The Employment Rights Bill cleared Parliament on Tuesday, 16th December, heading for Royal Assent before year-end. This represents the biggest shake-up to UK employment law in decades.
After months of debate between the Commons and Lords, the final version balances business concerns with union demands. Implementation is phased through to 2027, giving you time to prepare.
Here’s what’s changing and when you need to act.
Six-month unfair dismissal rule
The government dropped its “day one” protection pledge. Following negotiations between Ministers, unions and business representatives, the compromise landed at six months – down from the current two years.
This will increase tribunal claims, but it’s more manageable than the original proposal.
What this means for you:
You can still dismiss during the first six months if you follow fair procedures. After six months, dismissed employees can challenge you at tribunal. Clear probation policies, documented performance conversations and proper disciplinary processes become essential – not optional.
The bigger issue: the compensation cap is gone. Currently capped at the lower of 52 weeks’ pay or approximately £118,000, awards could climb significantly higher. High earners and pension loss cases could cost substantially more.
Getting dismissals wrong now carries higher financial risk. Employees gain stronger negotiating positions in settlements. We’ll be tracking how tribunals apply this in practice.
Zero-hours contract reforms
If you employ people on zero-hours or low-hours contracts, changes arrive in 2027. After a reference period (expected to be 12 weeks), you’ll need to offer contracts reflecting average hours worked.
Key points:
Workers can decline and stay on flexible terms. This recognises that flexibility genuinely works for many – students, carers, portfolio workers.
Agency workers are covered. Agencies handle payments but can recover costs from end hirers.
Seasonal work exemptions are being consulted on this autumn. If you’re in hospitality, retail, events or agriculture, pay close attention as regulations develop.
Shift cancellations get new protections. Reasonable notice becomes mandatory, with compensation for short-notice changes. “Short notice” is expected to land around 48 hours.
Trade Union Changes
Trade unions gain workplace access rights for recruitment and bargaining – both physical and digital.
Your obligations:
Respond within five working days to union requests. Unresolved issues go to the Central Arbitration Committee (CAC). Small businesses (under 21 workers) may get exemptions, but larger organisations face new requirements.
Recognition becomes easier. The 40% ballot support requirement is removed. The government can lower union membership thresholds to as low as 2% through regulations.
Political fund contributions revert to opt-out. Union members contribute unless they actively decline.
Union organising may become more visible in your workplace. View it as insight into workforce priorities, not confrontation.
Implementation Timeline
Soon after Royal Assent:
- Trade union reforms
- Repealing restrictive strike legislation
April 2026:
- Day one statutory sick pay
- Day one paternity leave
- Fair Work Agency establishment
2027:
- Zero-hours contract reforms
- Guaranteed hours provisions
Detailed regulations follow consultations through 2025-26.
What employers should do now
Don’t wait. Start preparing now.
- Review recruitment and onboarding: Probation periods need strengthening. Build in clear objectives, regular reviews, documented feedback throughout. Six months isn’t long to identify and address problems properly.
- Update employment contracts: Most reference two-year qualifying periods. These need changing. Zero-hours contracts need reviewing against 2027 requirements.
- Train managers: Documentation matters more than ever. Fair process, performance management from day one, consistency across teams. Ensure managers understand the stakes.
- Check disciplinary procedures: Are they current? Do managers actually follow them? Without a compensation cap, procedural failures cost significantly more.
- Review flexible working arrangements: Guaranteed hours represent a shift in employment philosophy. Check whether current arrangements work for both business and workforce.
- Model financial impact: For zero-hours users, calculate potential costs under guaranteed hours. Run scenarios. Adjust workforce budgets accordingly.
Other important changes
The Bill includes additional reforms worth noting:
- Day one rights: Statutory sick pay and paternity leave from April 2026. This changes absence management and parental leave planning immediately.
- Fair Work Agency: A new enforcement body launches in 2026, replacing existing structures. Expect more proactive workplace compliance checks.
- Fire and rehire: Effectively banned except in limited circumstances. Restructuring conversations need different approaches.
- Collective redundancy: Consultation thresholds and protective award periods are changing. Review large-scale redundancy planning processes now.
- ACAS Early Conciliation: The conciliation period doubled from six weeks to 12 weeks on 1 December 2025. This allows more time for settlement before tribunal claims, but extends uncertainty for employers.
We’re offering comprehensive HR audits tailored to these changes.
Our employment team provides:
- Employment contract reviews and compliance updates
- Probation and performance management procedure assessments
- Flexible working, zero-hours and agency worker policy audits
- Manager training on documentation, fair dismissal and performance management
- Union engagement strategy development
- Guaranteed hours impact modelling on workforce costs
We focus on practical, business-focused advice. Not just legal compliance, but solutions that work for your organisation.
Why act now?
Changes arrive in waves through 2027. Early preparation gives you options and reduces risk. Reactive compliance typically costs more – both financially and operationally.
The six-month dismissal rule affects hiring decisions as soon as it takes effect. Get procedures right beforehand, not after your first tribunal claim.
Looking ahead
The Employment Rights Bill represents fundamental change to the employment relationship. While parliamentary debate scaled back some controversial elements, the reforms still significantly expand employee rights.
Detailed regulations and guidance will emerge through 2025-26 consultations. Areas requiring clarification include:
- Precise definitions of “low-hours contracts” and seasonal work exemptions
- Specific mechanics of guaranteed hours calculations and offers
- Details of shift notice requirements and compensation levels
- Fair Work Agency powers and enforcement approach
- Union access protocols and dispute resolution processes
We’ll keep you updated as these details emerge. The key is starting preparation now rather than waiting for final regulations.
How can we help?
Laura Kearsley is a Partner in our Employment Law team. Laura has a strong reputation in all aspects of employment law, including Employment Tribunal litigation, discipline and grievance issues, and unfair and constructive unfair dismissal claims.
The Employment Rights Bill reshapes employment law fundamentally. With proper preparation, businesses can adapt successfully.
If you’re concerned about how these reforms affect your organisation, or want to discuss our HR audit service, contact our employment team. We’ll help you navigate these changes effectively, ensuring compliance while maintaining operational flexibility.
Contact Nelsons’ employment team on 0800 024 1976 or via our online enquiry form for practical advice on preparing for the Employment Rights Bill.
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