Employment Rights Bill: The Latest Developments

There has been a recent flurry of activity on the Employment Rights Bill, which will now make its way through the House of Lords.

After a short lull, there has been a recent flurry of activity on the Employment Rights Bill (ERB), which has completed its stages in the House of Commons and is now going through the House of Lords before it becomes law.

In this article, we provide the key developments of which employers need to be aware.

Further detail on the ERB and other employment reforms are available on our reform hub.

Speed read

On 4 March 2025, the Government announced that amendments to the ERB will be published to take responses By way of reminder, the ERB was introduced in October 2024 and has been making its way through the legislative process. At the same time, targeted consultations took place on some details of reforms in the ERB. On 4 March 2025, the Government published its response to those consultations (see here), which have led to amendments being made to the ERB, in addition to some new reforms that have been included.

Consequently, the ERB has now nearly doubled in size from 158 pages when it was introduced to 310 pages!  

Key recent changes to the ERB include:  

• Changes to collective redundancy consultation, including (a) dropping the proposed plan to remove the ‘at one establishment’ test and creating, in addition to the current threshold trigger for collective consultation obligations, a new separate threshold trigger (details to be set out in regulations) where redundancies are proposed across the business; and (b) doubling the maximum protective award for failure to collectively consult to 180 days.
• Increasing enforcement powers of the new enforcement body, or ‘Fair Work Agency’ (FWA), including the power to issue notices of underpayment and to bring proceedings on behalf of a worker to the employment tribunal.
• Introducing a new duty on employers to keep records relating to certain obligations in respect of annual leave and pay under the Working Time Regulations 1998.
• In respect of the new rules on zero-hours contracts; extending the rights to a guaranteed hours offer and reasonable notice of shifts to agency workers etc, including that, the obligation to make a guaranteed hours offer will be the responsibility of the hirer.
• Create a new definition of ‘umbrella companies’ to allow for their regulation.
• Multiple changes to trade union legislation, including extending the new rights of access to include digital access.
• Changes to the rate of Statutory Sick Pay (SSP) payable to employees.

At the time of writing, and despite rumours, there has been no further detail on probationary periods for day one unfair dismissal rights in the amendments to the ERB, nor has there been explicit clarification that the ‘right to switch off’ has been dropped.

We set out below in more detail the key Government amendments to the ERB and the Government’s responses to the consultations by reform area.

Key developments

1. Unfair dismissal

One of the most significant reforms in the ERB is making ordinary unfair dismissal a ‘day one right’, with no requirement to have two years’ service as is currently the case. The ERB permits employers to implement probation periods, called the “initial period of employment,” with the Government previously indicating it would be introducing a new ‘lighter-touch’ process for certain qualifying dismissals during this initial period.

There had been rumours recently that the changes being published to the ERB on 5 March 2025 would include details of this ‘lighter touch’ process and that the initial period of employment would be set at nine months. However, this was not included in the ERB amendments and although mentioned in an industry quote included in the Government’s press release of the amendments, details have not been made public. Previous Government statements indicated that it would consult on these details –we will continue to monitor any developments.

2. Collective redundancy consultation

Currently, collective redundancy consultation (and the requirement to give advance notice to the Government via a form HR1) is triggered where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. One of the biggest changes in the original draft of the ERB was the proposal to remove the ‘at one establishment’ component from the trigger, meaning that the threshold to trigger such obligations would be assessed by looking at the number of proposed dismissals across the employer as a whole.  This proposal had been criticised by business groups including on the basis that it would be difficult for employers to manage in practice, as employers would need to keep track of unrelated redundancies across different sites and collective consultation requirements would be triggered more frequently.

In response to this, the Government has made some changes to the ERB in perhaps the only concession to employers. Under the new proposals, collective redundancy consultation obligations will be triggered when an employer is proposing to dismiss as redundant within a period of 90 days or less either:

• 20 or more employees at one establishment (as is currently the case); or
• at least the threshold number of employees (what that threshold is will be set out in regulations) – this will likely be a threshold that applies across the business as a whole.

We do not yet know what this new alternative threshold number of employee dismissals will be. This could be set at either a specified number or a specified percentage of employees or a number that is the highest or lowest of two or more numbers, however it must not be lower than 20 employees. The Government’s intention is seemingly that where redundancies are proposed across an employer at more than one establishment, then this threshold will be higher than redundancies proposed at one establishment.

Additional amendments have also been made, for example to clarify that the employer is not required to consult all the appropriate representatives together or undertake collective consultation with a view to reaching the same agreement with all of the appropriate representatives. This is being introduced to try to alleviate concerns from employers about how to manage their collective consultation obligations with representatives when they are making unrelated redundancies across multiple sites.

Remedies

Another significant change introduced to the ERB is that the maximum protective award that an employment tribunal could make if an employer fails to comply with its collective consultation obligations will be doubled to 180 days gross pay per affected employee (currently 90 days). The rationale behind this increase is to deter employers from non-compliance with the obligations and from ‘buying out’ the claims.

The Government has confirmed that it will not be taking forward its proposal to introduce interim relief for employees who bring claims for the protective award. It seems multiple responses were concerned that this would put increased pressure on employment tribunals, employees, and employers.

Other developments

In recognition of the complexity of the collective redundancy regime, including when the obligations are triggered, the Government has promised to issue further guidance for employers on consultation processes for collective redundancies.

The Government also intends to gather further views on strengthening the collective redundancy framework in 2025, so there may be more change to come.

Some of these amendments may be welcomed by employers, depending of course on where the new additional threshold is set for triggering collective consultation where redundancies span different establishments. Detailed guidance will also be welcomed, provided it gives employers useful assistance in assessing when the collective redundancy consultation obligations are triggered. Such guidance will be important to assuage employers’ concerns that they will not be excessively penalised with increased protective awards for only inadvertent or minor breaches.

3. Enforcement (updated 24.04.25)

The amendments to the ERB introduce significant new powers to the Secretary of State, which will likely be exercised by or delegated to the FWA once established, including powers to:

• Issue notices of underpayment to liable parties, including employers that owe sums to an individual under a statutory pay provision (similar to the existing national minimum wage enforcement powers of HMRC):
  • The notice of underpayment will require the employer to pay the underpayment sum specified to the individual within 28 days.
  • The underpayment must relate to sums due under certain statutory pay provisions, such as the national minimum wage, statutory sick pay, unpaid tribunal awards, and, perhaps most notably, holiday pay (although the amendments also include powers to exclude or add to this). The inclusion of holiday pay could have potentially significant cost implications for employers who have miscalculated holiday pay (particularly given that holiday pay is notoriously complex for certain types of workers) or have misclassified workers or employees as self-employed contractors and have therefore failed to pay holiday pay.
  • A penalty, to go into the Government’s Consolidated Fund, of 200% of the payable sum (up to a maximum of £20,000 per individual) will also be applied and will be payable within 28 days. Early payment is incentivised as the penalty can be reduced in such circumstances.
• Bring proceedings in the employment tribunal on a worker’s behalf where it appears that a worker is not going to bring those proceedings. The ERB also introduces powers for the Secretary of State to provide or arrange for legal advice, legal representation, or assistance to someone party to any proceedings that are related to “employment, trade union or labour relations law”. Where such assistance has been provided and that person becomes entitled to costs (such as via a cost award in the relevant tribunal or court or by agreement), then the Secretary of State’s costs of providing assistance can be recouped by the Secretary of State from the party liable to pay those costs (such as the employer). We note that the ERB as currently drafted indicates that this will not be an enforcement function nor delegable to the FWA, but other Government communications (for example this Government FactSheet ) suggest otherwise.
• To recover the costs incurred in connection with the exercise of any enforcement function (e.g., against an employer).
• To enforce a new requirement that has been introduced for employers to keep records to demonstrate their compliance with rules on annual leave and pay, with the requirement that such records be retained for 6 years. This record-keeping obligation reflects existing rules that apply to other aspects of the regulation of working time.

These amendments are clearly intended to demonstrate that the FWA will have ‘teeth’, as the Government has recently stated that the FWA will take “strong action against rogue employers that exploit their workers, and it will provide better support to the majority of businesses who want to do right by their staff.” These changes also demonstrate a true step change in the enforcement of employment rights, moving the dial from an emphasis on the enforcement of individual workers’ rights to proactive state enforcement of certain fundamental rights.  However, for this to be possible, the FWA will need to be appropriately funded and resourced.

4. Zero-hour contracts

The Government has confirmed that the zero-hour contract regime and the right to a guaranteed hours offer (GHO) introduced in the ERB is also being extended to agency workers. Following consultation, the Government has decided to extend these rights to agency workers to “ensure that agency work does not become a loophole in the plans to end exploitative zero hours contracts.”

Amendments to the ERB set out that:

• It will be the end hirer who is obliged to make a GHO. Details on how this will work will be set out in secondary legislation and there is a power for this to be disapplied in certain circumstances so that a work-finding agency or other party is required to make the GHO.
• Agency workers will also be entitled to the rights in respect of reasonable notice of shifts, however this responsibility will be placed on both the work-finding agency and the end hirer to provide the agency worker with such reasonable notice.
• Qualifying agency workers, as for qualifying workers, are also required to be paid compensation if they are given insufficient notice of a cancelled, moved or curtailed shift. It will be the responsibility of the work-finding agency to make the payment for compensation on the basis that the Government considers this is “most efficient option,” as the agency worker will already be on the agency’s payroll. There are transitional provisions which will allow the agency to recover from the hirer the proportion of payments made to agency workers for short notice that reflect the hirer’s responsibility for the insufficient notice. However, these are only temporary provisions, and once they cease to have effect it will be for the agencies and hirers to negotiate the terms between them in their contracts as to the recovery of such payments.
• The rights to a GHO, reasonable notice of shifts and compensation for cancelled, curtailed or moved shifts can also be contracted out by way of collective agreement for both qualifying workers and agency workers. This is subject to the terms of the collective agreement to expressly exclude and replace the duty or right being (a) incorporated into the qualifying worker/agency worker’s contract and (b) the employer notifying the worker/agency worker in writing of the incorporation and effect of the terms.

These ERB changes also add new provisions and rights, or aim to ‘tidy up’ existing provisions, with key aspects still needing to be determined (such as the length of the initial and subsequent reference periods, what the threshold number of hours of work will be to trigger the obligation to make a GHO for qualifying workers, and what is ‘short notice’ of a change to a shift).

The Government’s consultation response recognises some of the feedback it has received about employers being able to offer temporary contracts where there is a genuine work need and so the Government is also planning to consult further on this topic, before setting out detail in regulations about what constitutes a ‘temporary need’.

5. Umbrella companies (updated 03.04.25)

The previous Government launched a consultation in 2023 on non-compliance in the umbrella company market (i.e. a business which employs a worker with a view to that worker being supplied to work for, and be under the control of, an end-client). The new Government has issued a response and has:

• Legislated (by way of an amendment to the ERB) to define umbrella companies, to allow for their regulation and enforcement by including them within the definition of ’employment businesses’. Businesses caught by the new definition will be brought within the remit of existing laws in respect of the conduct of employment agencies and businesses. Currently, these include obligations such as: (i) providing a ‘key information document’ to agency workers, (ii) maintaining accurate records of compliance with regulations, (iii) protections from detriment for the agency worker if they terminate their agreement with the employment business or work elsewhere; and (iv) ensuring transparency regarding pay and deductions. However, a recent Government Fact Sheet published indicates that the Government will consult on amending such laws to ensure they are appropriate for application to umbrella companies.
• Decided to legislate separately (following consultation this year) to transfer responsibility to account for PAYE and National Insurance Contributions from the umbrella company that employs the worker, to the recruitment agency that supplies the worker to the end client. Where there is no agency in a labour supply chain, this responsibility will sit with the end client. The idea is that this will take effect from April 2026.

6. Collective bargaining and trade unions

The Government has tabled numerous amendments to the ERB covering various different aspects of the law relevant to collective bargaining and trade unions. We haven’t covered all of the changes here, but key changes include:

• Expanding the ERB’s new rights of access for trade unions, to include not just physical entry to a workplace (as originally included in the ERB) but also paving the way for digital access to workplaces (how this will work will be set out in secondary legislation). The amendments also include new provisions enforcing trade union rights to access workplaces.
• Reducing the information that unions are required to include in ballots and industrial action notices.
• Extending the time period for which an industrial action ballot has effect to 12 months (from 6 months or 9 months, if agreed between the employer and trade union).
• Decreasing the notice period that needs to be given by unions to employers of industrial action from 14 to 10 days.
• Removing the 10-year ballot requirement for political funds but instead requiring trade union members to be reminded on a 10-year basis that they can opt out.
• Reforms to the ‘unfair practices’ regime – making it easier for unions to bring complaints and extending the procedure so that the prohibition on unfair practices applies during the entire trade union recognition process.
• The requirement for there to be 50% turnout for an industrial action ballot will be repealed on a date to be confirmed to align with the development of e-balloting, which is going to be consulted on at a later date.

These changes are aimed at increasing the collective voice at work and modernising the framework for unions. However, much of the detail is still to be worked out. The Government has confirmed it will consult further on modernising the trade union landscape following the ERB becoming law. This would include, for example, further consultation on the threshold for the statutory trade union recognition ballot process. Currently, the ERB creates a power for this to be changed in regulations, meaning that the threshold for recognition could change from 10% of the proposed bargaining unit being union members to as low as 2%.

7. Statutory sick pay (SSP)

The first draft of the ERB removed the waiting days, so that SSP will be payable from the first day of sickness, and removed the lower earnings limit on eligibility, allowing for a lower rate of SSP to be payable to those on low incomes. The latest Government amendments set the rate of SSP payable to employees at the lower of: (i) 80% of the average weekly earnings; or (ii) the current weekly rate of SSP (£118.75 from 6 April 2025). This means that employees earning less than the current weekly rate of SSP would receive 80% of average weekly pay, where under the current law they are not entitled to SSP at all. The Government anticipates that this will benefit up to 1.3 million employees on low wages and will reduce the amount of people going to work when ill.

8. Fire and rehire

As for collective redundancy consultation, the Government has decided not to take forward its proposal to introduce interim relief for employees who bring claims that their employer failed to comply with their collective redundancy consultation obligations in a fire and rehire scenario. However, the Government is continuing with its changes to fire and rehire/fire and replace in the ERB that will make the practice of fire and rehire ‘automatically unfair’, save in limited circumstances.

Legislation has already been introduced which provides that, where an employer has not followed the Code of Practice on Dismissal and Reengagement, then the employment tribunal may uplift the compensation of up to 25% to a protective award. The Government has also promised to monitor the level of compliance with this and to update the Code of Practice to reflect the changes in law for fire and rehire provided for in the ERB.

9. Family friendly rights

Dismissal during/after a protected period of pregnancy

We have had little information about the changes proposed here, save that the intention is to “amend existing powers so that regulations can be made to ban dismissals of women who are pregnant, on maternity leave and during a six-month return-to-work period – except in specific circumstances,” and that this would be expanded to cover other types of family leave.  A new provision has been tabled to the ERB which would give regulation-making powers to make provisions about the procedures to be followed by employers and the consequences of failing to follow those procedures. However, we still await details.

Bereavement leave – pregnancy loss

Currently, parents are entitled to two weeks’ parental bereavement leave in relation to a death of a child under the age of 18, or if they have a stillbirth after 24 weeks of pregnancy and are eligible for statutory parental bereavement pay where they fulfil certain eligibility criteria.  Although not a Government amendment to the ERB, an amendment proposed by Sarah Owen MP (Labour) proposed to extend this right to where there is a pregnancy loss (such as miscarriage, ectopic pregnancy etc) during the first 24 weeks’ of pregnancy, looks as if it may gain Government backing. Although this amendment has not been taken forward in the form proposed by Sarah Owen into the version of the ERB presented to the House of Lords, this policy does seem to have gained Government backing and could lead to a further amendment to the ERB. We wait to see how this progresses.

10. Right to switch off

Although not included in the original ERB, the Government had promised to take forward the ‘right to switch off’ through other means, such as via a statutory code of practice. Recent rumours are that this is being dropped. However, the announcement that launched the changes to the ERB is silent on this, so we wait for confirmation.

What does this mean for employers?

The ERB is expansive and is the most significant package of employment law reforms that we have seen in decades – increasing the burdens on businesses whilst simultaneously enhancing workers’ rights. 

The Government has explained that its recent amendments, which it introduced following consultation, serve to “demonstrate the Government’s commitment to working in partnership with businesses and trade unions to ensure the plan to Make Work Pay is firmly pro-business and pro-worker.” However, despite much talk in the press about concessions to businesses, most of the changes are to introduce new or strengthen existing rights for workers and obligations on employers.

The ERB has grown in size, scope, and in complexity at each stage of the Parliamentary process to date. In addition, several important aspects of the ERB’s reforms are still in development as further regulations and consultations are promised on the detail.  With only a few months to go before the end of this Parliamentary Session and significantly more detail required, time is tight for the Government to provide much needed clarity to employers before the ERB is passed. Given this, and the vast amount of reforms that are still evolving, businesses have been calling on the Government to set out a more detailed implementation plan and timeline so that they can prepare for the changes.

We will continue to monitor the ERB’s progress through Parliament and any additional reforms coming down the track and employers should keep watch as the position evolves.

To assist, we will continue to track future developments in the reform hub as they are announced. If you have any questions as to the content of this article, or to understand how your business can start preparing for the changes, please reach out to your usual Littler contact.

We note that these changes are considered from the perspective of England and Wales only, there may be differences in application in Scotland and, employment law is devolved to Northern Ireland.