Employment Rights Bill passes in the Lords

Update: Following agreement by both Houses on the text of the bill it received Royal Assent on 18 December. The bill is now an Act of Parliament (law).

Following a compromise agreed with six leading organisations, including the CIPD, the Employment Rights Bill has passed through parliament and now become law as the Employment Rights Act 2025

Having a direct operational impact on HR professionals and businesses, the legislation will balance worker protections with business sustainability, providing employers sufficient time to prepare for changes.

Prime Minister Sir Keir Starmer proclaimed that the development marks a major victory for working people in every part of the country.

Starmer stated: “We have just introduced the biggest upgrade to workers’ rights in a generation.

 “Today our plans passed through parliament, and will soon become law.”

Progressing new worker laws

It’s worth noting that most of the bill’s measures will require further consultation and secondary legislation.

As such, implementation will occur in phases, with final measures concluding in 2027.

Additionally, the bill will apply to England, Scotland and Wales, but not Northern Ireland.

Northern Ireland is in the pre-legislative phase of developing its own ‘Good Jobs’ Employment Rights Bill.

Unite Union’s General Secretary Sharon Graham commented: “Labour need now to stop being embarrassed by these new laws for workers.

“The bill had already been watered down far too much, not least the failure to ban fire and rehire and zero hours contracts.”

What does this mean for businesses?

The Employment Rights Act 2025 will introduce 28 major employment reforms that aim to modernise the workplace, improve job security and strengthen protections for workers.

This marks the most significant overhaul of UK employment law in decades.

However, some reforms have been scaled back or delayed, leaving questions about their practical implementation.

Here are some of the key changes and what they mean for your business:

Unfair dismissal

Initially, the bill proposed giving workers the right to claim unfair dismissal from day one, replacing the current two-year qualifying period.

Following opposition, this has been revised to six months, effective from early 2027.

The bill removes the compensation cap for financial loss in unfair dismissal cases in its entirety.

Zero-hours contracts

Under the new rules, zero-hours workers who qualify will have the right to request a guaranteed-hours contract.

To qualify, workers’ hours need to exceed the guaranteed minimum over a set reference period, which is anticipated to be 12-weeks, unless an exemption applies.

Those who prefer the flexibility of zero-hours contracts can retain them.

Employers will also need to provide reasonable notice of shifts and compensate workers for cancelled or shortened shifts.

Flexible working

Flexible working will become the norm, rather than an exception.

Employers can only refuse a request where it is reasonable to do so, on the grounds of one or more of the eight business reasons already set out in primary legislation, such as additional costs or impact on customer demands.

However, the grounds for refusal remain broad and the consultation process unclear, raising doubts about how much will change in practice.

Statutory Sick Pay (SSP)

The waiting period and earnings threshold for Statutory Sick Pay (SSP) will be scrapped, meaning employees will no longer need to wait until the fourth day to claim sick pay.

Additionally, the Lower Earnings Limit (LEL) threshold will be abolished, making SSP accessible to more employees. 

Parental and Bereavement Leave

Unpaid parental leave will become a right from day one of employment, removing the current one-year qualifying period.

The bill will also establish an entitlement to bereavement leave.

This will be a day one right to ‘protected time off’ for employees to grieve the loss of a loved one, with the entitlement to be set out in secondary legislation.

Fire and rehire

The bill will largely ban fire-and-rehire practices, where employers dismiss workers and rehire them on worse terms.

Exceptions will apply if a company faces insolvency.

Preparing for the Employment Rights Bill

The Employment Rights Bill introduces significant changes that will impact both employers and employees.

Preparing for these reforms is crucial to ensure compliance.

At IRIS, we’re here to support you every step of the way, providing the tools and guidance you need to navigate these changes with confidence.