair dismissal rights
The bill, touted as “pro-business, pro-worker”, includes the much debated right to protection from unfair dismissal from day one.
Currently, employees must complete a two-year qualifying period before they are eligible for protection from unfair dismissal.
While this qualifying period will be removed, the government also plans to consult on a new statutory probation period that would give employers “fair and proportionate processes for dismissal” if a new hire was found to be unsuitable.
The government said that reforms of unfair dismissal will take effect no sooner than autumn 2026.
Default flexible working
Further day one rights include entitlement to paternity leave, unpaid parental leave, bereavement leave, and flexible working as the default option.
The government said it would change the law “to make flexible working the default for all, unless the employer can prove it’s unreasonable”.
What constitutes “unreasonable” will be the subject of intense scrutiny during consultation.
But Jane van Zyl, CEO at Working Families, said: “Establishing workplace rights from day one and making flexible working the default could be the key to unlocking labour market mobility, with the promise of getting the economy moving and ensuring parents and carers are not held back in their careers.”
She added that it sends the message that “worker’s rights matter”, and that the government’s willingness to address inequalities “is very promising”.
Pay setting
The bill will tackle low pay by accounting for the cost of living when setting the minimum wage and remove discriminatory age bands.
Nye Cominetti, principal economist at the Resolution Foundation, said: “The introduction and ramping up of the minimum wage have boosted the hourly pay of low earners, but wider concerns about job security have been left unresolved for far too long. The government’s Employment Rights Bill is set to address these concerns head on, and marks a major step forward in the working conditions of low earners across Britain.
“There are inevitably trade-offs and compromises involved in introducing new rights, so the government will need to strike a sensible balance between boosting job security and maintaining labour market flexibility as it consults on the detail of these measures.”
Sick pay extended
More workers will become eligible for statutory sick pay from day one of sickness as the bill removes the lower earnings limit and entitles people to pay from day one of sickness rather than waiting three days for it to kick in.
The bill bans exploitative zero-hours contracts, ends fire and rehire practices by closing legal loopholes, and strengthens legal provisions around collective redundancy.
It increases protection from sexual harassment at work, introduces gender and menopause action plans and strengthens rights for pregnant workers and people on maternity leave and those within six months of returning to work.
Under the bill, a new Fair Work Agency will be created to link different government enforcement bodies, enforce holiday pay for the first time and strengthen statutory sick pay. The idea is that this agency will be “a stronger, recognisable single organisation that people know where to go for help”, the government said. It will also provide improved support for employers who want to comply with the law.
Trade union laws
Laws that govern trade union activity will be modernised under the bill. This includes the repeal of “anti-union legislation put in place by the previous administration”, such as the Minimum Service Levels (Strikes) Act.
Employment rights minister Justin Madders said: “We know that most employers proudly treat their staff well. However, for decades as the world of work has changed, employment rights have failed to keep pace, with an increase in one-sided flexibility slowing the potential for growth in the economy.
“The steps we’re taking today will finally right these wrongs, working in partnership with business and unions to kickstart economic growth that will benefit them, their workers and local communities.”
Further changes in the bill include the introduction of a Fair Pay Agreement in adult social care to improve pay and conditions in the sector.
Next steps
In a policy paper titled ‘Next Steps to Make Work Pay’, published alongside the bill, the government said it would publish a limited number of targeted consultations that would help to inform the next steps.
“We will consult on what the percentage replacement rate for those earning below the current flat rate of statutory sick pay should be, and will bring this change forward through a government amendment to the bill during its passage,” the document said.
“We will also consult to ensure the bill’s provisions on zero hours contracts are effectively and appropriately applied to agency workers, as well as on reforms to modernise and update trade union laws so they are fit for the modern economy, with the potential to inform further amendments during the bill’s passage.”
The paper also said: “As is typical with employment legislation, further detail on many of the policies in the bill will be provided through regulations, and in some cases codes of practice, after Royal Assent. This government understands that adjusting to these new reforms will take time and is committed to ensuring that all stakeholders receive appropriate time to prepare for these changes.”
Employers respond
Simon Roberts, chief executive of Sainsbury’s, said: “As one of the UK’s largest employers we put our colleagues at the heart of everything we do. We see the clear link between engaged, motivated colleagues and business performance and that is why we have increased colleague pay by over 50 percent in the last five years.
“We share the government’s vision of making work pay, enabling growth and driving productivity. We welcome today’s announcement and government engagement with business to date and look forward to seeing progress on business rates reform, which would deliver real benefits for our colleagues, customers and communities.”
‘Good work for longer’
Sara Thompson, chief people officer at Phoenix Group, said: “To achieve economic growth, we need a strong labour market and it is encouraging to see a clear recognition of the importance of people remaining in good work for longer.
She welcomed the bill’s improved flexible working arrangements and a review of carers leave to support a more diverse and inclusive workforce, and said her organisation was looking forward to a detailed engagement and consultation process to make good longer working lives a reality for everyone.
“At Phoenix Group, the UK’s largest long-term savings and retirement business, we recognise that high rates of economic inactivity among people over 50 risk jeopardising their financial security in retirement. Addressing the barriers that people face to find and remain in good work for longer is a central commitment of ours and we share the government’s ambition to deliver economic growth.
“The benefits of a more inclusive and sustainable labour market for the economy and businesses are clear, but the impact on individuals is just as significant, with more responsibility for their financial futures placed on them.
“The way that people work and how long they work for is undergoing rapid transformation and the only way to achieve good work is with government and businesses collaborating.”
‘Greatest legislative update in decades’
Peter Cheese, chief executive of the CIPD, said: “The changes being proposed represent the greatest update in employment legislation in decades. We’re pleased to see the ongoing commitment from government to engage with the business community to work through the important details to ensure they have a positive impact for both employers and workers.”
Delivering economic growth
Shirine Khoury-Haq, CEO of the Co-op, said: “As the UK’s largest consumer co-operative, Co-op has long supported colleagues to have good working lives, with policies like our leading bereavement leave, day one right to request flexible working arrangements, and menopause support already in place. The positive impact of these policies is clear to see.
“Being able to support colleagues when they need it, and in particular women, parents and carers, helps retain valuable talent and makes good business sense. We look forward to continuing to work with government to make work pay and to deliver economic growth.”
