The UK government is moving forward with significant changes to the Employment Rights Bill, which will reshape several key aspects of employee rights in the coming years.
With provisions aiming to improve working conditions and protect workers, these changes will have a far-reaching impact on businesses as we discuss here. The government announced earlier this month that amendments will be made to the Bill following consultation and responses from business groups. The amendments are made with the aim of demonstrating the government’s commitment to make significant changes to employment law “in partnership with businesses”.
As employers look ahead to the anticipated 2025 and 2026 implementation dates with some significant changes on the horizon, it’s crucial to understand the implications and prepare accordingly.
- Zero hours contract measures to apply to agency workers The changes proposed to end exploitative zero hours contracts and provide individuals with contracts which reflect the hours they actually are now being proposed to extend to agency workers. Employers will need to review both their zero hours workers as well as any agency staff in order to ensure appropriate contractual changes are in place in good time prior to this amendment coming into effect.
- Statutory Sick Pay (SSP) as a Day One Right Under the new reforms, employees will be entitled to Statutory Sick Pay (SSP) from their very first day of employment, rather than having to wait for the usual three-day waiting period. This shift is expected to have a notable impact on small and medium-sized businesses, in particular, that may not have been providing SSP from day one previously. Employers will need to ensure they are ready to implement this change into their payroll processes and will need to update their sick pay provisions accordingly.
- Increased Penalties for Collective Consultation Failures Employers will now face significantly higher penalties if they fail to comply with legal requirements for collective consultation. This includes the mandatory consultation process when proposing redundancies. The protective award will increase from the current 90 days to 180 days pay. The aim of the increase is to encourage greater compliance, but for employers, this means it’s critical to ensure proper consultation procedures are followed to avoid costly fines.
- Tackling concerns with non-compliance for umbrella companies The aim is to strengthen the regulation of umbrella companies so workers are afforded comparable rights with those they would have been provided with when taken on directly by the recruitment agency.
Why Employers Should Act Now
As these changes will be taking effect in a staged way in 2025 and 2026, once Royal Assent is granted (anticipated to occur in July 2025), employers must ensure they are fully compliant to avoid penalties and legal risks. One of the most proactive steps businesses can take is to review employee contracts and handbooks to reflect the new laws. Here’s why:
- Updating Contracts: With the extension of rights for agency workers and the shift to day-one SSP, employers need to update their contracts to clarify terms around sick leave, benefits, and working conditions.
- Training & Awareness: Ensure that your HR teams, managers and payroll staff are trained on the new rules to avoid costly mistakes. Increased penalties for collective consultation failures could lead to significant financial liabilities if employers are not fully aware of their obligations.
- Ensuring Compliance: Start preparing now to avoid a last-minute rush when the laws come into effect. By reviewing your policies today, you can mitigate any risks of non-compliance and ensure that you are ahead of the curve.
The Employment Team at Law 365 offer a free review of your contract and handbook in order to provide you with tailored advice on how you can prepare for the upcoming changes.
Book your slot with our legal expert here.
The legal position in this article is correct at the time of publication in March 2025.
