The UK Government has released the long-awaited Employment Rights Bill, considered the "biggest shake-up in UK employment law in over 30 years."
This Bill marks a significant step toward fulfilling its promise to overhaul workplace rights and improve pay, impacting both employers and employees. While branded 'pro-worker and pro-business,' some proposed changes have been scaled back, though the remaining reforms are still substantial. Full implementation will require over two years of consultation.
Key highlights include day-one rights, where workers will be protected against unfair dismissal from their first day on the job, benefiting 9 million individuals. Paternity leave and unpaid parental leave will also be available from day one, with an extensive review of parental leave rights promised. The Bill introduces a universal sick pay entitlement starting from the first day of illness, shifting the right from day four. Statutory sick pay will be strengthened by removing the lower earnings limit for all workers, ensuring broader access to support during illness.
Additionally, a statutory probation period for new hires will be implemented, allowing employees to claim for unfair dismissal. A nine-month limit is set for consultation, with implementation planned for autumn 2026. Over 1 million workers on zero-hours contracts will gain the right to guaranteed hours, while those on low-hours contracts can secure a guaranteed-hours contract if they work regular hours over a specified period.
The practice of fire and rehire will be banned except in extreme cases, though exceptions for businesses at risk of collapse may concern unions. New laws will also make flexible working the default "where practical," requiring action plans to address gender pay gaps and support women experiencing menopause. Enhanced protections during pregnancy and after maternity leave will also be introduced.
Finally, the Bill will establish the Fair Work Agency to oversee rights, including holiday pay, and revise the remit of the Low Pay Commission to consider the cost of living when setting the minimum wage. This change will eliminate lower rates for younger workers, resulting in pay increases for many. Union rights remain crucial to the plan, with many commitments to be implemented through alternative means.
Tony Matharu, founder and Chairman of Central London Alliance CIC, remarked on the government's first 100 days, stating, "Understanding the meaning and purpose behind the new government’s messages has not been easy." He questioned whether Chancellor Rachel Reeves included business owners in her broad definition of "working people," especially in light of proposed increases to employers’ national insurance contributions. "Are the 'broadest shoulders' those of business owners and small to medium-sized enterprises, which represent 99.2% of the UK’s business population, expected to bear the increased tax burden?"
Matharu emphasised the need for clarity, asking, "What does Anneliese Dodds (Minister for International Development and Women’s Equalities) mean when she promises a partnership with business? Does this include collaborating with and encouraging business owners who identify as 'working people'?"
He pointed out that many questions need clear answers. "Business owners and risk-taking entrepreneurs require certainty, as vagueness is unhelpful, especially for investors the government aims to attract."
As the Labour Party takes control and focuses on its "national mission for growth," Matharu stressed the importance of supporting central London and its businesses. "The challenges facing global cities like London are significant. To recover sustainably, London needs the right environment and tools to enhance its competitive advantage and remain the best place to live, work, visit, study, and invest."
He concluded that businesses understand how to support, invest in, and retain their workforce better than governments do. "Any governmental impositions should focus on stimulating investment and employment rather than creating naïve and impractical rules that hinder hiring."
