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Government Policy Reform

The latest developments, details and anticipated timings of key employment law reforms.

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Overview

Key Developments

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Significant employment law changes are coming through the Employment Rights Bill and beyond.

Explore our Reform Hub to stay ahead of the curve.

During the general election, the Labour Party promised significant reforms to employment law in its Manifesto Commitments and Plan to Make Work Pay. The Labour Party won the election and is seeking to deliver on those reforms as part of a phased plan.

Following the King’s Speech on 17 July 2024, employers eagerly awaited details of the potential reforms. The King’s Speech Briefing Notes promised two key new employment Bills in the 2024/25 Parliamentary Session:

  • the Employment Rights Bill; and
  • the draft Equality (Race and Disability) Bill.

The King’s Speech also proposed a new Bill in respect of Digital Information and Smart Data (see the Data Privacy and AI section for detail on this).

Key Developments

Employment Rights Bill

Described as phase one of the Plan to Make Work Pay, the Employment Rights Bill was published on 10 October 2024. To read an overview of our take of it in its original form, please see our article here.

The Employment Rights Bill is making its way through Parliament, with significant amendments being made along the way, and it has now doubled in size since its first iteration. For our thoughts on the Government amendments made to the Bill on 5 March 2025 please see here.

The Employment Rights Bill is anticipated to pass by Summer 2025. For many reforms, however, it simply provides the framework, with much of the detail still to be fleshed out by secondary legislation, codes of practice and guidance.

Other employment reforms beyond the Employment Rights Bill

Reforms are also underway or anticipated in addition to the Employment Rights Bill, as part of the Government’s plan:

  • Some reforms are being delivered via existing powers, and non-legislative routes, such as changes to minimum wage rates.
  • Changes in respect of pay and tax were also announced in the Autumn Budget on 30 October 2024.
  • Additional reforms are promised via the Equality (Race and Disability) Bill, which is still awaited. On 18 March 2025, the Government published a consultation on mandatory ethnicity and disability pay gap reporting, which will help shape this bill and has promised a separate call for evidence seeking views on making the right to make equal pay effective for ethnic minority and disabled people and other areas of equality law.
  • Longer-term reforms (such as to worker and employment status) are also promised but the Government recognises that these will take longer to undertake and implement.

Separately, the Data (Use and Access) Bill (‘DUA Bill’) was published on 23 October 2024, which proposes some reforms in respect of data privacy and AI that, although not necessarily linked to the Plan to Make Work Pay, may be of interest to employers. The DUA Bill is currently going through Parliament. We discuss aspects of the DUA Bill in brief in the Data Privacy and AI section. The DUA Bill, however, is not included in the Timings etc section of this reform hub.

Timings

Day One Employment Rights & Unfair Dismissal

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Timings

The Government is taking a phased approach to implementation of its Plan to Make Work Pay, which we explain in more detail below:

1. Employment Rights Bill

Described as phase one, the Employment Rights Bill was introduced on 10 October 2024 and is now making its way through Parliament with significant amendments being made along the way. Targeted consultations took place in October 2024 on some of the details of reforms in the Employment Rights Bill, and responses were published on 4 March 2025 (see here). Amendments have been made to the Employment Rights Bill to account for these consultation responses and additional reforms have also been introduced during its passage. Consequently, the Employment Rights Bill has now doubled in size since its first iteration.

The Employment Rights Bill has completed its stages in the House of Commons and has passed to the House of Lords. It will likely then be sent back and forth between the Houses as any disagreements on the final wording are resolved. This is known as ping-pong. Only once the Employment Rights Bill is agreed by both Houses, will it become law. It is anticipated that it will pass by Summer 2025.

The Employment Rights Bill, however, for many reforms simply provides the framework. Much of the detail is still to be fleshed out by secondary legislation, codes of practice and guidance. Further consultations on this detail are also anticipated.

Overall, the Government anticipates that most reforms in the Employment Rights Bill will take effect no earlier than 2026, with reforms to unfair dismissal no sooner than Autumn 2026.

There will, however, be some reforms in the Employment Rights Bill that will come into force earlier than this, such as:

  • the repeal of the Strikes (Minimum Service Levels) Act 2023, which is currently set to come into effect as soon as the Employment Rights Bill is passed; and
  • the repeal and replacement of certain provisions of the Trade Union Act 2016, which are currently set to apply from two months after the Employment Rights Bill passes.

2. Reforms using existing powers or other means

Some reforms can be delivered outside of the Employment Rights Bill using existing powers or other means such as the amendments to National Minimum Wage in April 2025. The right to switch off was also promised to be introduced via a Code of Practice. Although not formally confirmed by the Government, current rumours are that this may be being dropped or pushed significantly down the Government’s agenda.

3. Equality (Race and Disability) Bill

Other reforms will be contained in the Equality (Race and Disability) Bill, such as extending pay gap reporting and equal pay to ethnicity and disability. The Government previously promised in its Next Steps document that this would be published in draft during the 2024/25 Parliamentary Session.

On 18 March 2025, the Government published a consultation on mandatory ethnicity and disability pay gap reporting open until 10 June 2025. In addition, a call for evidence was opened on 7 April and closes on 30 June 2025, seeking views on making the right to equal pay effective for ethnic minority and disabled people and other areas of equality law. Responses to this will help shape this bill.

Timings for implementation are therefore still very uncertain, but one could anticipate that it would take a bit of time after the consultations to reconsider any bill drafting, before the Equality (Race and Disability) Bill is introduced in draft and before it makes its way through Parliament to become law. We anticipate, therefore, that these reforms will be more likely to be introduced later, for example into 2026/27.

4. Other longer term reforms

There will also be longer-term reforms (such as a review of worker status), which the Government recognises will take longer to undertake and implement and will require a further review or call to evidence, with any changes to the law to follow.

We have created the below table, colour coded as to when headline employment policies, based on their priority in the reform agenda, are likely to be introduced.

We don’t have full implementation timelines yet but will keep this updated as this becomes clearer.

At a glance

  • Red – High priority policy. Set out in the Employment Rights Bill, or a separate policy where early steps are already being taken, indicating it is high up the agenda. Those in the Employment Rights Bill are bold.
  • Amber – Medium to high priority. Confirmed as either in the Equality (Race and Disability) Bill or via other means.
  • Green – Lower priority. Subject to a longer-term review or consultation as per the Next Steps document.

Day one employment rights and unfair dismissal

Policy

One of the most significant reforms in the Government’s plans, the Employment Rights Bill makes provision for ‘day one employment rights’ for protection from unfair dismissal, statutory sick pay, parental leave and paternity leave as well as introducing a new statutory right to bereavement leave.

Unfair dismissal

The Employment Rights Bill removes the current two-year qualifying period for unfair dismissal, making it available from day one of employment. The qualifying period has been present in some form since unfair dismissal was introduced in the 1970s so this is a significant change in the law, which will have an impact on day-to-day HR processes including hiring, performance management and termination of employees with under two-years’ service.

However, the reforms contained in the Employment Rights Bill will allow employers to dismiss an employee using a ‘lighter touch’ process in certain circumstances during a probation period, to be called an ‘initial period of employment’ (‘IPE’). In respect of this:

  • We don’t yet know what the ‘lighter touch’ process will require, as regulations will set out the detail on how the current test to assess the fairness of a dismissal will be modified for certain qualifying dismissals. The Next Steps document suggests that this process could involve, as a minimum, holding a meeting with the employee to explain performance concerns but does not expand with any further detail.
  • The ‘lighter touch’ process will apply where (a) notice is given during the IPE, so long as notice expires no later than 3 months after the IPE ends and (b) the reason for the dismissal relates to the employee’s conduct, their capability or qualifications (including performance), their breach of a statutory duty or restriction, or some other substantial reason relating to the employee. This means that a dismissal for redundancy or for some other substantial reason not relating to the employee will require a full unfair dismissal process from day one of employment, even if it happens during the IPE.
  • The Employment Rights Bill does not yet set out the duration of the IPE. The Government has stated a preference for the IPE to be a maximum of 9 months but has been under pressure from unions to cap the IPE at 6 months.
  • The Employment Rights Bill provides that the ‘day one’ right to claim unfair dismissal does not apply where the employee has entered an employment contract but has not commenced their employment, save for in certain limited circumstances, such as where the reason for the termination of the contract is automatically unfair.
  • A proposed Government amendment, agreed at Committee Stage, would allow for regulations to set a reduced cap on the compensatory award for unfair dismissal (the lower of 12 months’ pay or £115,115 – increasing to £118,223 from 6 April 2025) for employees dismissed during the IPE in circumstances where the ‘lighter touch’ dismissal process applies  – although details of this lower cap are not yet known.

Statutory Sick Pay 

The Employment Rights Bill will make the following changes to Statutory Sick Pay (‘SSP’):

  • make SSP available from day one of absence, removing the three ‘waiting days’ before it becomes payable (as is currently the case);
  • remove the lower earnings limit on eligibility (currently average pre-tax earnings of £123 per week); and
  • 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 (currently £116.75 but increasing to £118.75 from 6 April 2025).

These changes will mean that low earners will become entitled to receive 80% of average weekly pay, where under the current law they are not entitled to SSP, and that SSP will be available for all employees from day one of sickness absence.

Paternity and parental leave

  • The Employment Rights Bill will remove the requirement for employees to have completed a qualifying period of employment to be entitled to take statutory paternity leave and statutory parental leave, making them available from day one.
  • This does not amend entitlements to statutory paternity pay, which will remain available only after 26 weeks of employment. Statutory parental leave will remain an unpaid right.
  • However, the Next Steps document commits to consulting on the parental leave system which it says, “does not support working parents”. It is still not clear if the Government intends to consult just on the current unpaid right to take parental leave or is talking more generally about all types of parental/family leave (maternity, paternity, shared parental, adoption, etc) – for more details, see the Family friendly rights: parental leave system section.  

New right to bereavement leave

  • The Government is introducing a new day one right to bereavement leave. For more details, see the Family friendly rights: bereavement leave section.

Timing and developments

Unfair dismissal

  • Included in the Employment Rights Bill. The Government promised previously that it will consult on certain aspects prior to implementation, including the length of the IPE, how the test of ‘fairness’ will be modified for qualifying dismissals during the IPE and the new compensation regime for such dismissals.
  • Following this, regulations will need to be made and guidance published. There had been rumours that the changes being published to the Employment Rights Bill on 5 March 2025 would include details of the ‘lighter touch’ process and would indicate the Government’s intention to set the IPE at 9 months. However, these were not included in the Employment Rights Bill amendments and although the 9-month IPE was mentioned in an industry quote included in the Government’s press release of the amendments, details have not been made public.
  • The Government has committed to the changes becoming effective no sooner than Autumn 2026.  

Statutory Sick Pay

  • Included in the Employment Rights Bill. The Government launched a Consultation on 21 October 2024. A response to which was published on 4 March 2025, alongside amendments to the Employment Rights Bill making the change to the rate of SSP.
  • This right could be brought into force by regulations soon after the Employment Rights Bill becomes law (so during 2025) rather than waiting until 2026 as indicated for most reforms in the Employment Rights Bill. However, firm details on timing have not yet been provided.

Paternity, parental, and bereavement leave:

  • Included in the Employment Rights Bill. Regulations will be required in respect of details on bereavement leave (see the Family friendly rights: bereavement leave section).
  • These rights are referred to as ‘immediate‘ changes in the Next Steps document – perhaps indicating that this is expected to be earlier in the Government’s implementation timeline than most reforms in the Employment Rights Bill, which are anticipated for no earlier than 2026.  However, firm details on timing have not yet been provided.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Employment Rights Bill, Next Steps to Make Work Pay, SSP Consultation on 21 October 2024, Response to SSP consultation 4 March 2025, 5 March 2025 amendments to the Employment Rights Bill.

Worker and employment status

Policy

The Government wants to transition towards a two-part framework for employment status that will consist of workers and self-employed only (unlike the three-tier category of employee, worker and self-employed that we currently have). These reforms are not included in the Employment Rights Bill but are currently intended to be part of the Government’s longer-term reform plan.

It is unclear at this stage if this policy would entitle all those who are currently considered workers to have the same level of employment rights as employees currently do, or whether new boundaries between workers and self-employed will be drawn.

Whichever approach is taken may increase the number of individuals that have the fuller set of employment rights that are currently only available to employees. That could mean individuals who were previously considered self-employed workers will gain the right to minimum notice on termination and to unfair dismissal, for example.

If the Government also looks to align the employment law tests with the tax tests, it could also have the effect that those who are ‘workers’ on the new test would be taxed as employees and so employers would have to pay employer National Insurance contributions – currently, self-employed workers are taxed as self-employed.

The effect of this reform could be significant for employers in terms of cost and their employment or engagement models – particularly coupled with the other reforms proposed (such as day one unfair dismissal rights) which would then extend to all such ‘workers’.

In addition, the Labour Government also promised to “strengthen rights and protections to help self-employed workers thrive”, including the right to a written contract, action to tackle late payments, and by extending health and safety and blacklisting protections to self-employed workers in addition to potentially extending union rights to the self-employed. These reforms are also part of the Government’s longer-term plan.

Timing and developments

Not included in the Employment Rights Bill.

This reform will be part of its longer-term plan – as the Government recognises that it will take longer to consider how to make changes and implement them. It has committed to a full consultation on both worker status and how to implement its manifesto commitments to enhance protections for self-employed workers. So, it may be some time before this is implemented.

Await developments.

Sources

Plan to Make Work Pay, Next Steps document

Zero-hour Contracts

Policy

Guaranteed hours offers

The Employment Rights Bill does not ban zero-hour contracts outright but includes several measures which will significantly inhibit their use.

The Employment Rights Bill contains detailed and (very) complex rules, but in short it will require employers to make a ‘guaranteed hours offer’ to ‘qualifying workers’ after the end of certain ‘reference periods’.

For now, much of the detail of how this will operate is left to further regulations, but what we know so far is:

  • To whom it will apply: A ‘qualifying worker’ includes zero-hour workers and certain ‘low hours’ workers who have a low number of guaranteed hours. What is considered ‘low hours’ will be set in regulations. Where this threshold falls will have a big impact on how significant this new right will be.
  • When to make a guaranteed hours offer: An employer must make a guaranteed hours offer to a worker if in relation to an ‘initial reference period’ the hours worked during such period satisfy certain conditions (such as to their number or regularity) and for low hours workers, the hours worked exceed the minimum number of hours under the contract. The detail will be set in regulations including:
    • the length of the initial reference period, although the Government indicates this will be 12 weeks;
    • the conditions that would trigger the obligation to make an offer (such as the number or regularity of hours to be worked over the reference period or such further conditions);
    • any workers that will be ‘excluded workers’.

A guaranteed hours offer will be an offer to a qualifying worker to either vary their terms and conditions or enter a new contract, although what the details will be set out in regulations.

This is not a one-time only duty, instead employers will have to repeat the assessment of whether a new guaranteed hours offer needs to be made. After the initial reference period, the employer must monitor the worker’s working time over subsequent reference periods (the length of which is unknown – again, this will be subject to consultation and will be set in regulations) and offer further contracts for guaranteed hours if the conditions to make an offer are met.

As the law has been drafted to permit a worker the flexibility to choose to accept or reject a guaranteed hours offer, there are a raft of complicated rules as to what will constitute such an offer, with certain crucial details left to regulations.

  • Information rights: A set of Government amendments, agreed at Committee Stage, will place a duty on employers to take reasonable steps to give and provide continued access to specified information to certain workers regarding their rights to a guaranteed hours offer within an ‘initial information period’ and continuing thereafter.
  • Exceptions and withdrawals: There are some exceptions where an employer will not be required to make a guaranteed hours offer, or such an offer will be treated as withdrawn, where there is a ‘relevant termination’ (such as resignations other than constructive dismissal scenario, worker terminations that are akin to fair dismissals, or expiry of a limited term contract where it was reasonable to be a limited term contract) during the reference, offer or response periods. Government amendments, agreed at Committee Stage, will require employers to give workers a notice where they consider an exception to the duty to make a guaranteed hours offer or where a guaranteed hours offer has been withdrawn.
  • Limited term contracts: Where work is genuinely temporary there will be no expectation on employers to offer permanent contracts but a guaranteed hours offer can only be on a limited-term basis if it is ‘reasonable’. A Government amendment to the Employment Rights Bill, agreed at Committee Stage, will essentially create a rebuttable presumption that is it ‘not reasonable’ for the workers contract to be limited-term unless the contrary can be shown. The Government in its consultation response on the matter confirmed that employers will be able to offer temporary contracts where there is a genuine temporary work need. The Government will consult before setting out further detail about what constitutes a temporary need in regulations and is also “keen to discuss other ways in which it believes the legislation can cater for seasonal work.”
  • Anti-avoidance: Anti-avoidance provisions have been included in the amendments to the Employment Rights Bill on 5 March 2025. These provisions will introduce additional grounds of action to prevent the manipulation of hours made available to a worker for the sole or main purpose of either making a reduced offer or avoiding the requirement to make a guaranteed hours offer altogether.   
  • Claims: A worker can bring a claim to the employment tribunal for failure by an employer to make an offer or a compliant offer for the purposes of these provisions or breaches the anti-avoidance provisions. A successful claim can lead to an award of compensation (with regulations being needed to set the maximum compensation that could be awarded). There are also amendments to the Employment Rights Bill that have been tabled by the Government for additional rights to bring a complaint to the employment tribunal regarding failing to give certain information or notices under the provisions.

As is usual, there are some corresponding dismissal and detriment protections:

  • Contracting out by way of collective agreement: Following amendments to on 5 March 2025, the rights to a guaranteed hours offer can also be contracted out by way of collective agreement for workers. This is subject to the terms of the collective agreement to expressly exclude and replace the duty or right being incorporated into the qualifying worker’s contract and the employer notified the worker in writing of the incorporation and effect of the terms.

These provisions are complicated, and unfortunately much of the detail is saved for regulations, so we cannot say yet how this new right will work in practice. There is also a promise to consult later on the implementation of the zero-hour contracts measures more generally.

It will be interesting to see what the threshold will be for being a low hours worker, as some employers may try to bypass these complicated laws and just set minimum contractual hours above that threshold if they aren’t set too high – although such employers may be caught by the new anti-avoidance provisions. Even if not – this might not be workable for all businesses.

Further, as the obligation to monitor working time and make guaranteed hours offers is an ongoing one, this will likely be a compliance headache for smaller businesses and for certain sectors such as retail and hospitality that may rely on zero-hour contracts to fill seasonal resourcing gaps. Employers will be watching to see what, if any, concessions the Government makes in respect of seasonal workers.

Notification of shifts

The Employment Rights Bill will introduce the following rights and obligations:

  • It will require an employer to give a worker ‘reasonable notice’ of shifts for workers engaged on zero hours or certain workers with no set working patterns. What length of time amounts to ‘reasonable notice’ is not defined and the minimum time will be left to regulations.
  • Such workers also will have the right to ‘reasonable notice’ of any cancellation of or change to a shift.
  • If an employer fails to provide sufficient notice of a cancelled, moved or curtailed shift, they must make a payment to the worker (the amount of the payment will be set out in regulations – but it will be proportionate to the cancellation, change or curtailment).
  • The right to reasonable notice of shifts can also be contracted out by way of collective agreement for workers in a similar way as to the requirements for a guaranteed hours offer.

The above provisions are aimed at ending one-sided flexibility, although employers will need to be organised with resourcing and have facilities to make payments for short notice changes to shifts – this may be more significant for large employers that employ flexible workers regularly (such as in retail and hospitality).

The Employment Rights Bill will also repeal the Workers (Predictable Terms and Conditions) Act 2023, which would have introduced a new right to request a predictable working pattern.

Application to agency workers

The Government launched a Consultation in October 2024, asking for views on whether the provisions should apply to agency workers. The Response and amendments to the Employment Rights Bill confirm that these rights will be extended to qualifying agency workers in a similar way (although with some key differences to reflect the nature of this different arrangement). The amendments to the Employment Rights Bill clarify that:

Guaranteed hours offers

  • An agency worker (as defined) of a hirer will be a qualifying agency worker if during the particular reference period the agency worker worked for and under the supervision and direction of the hirer for a certain number of hours and with a certain regularity (details of which are not yet known and will be set out in regulations.)
  • It will be the end hirer who is obliged to make a guaranteed hours offer to the qualifying agency worker. Details on how this will work is not yet known and will be set out in regulations 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 offer.
  • It appears that the effect of this provision will be that if a qualifying agency worker accepts the offer from the hirer, it will become a direct worker of the hirer.
  • As for workers, a guaranteed hours offer must not propose a limited-term contract unless it is reasonable to do so, and there are provisions which set out what is ‘reasonable’.
  • The amendments seemingly do not change the system of transfer fees and extended hire periods which are set out in the Conduct of Employment Agencies and Employment Businesses Regulations 2003 – which the Government has confirmed will continue to apply.

Reasonable notice of shifts and compensation for short notice:

  • Agency workers will be entitled to the rights in respect of reasonable notice of shifts, unless the shift is an ‘excluded shift’ (details of which are currently unknown). This responsibility will be placed on both the work-finding agency and the end hirer and liability will be apportioned to reflect the party responsible for providing unreasonable notice in each case.
  • Qualifying agency workers, as for qualifying workers, are also required to be paid compensation for short-notice cancellation, curtailment or movement of shifts (but not in respect of ‘excluded shifts’). 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, this will only apply where the arrangement between the employment agency and the hirer was pre-existing on or before the period of two months after the Employment Rights Bill is passed and it has not been modified since. After this, it will be for the agencies and hirers to negotiate the terms between them in their contracts as to the recovery of such payments.

Contracting out by way of collective agreement:

  • The rights to a guaranteed hours offer and to reasonable notice of shifts can also be contracted out by way of collective agreement for agency workers in a similar way as for workers.

Employers are likely to be concerned about these measures, and the knock-on impact of using agency workers, including increased complexity and costs, but the impact of this will largely depend on some of the details of the threshold application. The Government has said that it will maintain flexibility to cater for different circumstances by exception – but as with many of the elements of this reform, details of how the measures will work in practice are still to be set out.

Timing and developments

Included in the Employment Rights Bill.

The Government launched a Consultation on 21 October 2024 on how the provisions will apply to agency workers. A response was published on 4 March 2025 confirming how the right will apply to agency workers and introducing amendments to the Employment Rights Bill on 5 March 2025.

The legislation simply creates a policy framework, and so further consultation is promised on the regulations that will be required to flesh out the detail. For example, on:

  • guaranteed hours offers – the definitions of low and zero-hour contracts and what working hours and patterns will make an agency worker qualify for the rights, length of any reference periods and the requirements of a guaranteed offer etc; and
  • shifts – what amounts to short notice or a moved shift and the payment amount.

The Government has also promised that it will develop guidance on understanding the new rights before they come into force. Further consultation is also promised in respect of the rights more generally and are likely to commence in 2025.

Implementation is currently anticipated no earlier than 2026, though firm details on timing have not yet been provided.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Employment Rights Bill, Next Steps to Make Work Pay, Consultation on the application of zero hours contracts measures to agency workers on 21 October 2024, Response to zero hours consultation 5 March 2025, 5 March 2025 amendments to the Employment Rights Bill.

Fire & Rehire

Policy

Currently, there is not an outright ban on the practice of fire and rehire or fire and replace. However, using this method to change terms and conditions of employment is considered a last resort and is usually a higher risk strategy given the ability for employment tribunals to increase awards (such as a protective award) for an employer’s failure to comply with the Code of Practice on dismissal and re-engagement brought into force in July 2024.

The Government stated previously that it wanted to introduce reforms to the law to abolish ‘fire and rehire’ and ‘fire and replace’. Although not quite an outright ban, the Employment Rights Bill inserts new provisions that significantly reduce the scope for imposing changes to contracts through fire and rehire or fire and replace. It does this by making a dismissal automatically unfair if the reason or principal reason for the dismissal is:

  • that the employer sought to vary the employee’s contract of employment and the employee did not agree to the variation; or
  • to enable the employer to employ another person, or to re-engage the employee, under a varied contract of employment to carry out the same duties, or substantially the same duties, as the employee carried out before being dismissed.

There is a (very) limited exception where employers can demonstrate that:

  • the reason for the variation was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business; and
  • in all the circumstances the employer could not reasonably have avoided the need to make the variation.

This exception is clearly a high hurdle for the employer as it must demonstrate both a significant financial threat to the business and that the variation was unavoidable. If the exception applies, the dismissal will not be automatically unfair, however an Employment Tribunal must still assess whether the dismissal was fair in all the circumstances, considering certain factors, including:

  • whether any consultation was carried out by the employer with the employee and/or a trade union or any person representing the employee about varying the contract of employment;
  • anything offered to the employee in return for agreeing to the variation; and
  • any other matters to be set out in regulations.

In addition, a Government Consultation last year, proposed introducing the right for employees to apply for ‘interim relief’ when making a claim for unfair dismissal in a fire and re-hire scenario. The Government’s response confirmed that it is now not taking this proposal forward.

However, as a result of the same consultation, an amendment to the Employment Rights Bill has been made that will double the maximum protective award for collective redundancy consultation from 90 to 180 days. See the Redundancy collective consultation section for more details.

The net effect of these changes will mean that fire and rehire will likely become an absolute last resort. Clearly, the policy intent behind these changes is to prevent the more extreme high-profile examples of fire and rehire practices that played out in the press recently – but on their current drafting the provisions may have unintended consequences. The provisions could potentially impact employers who may not consider themselves engaging in ‘traditional’ fire and rehire exercises but where, although the employer may not be in such financial difficulties as contemplated by the exception, there are good business reasons for wanting to change terms and conditions of employment. For example, adjusting an employee’s working hours to accommodate a new client contract, or requiring office working for a home worker for one day a week.

Employers may try to get round this practice by including ‘flexibility’ clauses into the contract, such as mobility clauses dealing with where the employee works and clauses in relation to duties or hours of work. These clauses usually reserve discretion to the employer to make changes without agreement from the employee (as agreement is essentially already baked into the contract). However, such clauses would need to be drafted carefully and clearly and not exercised in such a way as to breach mutual trust and confidence. The Government may also seek to introduce restrictions on this in due course.

Timing and developments

Included in the Employment Rights Bill.

The Government launched a Consultation on 21 October 2024 on increasing or lifting the cap of the protective award and the potential role of interim relief. On 4 March 2025 the Government confirmed it would not be pursuing introducing interim relief but that it would be doubling the protective award and has introduced an amendment to the Employment Rights Bill to this effect (see the Redundancy collective consultation section).

Further regulations are also required on the factors for a fair dismissal for when the financial exception applies.

The Government has also promised to monitor the level of compliance with the current Code of Practice on dismissal and re-engagement and will update it to reflect the changes in law for fire and rehire in the Employment Rights Bill. The Government will also issue further guidance in respect of scenarios where the collective redundancy consultation obligations are triggered.

Implementation is currently anticipated no earlier than 2026, though firm details on timing have not yet been provided.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Employment Rights Bill, Next Steps to Make Work Pay, Consultation on 21 October 2024, Response to Consultation on Strengthening remedies against abuse of rules on collective redundancy and fire and rehire 4 March 2025, 5 March 2025 amendments to the Employment Rights Bill.

Flexible Working

Policy

The Government’s stated policy is to make flexible working the default from day-one on the job, with employers required to accommodate this as far as is reasonable (or except where it is not reasonably feasible).

The current law (amended in 2024 – see our article here) gives employees the right to request flexible working rather than a right to have flexible working, and employers have broad business reasons for which they can refuse an individual’s request.

The Employment Rights Bill builds on the current legal framework, increasing the obligations on employers, and provides for the following:

  • An employer may refuse a flexible working request only if:
    • the employer considers that the application should be refused on one or more of the eight statutory grounds (which are set to remain the same as the current law); and
    • it is reasonable for the employer to refuse the application on that ground (or grounds).
  • An employer must explain in their notification of refusal why it considers it reasonable to refuse the application on the statutory ground or grounds (unless the provision of information would be contrary to the interests of national security).
  • A new power for the Government to make regulations setting out what steps employers will have to take to comply with the requirement to consult with the employee about their flexible working application.

Despite these changes, the penalty for non-compliance looks set to remain a maximum of 8 weeks’ pay (currently capped at £719 from 6 April 2025), together with an order for reconsideration.

It remains to be seen whether these proposed legislative amendments will greatly change the flexible working landscape for employers. However, the amendments would, at a minimum, increase the burden of justification on employers to consider and demonstrate the reasonableness of any refusal and may add additional compliance steps for employers to demonstrate compliance with the duty to consult the employee about their application. These enhancements could lead to an increase in claims relating to the refusal of flexible working requests and may make the implementation of wholesale office mandates increasingly difficult at a time when more and more employers are pushing for in-person office attendance.

Timing and developments

Included in the Employment Rights Bill.

Further consultation and regulations are required. In particular, the Government has committed to consulting on the detail of the provisions and regulations will be required to set out the steps an employer must take to comply with the obligation to consult on an application.

This right is referred to as an ‘immediate’ change in the Next Steps document, perhaps indicating that this is expected to be earlier in the Government’s implementation timeline than most reforms in the Employment Rights Bill, which are anticipated for no earlier than 2026. However, given that consultation has been promised and regulations are required, implementation earlier than 2026 may be ambitious. In any event, firm details on timing have not yet been provided.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Employment Rights Bill, Next Steps to Make Work Pay.

Right to Switch Off

Policy

The ‘right to switch off’ was referenced in the Plan to Make Work Pay but was not one of the legislative changes included in the Employment Rights Bill.

The Next Steps document indicated that the Government would be taking forward the ‘right to switch off’ through other means via a statutory code of practice (mirroring approaches taken in Ireland and Belgium) rather than via a statutory ‘right to disconnect’.  Recent press reports have rumoured that the Government is dropping this proposal. However, the announcement on 4 March 2025 is silent on this, so we wait for confirmation. Given there is no confirmation that this policy is being dropped, we set out details of what this might look like below.

If introduced, a statutory code of practice, potentially issued by Acas, would likely require employers to agree policies and practices regarding expectations of normal working hours and when staff should expect to be contacted. Earlier Government announcements suggested that the purpose of the code of practice will be to prevent employees from being contacted out of hours, except in exceptional circumstances, to allow them the rest and recuperation they need to give 100% during their working hours. 

If the code of practice were to operate in a similar way to other Acas codes of practice, such as for disciplinary and grievances, we could see Employment Tribunals being granted the power to increase compensation awards if an employee is successful in another claim for an employer’s failure to adhere to guidance regarding the ‘right to switch off’. For example, as we see in other areas, we may see an Employment Tribunal having the ability to increase compensation awarded by up to 25% for an employer’s failure to follow the code of practice.

Finding a balance between working flexibly and giving clear boundaries for when an employee can ‘switch off’ is no easy task. If the Government proceeds with this reform, then any code of practice will need to find a solution that considers different sectors and roles rather adopting a blanket one-size fits all approach.

Timing and developments

Not included in the Employment Rights Bill.

This was listed as one of the ‘non-legislative’ reforms that the Government will look to develop alongside the Employment Rights Bill’s passage and beyond it becoming law. However, there are rumours that this has been dropped by the Government, although official confirmation has not been provided. We await confirmation.

Sources

Plan to Make Work Pay, Next Steps to Make Work Pay.

Collective Bargaining & Trade Unions

Policy

The Government wants to modernise trade union laws and strengthen collective voices at work, creating a new era of partnership between businesses and unions.

The Employment Rights Bill aims to significantly strengthen the power and access of trade unions, introducing new measures and repealing some existing restrictions. Much of the detail will be subject to consultation to “modernise the legislative framework that underpins our trade unions” and further regulations.

We don’t cover all the changes here, but key reforms (which have been amended during the bill’s passage through Parliament) currently include: 

Employers will have a legal duty to give workers a written statement that informs the worker they have the right to join a trade union. This statement should be given at the same time as they receive a section 1 statement of terms and conditions of employment, and at other prescribed times. Further details will be set out in regulations.

Independent trade unions will be given new broad rights to request access

  • To meet, support, represent, recruit or organise workers (whether or not they are members of a trade union) or to facilitate collective bargaining (‘access purposes’).
  • Access means (1) physical entry to a workplace (although not to any part used as a dwelling) and/or (following recent Government amendments); (2) communication with, including providing information to, workers by any means whether directly or indirectly (for example via digital means). This is potentially very broad and could require an employer to provide information to their workers on behalf of officials of a union within an all-staff email.
  • There is a detailed statutory process setting out how employers and unions can enter into access agreements for the access purposes. If employers refuse, unions will be able to apply to the Central Arbitration Committee (‘CAC’) for a determination as to access in accordance with certain principles, including the principle that union officials should be able to physically enter a workplace or communicate with workers (or both) for any of the access purposes in any manner that does not unreasonably interfere with the employer’s business.

Reforms to statutory recognition thresholds

  • Introducing a power for the Secretary of State to lower the threshold for the CAC to accept a trade union recognition application from 10% of the workers in a bargaining unit to between 2% and 10% – the Government has promised that this will be subject to further consultation.
  • Repealing the requirement for unions to show at the outset of submitting a statutory recognition application to the CAC that a majority of workers in the bargaining unit are likely to support recognition.
  • Removing the requirement for at least 40% of workers in the bargaining unit to have to vote for recognition at the ballot stage – only a simple majority of the workers voting will be required.
  • Extending the ‘unfair practices’ regime, making it easier for unions to bring complaints and extending the prohibition on unfair practices so that it applies during the entire trade union recognition process.
  • Requiring employers to share within 10 working days of the statutory recognition application being submitted the number of workers in a proposed bargaining unit and preventing employers from altering that number.

Changes to industrial action ballots and other reforms, including repealing the Strikes (Minimum Service Levels) Act 2023 and much of the Trade Union Act 2016.

  • Removing certain restrictions to pave the way for e-balloting.
  • Reducing and simplifying the current threshold requirements for a trade union ballot to take industrial action so it is easier to ballot. This includes removing the 40% support threshold requirement in respect of workers engaged in important public services. However, the proposal to repeal the 50% turnout threshold is on hold to align with the development of e-balloting.
  • Removing certain requirements regarding the provision of information to be included on the ballot paper.
  • Reducing the notice period that a trade union must give the employer prior to industrial action from 14 to 10 days.
  • 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).

Several new rights will be introduced

  • Creating new rights of access to facilities and strengthening existing rights to time off for trade union representatives, as well as new rights for trade union equality representatives (including to time off for certain listed purposes).
  • Reviewing and updating by way of regulations the rules on blacklisting.
  • Introducing protections for workers against detriment for taking protected industrial action.
  • Strengthening unfair dismissal protection for employees who undertake protected industrial action so that the protection against dismissal will apply for the length of the strike action by removing the requirement for the dismissal to be within the ‘protected period’.

Sector specific reforms will be introduced

  • Implementing (by way of regulations) new social care negotiating bodies, including the Adult Social Care Negotiating Body for England, which has representation from trade unions in the social care sector and persons representing the interests of employers of social care workers. The new body will, subject to regulations on the details, be able to consider remuneration, terms and conditions of employment of social care workers and other matters in respect of the adult social care workers. Any agreements will be ratified by the Secretary of State so that they apply to all relevant employers. The aim will be to improve pay and conditions through a Fair Pay Agreement in adult social care – the details of which will be subject to consultation.
  • Reinstating the School Support Staff Negotiating Body, to establish national terms and conditions, career progression routes, and pay rates.

The net effect of these reforms is likely to lead to an increase in workers’ awareness of trade unions, which may in turn lead to an increase in the level of union membership. We may also see more pro-active steps being taken by trade unions, particularly to enter sectors where they have not traditionally had a presence – which could now be done more easily through the means of new digital access request rights. The new Government promises a sea change in union rights and protections and a ‘new era’ of partnership between employers, unions and the Government. Employers who may not have previously had to engage with unions may have to start doing so.

Also, previously, the Government said it wants to ensure “at a minimum” that any proposals to introduce surveillance technologies in the workplace are subject to consultation and negotiation, with a view to agreement of trade unions or staff representatives. The Next Steps document has promised as part of the Government’s longer-term reform plan to consult on surveillance technologies and negotiations with trade unions and staff representatives.

Timing and developments

Included in the Employment Rights Bill.

Specific provisions will come into force as follows:

  • the Strikes (Minimum Service Levels) Act 2023 will be repealed on the day the Employment Rights Bill is passed; and
  • relevant provisions of the Trade Union Act 2016 will be repealed and other amendments (such as in respect of the removal of the 40% support threshold for industrial action ballots) will come into force two months after the Employment Rights Bill is passed.

Further consultation and regulations are required on remaining reforms. A consultation was launched in October 2024, seeking views on some areas including in respect of changes to be made given the repeal of much of the Trade Union Act 2016. The Government’s response on 4 March 2025 confirmed the amendments that have been made to the Employment Rights Bill (details of which have been incorporated above). The Government promises further in due course (for example on lowering the admissibility requirements for the statutory trade union recognition ballot process, protections for trade union representatives and the delivery of e-balloting etc).

Save as indicated above, given the significance of these reforms, implementation in most areas is currently anticipated no earlier than 2026 although firm details on timing have not yet been provided.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Press release 6 August 2024 and see here, Employment Rights Bill, Next Steps to Make Work Pay, Consultation on 21 October 2024, Response to consultation on creating a modern framework for industrial relations 4 March 2025,  5 March 2025 amendments to the Employment Rights Bill.

Redundancy Collective Consultation

Policy

The Government has previously indicated that it wishes to strengthen the rules regarding the collective redundancy framework.

Trigger for collective redundancy consultation obligations

Presently, 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 introduced by the original draft of Employment Rights Bill was 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 on the basis that it would be difficult to manage in practice, as employers would need to keep track of unrelated redundancies across different sites and collective consultation redundancy obligations would be triggered more frequently.

In response, the Government made some changes to the Employment Rights Bill on 5 March 2025. 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.

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.

This change will hopefully mean that the obligation to collectively consult will not be triggered as often as would have been the case if the one-establishment part of the test had been removed entirely. However, employers with multiple sites will still have to engage in collective consultation if they are proposing redundancies across different sites within a 90-day period under the new threshold test. Employers will therefore need a mechanism to keep track of proposed redundancies across different sites, which may be administratively burdensome and requires central or intra-site coordination.

Additional amendments to the Employment Rights Bill were also made on 5 March 2025 to the collective consultation obligations to align with the above changes, including:

  • Ensuring the trigger to notify the Secretary of State of the proposed dismissals, via a form HR1 is aligned (and as is currently the case the amount of notice required will depend on the number of proposed dismissals).
  • Clarification 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 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.
  • Minor changes to the information requirements to be provided to employee representatives.

Remedies/penalties

The Government launched a Consultation last year on increasing protective awards and introducing interim relief for an employer’s failure to comply with the collective redundancy consultation obligations. The Government published its response and has:

  • Amended the Employment Rights Bill to double the maximum protective award that an employment tribunal could make from 90 days to 180 days gross pay per affected employee. The rationale behind this increase is to deter employers from non-compliance with the obligations and from ‘buying out’ the claims.
  • Confirmed that it will not be taking forward its proposal to introduce interim relief. Multiple responses were concerned that this would put increased pressure on employment tribunals, employees, and employers.
  • Promised to issue further guidance for employers on collective redundancy consultation processes, in recognition of the complexity of the regime.
  • Confirmed that it intends to gather further views on strengthening the collective redundancy framework in 2025. The consultation previously noted that the Government may consult in future on doubling the minimum consultation period when an employer is proposing to dismiss 100 or more employees from 45 to 90 days.

The about-turn on the removal of the establishment test should be welcomed by employers, depending of course on where the new threshold for triggering consultation on multi-stie redundancies is set. Detailed guidance will also be welcomed.

However, clearly the increased protective awards will likely be a concern for employers, particularly given the complexity of the current regime. Future Government guidance must be sufficiently detailed to address the regime’s complexities to assuage employers’ concerns that they will not be excessively penalised with increased protective awards for only inadvertent or minor breaches.

Timing and developments

Included in the Employment Rights Bill.

Regulations will be required to determine the new threshold test for redundancies across more than one establishment. Implementation is currently anticipated no earlier than 2026, though firm details on timing have not yet been provided.

Further consultation is also promised to gather views on strengthening the collective redundancy framework this year – so any changes proposed in respect of this potentially could come later still.

Sources

Plan to Make Work Pay, Employment Rights Bill, Next Steps to Make Work Pay, Consultation on 21 October 2024, Response to this consultation on 4 March 2025, 5 March 2025 amendments to the Employment Rights Bill.

TUPE

Policy

The Plan to Make Work Pay said that the Government wanted to ‘strengthen’ rights and protections for workers subject to TUPE processes. It is unclear what is meant by strengthening TUPE protections at this stage.

The Next Steps document states that this is part of its longer-term reform plan and that the Government will launch a call for evidence to holistically examine a wide variety of issues relating to TUPE regulations and process, including how they are implemented in practice.

In addition, the Employment Rights Bill introduces new principles in respect of public sector outsourcing – although this is outside the scope of this hub.

Timing and developments

Not included in Employment Rights Bill (save for the public sector outsourcing provisions which are in the bill).

This reform will be part of its longer-term plan as the Government recognises that it will take longer to consider how to make changes and implement them. It has committed to launching a call for evidence.

Await developments.

Sources

Plan to Make Work Pay, Next Steps to Make Work Pay.

Enforcement

Policy

Single Enforcement Body and Enforcement Powers

Currently, most employment rights are enforced by the individual through an employment tribunal and only a limited number of (mainly pay-related) rights are enforced by the state on behalf of workers.

The Government has promised to establish a new single enforcement body (or ‘Fair Work Agency’), which is intended to improve and expand the system of enforcement of employment rights.

The Employment Rights Bill gives the Secretary of State certain new powers to enforce employment rights and the ability to delegate most of those powers to a public authority and to appoint enforcement officers. Although not set out in the Employment Rights Bill, the Next Steps Paper confirms that this will be the new Fair Work Agency and will be established as an executive agency of the Department for Business and Trade. This official fact sheet explains that as the Fair Work Agency will not have its own distinct legal identity, the Employment Rights Bill works by giving the Secretary of State a series of functions, which will in practice be discharged (mostly) through the Fair Work Agency once it has been established. Accordingly we refer to the Fair Work Agency in these circumstances below for ease).

The Fair Work Agency will combine existing enforcement functions such as the Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement (which will both be abolished) and other certain enforcement functions including those of HMRC (who currently enforce National Minimum Wage). Significantly, it also introduces new enforcement powers and functions, which are explained in more detail below.

What laws will the Fair Work Agency enforce?

The Employment Rights Bill sets out that the Fair Work Agency will enforce certain ‘relevant labour market legislation’ listed in a Schedule to the Employment Rights Bill. Notably for employers this includes:

  • current enforcement areas carried out by different agencies, including National Minimum Wage and statutory sick pay; employment agencies and employment businesses; the unpaid employment tribunal award penalty scheme; labour exploitation (gang masters) and modern slavery; and
  • new areas of enforcement including the enforcement of holiday pay and annual leave, the new obligation to keep records for annual leave (see the Annual leave Records section) and certain offences of fraud under the Fraud Act 2006 when committed in relation to a worker or work-seeker.

The Employment Rights Bill also gives powers for the current scheduled list of relevant labour market legislation to be expanded in the future to include other relevant labour market legislation not currently within scope. This fact sheet indicates that the Fair Work Agency will take on enforcement of a wider range of rights over time.

What powers will the Fair Work Agency have?

The Employment Rights Bill includes detailed provisions setting out the enforcement powers, including:

  • General Powers: The Fair Work Agency will be able to require any individual to attend meetings and answer questions or provide documents or information if it believes that the person is able to provide information necessary for any enforcement purpose. In addition, enforcement officers will have the power to enter premises (including dwellings subject to a warrant) to exercise certain powers including to inspect or examine documents, require the production of documents, and to have access to any computer for any enforcement purpose.
  • Issue enforcement undertakings and apply for orders: The Fair Work Agency will have the power to request labour market enforcement (LME) undertakings in some circumstances and further to apply to the court for LME orders to ensure compliance with prohibitions, restrictions and requirements. Non-compliance by a person (or by corporate bodies, partnerships etc) with an LME order, or providing false information or obstructions as part of this enforcement is a criminal offence (which can on lead to imprisonment, a fine or both).
  • Issue notices of underpayment: In a recent amendment, the Fair Work Agency will also have the power to issue notices of underpayment (in a similar way to the existing enforcement regime for the National Minimum Wage). The Fair Work Agency will be able to issue an underpayment notice to remedy a failure to pay certain payments under relevant labour market enforcement legislation (which we explain above) which includes National Minimum Wage, Statutory Sick Pay and, most notably, holiday pay). The notice will specify the amount that will be payable by the liable party to the individual(s) within 28 days of the notice. In addition to the sums due, the notice of underpayment must also impose a penalty, to go into the Government’s Consolidated Fund, of 200% of the sum payable in the notice (up to a maximum of £20,000 per individual). This new power could have potentially significant implications for employers who have miscalculated holiday pay or have misclassified workers/employees as self-employed contractors and so have failed to pay holiday pay correctly or at all.
  • Bring proceedings in the employment tribunal on a worker’s behalf: Where a worker has the right to bring employment tribunal proceedings in England and Wales, or Scotland, and it appears to the Fair Work Agency that a worker is not going to bring those proceedings then the Fair Work Agency may bring proceedings in place of the worker. Notably, it seems that this power extends to any employment tribunal proceedings and not just proceedings in respect of the more limited relevant labour market legislation set out above.
  • Provide or arrange for legal advice, legal representation, or assistance: Although, the Employment Rights Bill as currently drafted indicates that this will not be an enforcement function to be given or delegated to the Fair Work Agency, the Employment Rights Bill also introduces powers for the Secretary of State to provide or arrange for legal advice, legal representation, or other form of assistance to someone party to any civil proceedings that are related to “employment or trade union law or the law of labour relations.”
  • Recover the costs incurred by the Fair Work Agency: Regulations can be made requiring a person to pay a charge as a means of recovering enforcement costs incurred in connection with the exercise of any enforcement function.
  • Enforce a new requirement for employers to keep records: This will be to demonstrate their compliance with rules on annual leave and pay (see the Annual Leave Records section).

The Next Steps document suggests that the Fair Work Agency will also be a ‘one stop shop’ for help and resource for employers to help provide clarity on employment rights.

The Employment Rights Bill sets some of the framework of this new enforcement agency and requires the set-up of an Advisory Board to provide enforcement function advice, with membership made up of persons representing trade unions, employers and independent experts. The Secretary of State will be required to consult the Advisory Board in its preparation and publication of its three-yearly labour market enforcement strategy and its annual reporting requirements.

The creation of such significant new state powers to be carried out by a single enforcement body may move the dial from an emphasis on the enforcement of individual workers’ rights to proactive state enforcement of certain fundamental rights on behalf of workers. For example, existing non-compliance risks in respect of holiday pay are likely to be magnified as the new agency could proactively investigate and enforce (for example using its powers to issue notices of underpayment or by bringing proceedings) such rights to holiday pay without the need for an individual worker to bring a claim.

On the flip side, having a ‘one stop shop’ for employment guidance and support could help an already fragmented and complicated system where employers must go to multiple agencies for assistance.

Regardless, it will no doubt take a while for the Fair Work Agency to be set up and its effectiveness will largely depend on how it is resourced – although the recent additions enabling the recouping of enforcement costs from liable parties may help with its ongoing funding.

Regulatory Enforcement Unit for Equal Pay

The Next Steps document indicates that the Government will implement an Equal Pay Regulatory and Enforcement Unit, which will be detailed in the Equality (Race and Disability) Bill. A call for evidence launched on 7 April 2025, states that the Government is considering carefully how enforcement of the equal pay scheme could be improved, including through the establishment of the Equal Pay Regulatory and Enforcement Unit with the involvement of trade unions. It is considering the best ‘home’ for the unit, as well as its functions. We wait to see the outcome of the call for evidence.

Employment Tribunal

The Employment Tribunal will remain the primary way for individuals to enforce individual employment rights for complex cases or contract disputes. The Plan to Make Work Pay suggests that the Government will work further to digitise the employment tribunal process but it has not suggested that it will increase investment in the tribunal system, which gives rise to a concern that the expansion of employment rights will slow down the tribunal process significantly and add to the backlogs, causing more delays in dealing with claims. This is not set out in the Employment Rights Bill.

Currently, the time limits for filing most Employment Tribunal claims are three months, save for some claims such as equal pay, which have a six-month period to bring a claim. A Government amendment to the Employment Rights Bill, agreed at Committee Stage, will amend the time limit for all types of employment tribunal claims in Great Britain from three to six months – which is not an insignificant change for employers (and employees) alike. Whether or not this will lead to an increase in the number of claims being brought as employees who were previously timed-out will have longer to bring a claim, or a decrease as it gives employers and employees longer to settle any issues, waits to be seen.

In addition, there is now a new power for the Fair Work Agency to step into the shoes of a worker and bring proceedings on the worker’s behalf (see the ‘Single Enforcement Body’ subsection above).

Collective Grievances and Compensation Caps

The Government has previously proposed to make it easier for workers to raise workplace grievances by enabling employees to “collectively raise grievances” about conduct in their place of work to Acas. This would be a big change as grievances currently are managed on an individual basis between employer and employee. This reform is now part of the Government’s longer-term plans to consult with Acas on enabling employees to collectively raise grievances about conduct in their place of work. 

In the original New Deal (the iteration before the Plan to Make Work Pay), Labour mentioned removing the caps on compensation that workers receive. Recent publications have been silent on compensation caps, as is the Employment Rights Bill. However, the maximum protective award for failure to collectively consult will be doubled to 180 days (see sections on Fire and rehire and Redundancy collective consultation) and the Government has promised to consult on the compensation regime for successful unfair dismissal claims during the new statutory probation period (or IPE).

Timing and developments

Fair Work Agency

Included in the Employment Rights Bill. The powers to set up the agency are set out and have been significantly increased following amendments published on 5 March 2025, and would require commencement regulations to come into force. However, setting up the new executive agency will involve transfers from existing bodies and so may take some time to do.  

Regulatory Enforcement Unit

Not included in the Employment Rights Bill and will instead likely be included in the Equality (Race and Disability) Bill following closure of the call for evidence.

Await developments.

Employment Tribunal

Changes to time-limits have been included in the Employment Rights Bill.Implementation is currently anticipated no earlier than 2026, though firm details on timing have not yet been provided.

Await developments.

Collective grievances

Not included in Employment Rights Bill.This reform will be part of the Government’s longer-term plan – as the Government recognises that it will take longer to consider how to make changes and implement them. The Government has committed to consulting with Acas. Await developments.

Compensation caps

Not included in Employment Rights Bill.However, the increase to the maximum protective award if an employer is found to not have properly followed the collective redundancy process has been added by way of amendment to the Employment Rights Bill on 5 March 2025.

Await developments.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Employment Rights Bill, Next Steps to Make Work Pay, Consultation on 21 October 2024,  Response to this consultation on 4 March 2025, Fact sheet, 5 March 2025 amendments to the Employment Rights Bill, Call for evidence 7 April 2025.

Umbrella Companies

Policy

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 decided to take steps to reform the umbrella company market. It has:

  • Introduced an amendment to the Employment Rights Bill to expand the  definition of ‘employment businesses’ to include umbrella companies.
    • The Employment Rights Bill allows for the regulation of umbrella companies, and for state enforcement by the Employment Agency Standards Inspectorate (and subsequently, the Fair Work Agency) by expanding the definition of employment businesses to include such umbrella companies.
    • Existing laws that regulate the conduct of employment agencies and businesses, include: (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.
    • The debate regarding the proposed amendments to the Employment Rights Bill on 11 March 2025 and the subsequent Fact Sheet published on 27 March 2025 suggests that the Government will consult on whether amendments to those regulatory obligations should be made to ensure they are “appropriate for application to umbrella companies and address the main harms identified in this sector (for example, lack of pay transparency and difficulty in enforcing employment rights and obligations).” No indication was given as to when this consultation might happen or how obligations may be varied.
  • Promised to legislate separately (following consultation, which is anticipated this year) to transfer responsibility to account for PAYE and National Insurance Contributions from the umbrella company that employs the worker, to either:
    • the recruitment agency that supplies the worker to the end client; or
    • where there is no agency in a labour supply chain, to the end client.

The Government has indicated this will not prevent umbrella companies being used to operate payroll on behalf of the recruitment agency or end-client but means that legal responsibility for any unpaid amounts will rest with the recruitment agency or end-client, as applicable. The Government intends for this change to take effect from April 2026 (see the Pay and Tax section for more information).

Timing and developments

Included in the Employment Rights Bill following amendments on 5 March 2025. Commencement regulations will be required to bring the provision amending the employment business definition into force. Firm details on timing have not yet been provided but it is anticipated to be implemented by 2026.

The Government has said that the change to the tax position will be brought into force from April 2026, although legislation has not yet been introduced.

Await developments.

Sources

Response to consultation on tackling non-compliance in the umbrella company market 4 March 2025, 5 March 2025 amendments to the Employment Rights Bill.

Annual Leave Records

Policy

Not included in the original draft of the Employment Rights Bill, but on 5 March 2025 the Government introduced an amendment that will require employers to keep records to demonstrate compliance with certain obligations in respect annual leave and pay under the Working Time Regulations 1998.

Like other requirements in respect of record keeping for working time, employers must keep records that are ‘adequate’ and retain them for six years. The records must be created, maintained and kept by employers in such manner and format as the employer reasonably thinks fit.

If an employer fails to comply with this duty it will be an offence, punishable by a fine. This will also become part of the enforcement remit of the Secretary of State which will be delegated to the new FWA enforcement agency once established.

Timing and developments

Included in the Employment Rights Bill following amendments on 5 March 2025. Commencement regulations will be required to bring the provision amending the employment business definition into force. Firm details on timing have not yet been provided but it is anticipated to be implemented by 2026.

Await developments.

Sources

5 March 2025 amendments to the Employment Rights Bill.

Family Friendly Rights

Policy:

Previously, the Government said in the Background Briefing to the King’s Speech that it will be “strengthening protections for new mothers by making it unlawful to dismiss a woman who has had a baby for six months after her return to work, except in specific circumstances” –  such circumstances were not set out.

The accompanying explanatory notes lay the grounds for the Government’s intention though, which 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. It will also expand existing powers in relation to adoption leave, shared parental leave, neonatal care leave and bereaved partners paternity leave to enable regulation of dismissal in the period after a person returns to work after taking one of these forms of leave.”

Although powers in respect of this are included in the Employment Rights Bill, the Bill itself does not provide much more clarity at stage, instead leaving the details to be set out in regulations. Amendments to the Employment Rights Bill empower the Government to make provisions about the procedures to be followed by employers (such as notices to be given and evidence the employer will need to produce) and the consequences of failing to follow those procedures. However, we still await details.

The policy intent behind the proposal, therefore, is to reduce the number of dismissals of pregnant women and mothers who are returning from maternity leave in addition to other types of leave. However, the impact of these proposed changes and how much further they will go further than current law will depend on the detail, including what specific circumstances will be excepted.

Currently, the law does not grant special protected status to employees in these circumstances (i.e. a woman can still be fairly dismissed during pregnancy), provided that the reason for the dismissal is not on discriminatory grounds and save for the particular priority protections afforded in a redundancy situation where an employee must be offered a suitable alternative vacancy if one is available. See how the law has recently expanded on this point here.

Timing and developments:

Included in the Employment Rights Bill.

Details are subject to further regulations. The related impact assessment states that  consultation with stakeholders will be carried out on options for delivering the enhanced dismissal before finalising the approach, which will be set out in regulations.

The above rights are referred to as ‘immediate’ changes in the Next Steps document – perhaps indicating that this is expected to be earlier in the Government’s implementation timeline than most changes in the Employment Rights Bill anticipated for no earlier than 2026. However, given that consultation will be undertaken prior to regulations, implementation earlier than 2026 may be ambitious. In any event, firm details on timing have not yet been provided.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Employment Rights Bill, Next Steps to Make Work Pay, impact assessment, 5 March 2025 amendments to the Employment Rights Bill.

Parental leave system

Policy:

The Government promised previously to review the parental leave system within the first year of Government. The Next Steps document makes this clear that this is a longer-term reform from Autumn 2024 and onwards, so this may not be within the first year of Government.

See the day one employment rights and unfair dismissal section for proposals in respect of unpaid parental leave and paternity leave in the Employment Rights Bill.

Timing and developments:

Not included in the Employment Rights Bill.

This reform will be part of the Government’s longer-term plan as it recognises that it will take longer to consider how to make changes and implement them.  It has committed to conducting a full review on this topic.

Await developments.

Sources

Plan to Make Work Pay and Labour Party Manifesto, Next Steps to Make Work Pay.

Paid carer’s leave

Policy:

The Government promised previously to review the recently introduced Carer’s Leave and potentially expand it to a right to paid leave whilst “being mindful of the impact of any changes on small employers”. The Next Steps document makes this clear that this is a longer-term reform from Autumn 2024 and onwards, so this may not be within the first year of Government.

See the day one employment rights and unfair dismissal section for proposals in respect of unpaid parental leave and paternity leave in the Employment Rights Bill.

Timing and developments:

Not included in the Employment Rights Bill.

This reform will be part of its longer-term plan – as the Government recognises it will take longer to consider how to make changes and implement them.  It has committed to conducting a review on this topic.

Await developments.

Sources

Plan to Make Work Pay, Next Steps to Make Work Pay.

Bereavement leave

Policy:

Currently, there is no general right to bereavement leave, save that:

  • 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; and
  • there is also the right to reasonable time off for family and dependents in an emergency, although this is unpaid.

Many employers of course currently choose to offer some form of compassionate leave (which may be paid or unpaid) for staff if they lose a family member.

The Employment Rights Bill:

  • Introduces a new statutory right to bereavement leave (which encompasses the existing right to parental bereavement leave and parental bereavement pay accordingly).
  • Will give the power for regulations to be made allowing employees who satisfy certain conditions as to the relationship with a person who has died, the right to take at least one week’s bereavement leave. This is a right from day one of employment. 
  • Does not currently create a corresponding right to bereavement pay in these circumstances, leaving it for employers to decide what, if any, pay to offer during such bereavement leave.

The Government has confirmed that employees will retain the right to take two weeks of leave in cases of the death of a child, as per the existing right to parental bereavement leave, and the existing entitlements to statutory parental bereavement pay will not be affected by the Employment Rights Bill.

A non-Government amendment to the Employment Rights Bill proposed by Sarah Owen MP (Labour) proposed to extend the existing right to parental bereavement leave (and pay where the conditions are met) to situations where there is a pregnancy loss (such as miscarriage, ectopic pregnancy etc) during the first 24 weeks’ of pregnancy. Although this amendment has not been taken forward in its form into the version of the bill presented to the House of Lords, Justin Madders during the Report Stage debates confirmed that the Government “fully accept[s] the principle of bereavement leave for pregnancy loss, as addressed by the amendments. We look forward to further discussions with my hon. Friend and noble Lords as the Bill moves on to its stages in the other place. Bereavement is not an illness or a holiday, and it needs its own special category.” It seems then, that although the wording has not been agreed that the Government is committing to extending parental bereavement leave to cover pregnancy loss.

Timing and developments:

Included in the Employment Rights Bill.

Further regulations will be required as to the detail of the right, in particular what relationship to the person would be required in respect of the bereavement – although one would assume that the Government would use the existing definition of ‘dependant’ for these purposes. It is unclear whether this is one of the targeted areas on which the Government plans to consult in 2025.

Bereavement leave was referred to as an ‘immediate’ change in the Next Steps document, perhaps indicating that this is expected to be earlier in the Government’s implementation timeline than most changes in the Employment Rights Bill, which are anticipated for 2026. However, given that regulations are required, implementation earlier than 2026 may be ambitious. In any event, firm details on timing have not yet been provided.

Sources

Plan to Make Work Pay, Employment Rights Bill, Next Steps to Make Work Pay, 5 March 2025 amendments to the Employment Rights Bill.

Pay Gap Reporting

Policy

The Government has said it wants to tackle equal pay and sees gender pay gap reporting as a way of achieving this. The Employment Rights Bill includes some measures in respect of gender pay gap reporting, with the remainder to be included in the Equality (Race and Disability) Bill.

The Employment Rights Bill makes amendments to the Equality Act 2010 (both of which will be subject to regulations) to:

  • Require large employers (those with 250 or more employees) to develop and publish equality action plans showing the steps they are taking in relation to their employees with regard to prescribed matters related to gender equality, which includes addressing the gender pay gap and supporting employees going through the menopause. 
  • Introduce the ability to make regulations on the information about outsourced workers that needs to be included in gender pay gap reporting, including, “among other things”, the identity of the providers of contract workers with whom the employer engages.

Additional reforms to pay gap reporting, anticipated in the Equality (Race and Disability) Bill, include extending pay gap reporting (applicable to large employers with 250 or more employees) to include mandatory ethnicity and disability pay gap reporting. The Government opened a consultation on 18 March 2025 and has said responses to the consultation will shape the legislation. The consultation commits to introduce mandatory ethnicity and disability pay gap reporting for large employers, using a similar framework already in place for gender pay gap reporting but with distinct considerations for ethnicity and disability, particularly in data collection and analysis. The Government is currently proposing:

  • To apply key aspects of the gender pay gap reporting rules to ethnicity and disability pay gap reporting, including using the same set of pay gap measures, using the same reporting dates, and applying the same enforcement policies.
  • That data collection for race and disability would be best achieved by voluntary reporting, with employees able to choose ‘prefer not to say’.
  • That covered employers should also have to report on the overall ethnic breakdown of their workforce, the breakdown of their workforce by disability status and the percentage of employees who did not disclose their personal data on ethnicity and disability.
  • To introduce certain additional reporting requirements for public bodies, including in relation to recruitment, retention and progression.
  • To apply a de minimis threshold for reporting on 10 employees in each ethnic group for ethnicity reporting and in each group being compared (e.g. disabled/non-disabled) for disability reporting for data privacy and identification reasons.
  • Whether employers should report on ethnicity as a minimum, on a binary classification basis using one of three proposed methods, (e.g. comparing White British employees with all other ethnic minority groups combined).
  • Whether employers should report on disability, using a binary approach reporting on differences in pay between disabled employees and non-disabled employees, rather than requiring reporting on the difference in pay between employees with different impairment types and non-disabled employees.
  • Whether equality action plans should also be produced by employers about what they are doing to improve workplace equality for ethnic minority employees and for disabled employees.

Reporting on ethnicity and disability poses inherent challenges. People are often reluctant to disclose that they are disabled or do not accurately report their status because they do not to understand the legal definition of disability. Also, there is a tension between balancing the risk of being able to identify individuals, and reporting meaningful data, particularly where there are smaller data groups.

Timing and developments

Equality action plans for gender equality

Included in the Employment Rights Bill. Further regulations will be required as to the detail of the action plans (including the form and manner and how frequently they should be produced) and what information is required in relation to outsourced workers.

It is unclear whether this is one of the targeted areas on which the Government plans to consult in 2025.

Implementation currently anticipated for no earlier than 2026, though firm details on timing have not yet been provided.

Extending pay gap reporting to ethnicity and disability

Not included in the Employment Rights Bill.

Consultation opened on 18 March 2025 and closes on 10 June 2025. The consultation will inform the provisions to be included in the Equality (Race and Disability) Bill.

Await developments.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Employment Rights Bill, Next Steps to Make Work Pay, Consultation 18 March 2025.

Equal Pay

Policy

The Government has indicated that it wants to tackle equal pay.

The Next Steps and Plan to Make Work Pay documents set out reforms in respect of equal pay that will be delivered through the Equality (Race and Disability) Bill and so are not included in the Employment Rights Bill. A call for evidence seeking views on making the right to make equal pay effective for ethnic minority and disabled people and other areas of equality law that will shape the contents of the Equality (Race and Disability) Bill was launched on 7 April 2025 and closes on 30 June 2025.

The proposed reforms include:

  • Extending the ability to bring equal pay claims to ethnicity and disability. This is currently limited to sex, although of course individuals currently have recourse by bringing a direct or indirect discrimination claim for these protected characteristics depending on the circumstances. The call for evidence suggests that the Government is considering whether the existing equal pay scheme provides the right model for these expanded equal pay rights, whether these rights should instead be given force by an amended version of the scheme or whether a different approach may be best. As part of this, the Government has said it is giving particular attention to whether the rules of procedure governing how equal pay claims are heard and the use of job evaluation schemes could be simplified or adjusted for these claims.
  • Changing equal pay law to ensure that outsourcing of services can “no longer be used by employers to avoid paying equal pay.” The detail of this has not been set out for certain, but the call for evidence indicates that the Government is exploring “enabling comparisons between outsourced workers and ‘in house’ employees in equal pay claims”. The Government explains that the term outsourced workers could cover a broad range of scenarios including traditional outsourcing of services through an external service provider, the use of arrangements such as subcontracting, umbrella companies, labour providers or employment agencies. This may involve employees working for a principal company being transferred to an external provider to provide a service and also scenarios where those workers have never been employed by the principal company. The Government is also seeking views on where liability should lie for equal pay claims made by outsourced workers.
  • Implement a Regulatory Enforcement Unit for equal pay with involvement from Trade Unions (see the enforcement section).

The recent call for evidence on 7 April 2025, also seeks views on improving pay transparency to see whether additional pay transparency measures, similar to some of the measures set out in the Pay Transparency Directive in the EU, to improve pay equality not only on the basis of sex and also race and disability. The call for evidence is also seeking views on the effectiveness of the current regime under the Equality Act 2010 (Equal Pay Audits) Regulations 2014, whereby employers who have been found by an Employment Tribunal to have committed an equal pay breach are required to carry out an equal pay audit in certain circumstances. It is considering whether the requirements to undertake equal pay audits should be expanded to cases where pay discrimination has been found in relation to race and disability, alongside sex and maternity.

Timing and developments

Not included in the Employment Rights Bill.

Call for evidence launched on 7 April 2025 in respect of the provisions to be included in the Equality (Race and Disability) Bill, closes on 30 June 2025.

Await developments.

Sources

Plan to Make Work Pay, Labour Party Manifesto and Background Briefing Notes to King’s Speech, Next Steps to Make Work Pay, Consultation 18 March 2025, Call for evidence 7 April 2025.

Menopause

Policy

The Employment Rights Bill introduces a new duty for large employers (those with 250 or more employees) to develop and publish equality action plans showing the steps they are taking in relation to their employees with regard to prescribed matters related to gender equality, which includes addressing the gender pay gap and supporting employees going through the menopause. Further regulations will be required as to the detail of the action plans to be published (including the form and manner and how frequently).

In addition, in the Next Steps document, the Government promises to develop menopause guidance for employers as part of its existing powers and non-legislative reforms.

Timing and developments

Equality action plans

Included in the Employment Rights Bill. Further regulations will be required as to the detail of the action plans (including the form and manner and how frequently) and what information is required in relation to outsourced workers (see the pay gap reporting section).

It is unclear whether this is one of the targeted areas on which the Government plans to consult in 2025.

Implementation currently anticipated for no earlier than 2026, though firm details on timing have not yet been provided.

Guidance

This can be delivered outside of the legislative process (said to be delivered from Autumn 2024 onwards).

Sources

Plan to Make Work Pay, Employment Rights Bill, Next Steps to Make Work Pay.

Pay & Tax

Policy

Strengthen Statutory Sick Pay

See the day one employment rights and unfair dismissal section of the reform hub.

National Minimum Wage

The Government has promised to deliver a genuine living wage that accounts for the cost of living. It has changed the Low Pay Commission’s remit to factor in the cost of living when recommending minimum wage rates. It has also instructed the Low Pay Commission to narrow the gap between the minimum wage rate for 18-20 year-olds and the National Living Wage as a first step towards achieving a single adult rate.

As a result, the following changes are now applicable from 1 April 2025:

  • Daily accommodation offset will increase from £9.99 to £10.66.
  • National Living Wage (21 and older) will increase from £11.44 to £12.21 an hour.
  • National Minimum Wage for 18 to 20-year-olds will rise from £8.60 to £10.00 an hour.
  • National Minimum Wages for Under 18s and Apprentices will increase from £6.40 to £7.55 per hour.

Tax and National Insurance Contributions (‘NICs’)

The Labour Party’s manifesto said that there would be no increase to NICs, the basic, higher, or additional rates of Income Tax, or VAT.

The Autumn Budget on 30 October 2024 announced:

  • No increases to Income Tax Rates (basic, higher or additional rates).
  • No increases to employee NICs or VAT.
  • Income Tax and NIC personal allowance thresholds will remain frozen until the 2028 deadline set by the Conservative Government. From April 2028, these will be uprated in line with inflation.
  • The rate of employer NICs has been increased by 1.2 percentage points, from 13.8% to 15% from 6 April 2025.
  • The Secondary Threshold – the per-employee threshold at which employers become liable to pay NICs on each employee’s salary has been reduced from £9,100 per year to £5,000 per year from 6 April 2025 until 6 April 2028 and then will increase by CPI thereafter.
  • The Employment Allowance has also increased from £5,000 to £10,500 on 6 April 2025 and is extended to all eligible employers by removing the £100,000 threshold for eligibility. Meaning that 865,000 employers will pay no NICs from this year.

Internships and Apprenticeships

The Government has indicated it wants to ban unpaid internships, except when they are part of an education or training course. The Government planned to launch a call for evidence on this by the end of 2024, but this is awaited.

The Government has announced it wants to make changes to the funding of apprenticeships in England. The Government plans to replace the existing apprenticeship levy with a new growth and skills levy – but details are awaited.

Private Equity

The manifesto said that “private equity is the only industry where performance-related pay is treated as capital gains. Labour will close this loophole.” Provision for this was specifically included in its fiscal plan in the manifesto too.

The Government introduced a call for evidence on this topic, which closed on 30 August 2024. It was announced in the Autumn Budget 2024 that there will be a phased approach to reforms in respect of the tax treatment of carried interest:

  • Phase one – Capital Gains Tax rates on carried interest increased to 32% from 6 April 2025; and
  • Phase two – from April 2026 carried interest will be taxed fully within the Income Tax framework, with ‘bespoke rules.’

This will have an impact on the incentivisation structures in Private Equity.

Capital Gains Tax (‘CGT’)

It was announced in the Autumn Budget 2024 that for CGT:

  • Lower rate – increase from 10% to 18% for qualifying disposals made on or after 30 October 2024; and higher rate – increase from 20% to 24% for qualifying disposals made on or after 30 October 2024.
  • These new rates match the residential property rates, which are unchanged at 18% for the lower rate and 24% for the higher rate.
  • The rate for Business Asset Disposal Relief and Investors’ Relief increased to 14% from 6 April 2025 and will increase again to match the lower main rate at 18% from 6 April 2026.

Tackling Tax Non-Compliance in the Umbrella Company Market

Alongside the Autumn Budget 2024, the Government published a policy paper indicating that it will legislate to change the responsibility for who must account for Pay As You Earn (‘PAYE’) and NICs where an umbrella company is used in a labour supply chain to engage a worker. This has also been confirmed by the Government in its response to the previous Government’s 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). See the Umbrella Companies section for details on the changes proposed.

Timing and developments

Minimum wage

New rates increased on 1 April 2025.

Tax and NICs

Timings vary but increases to employer NICs apply from 6 April 2025.

Unpaid internships and apprenticeships

Plans to launch a call for evidence on unpaid internships was promised for later in 2024 but this is seemingly delayed. Introduction of the new growth and skills levy and other apprenticeship reforms likely to commence during 2025/26 – although timings are not yet known.

Private equity carried interest

Phase one of CGT rate increases apply from 6 April 2025. Phase two of taxing carried interest as Income Tax will apply from April 2026.

Capital Gains Tax

Increase to rates apply to qualifying disposals made on or after 30 October 2024.

Tax responsibility in umbrella companies

April 2026. The Government has also said it will set out full details of how this measure will operate in the coming months, alongside draft legislation which it will consult upon.

Sources

Plan to Make Work Pay, Labour Party Manifesto, Background Briefing Notes to King’s Speech, separate announcement on 30 July 2024 and call for evidence, Employment Rights Bill, Next Steps to Make Work Pay, Skills England Report,  Response to consultation on tackling non-compliance in the umbrella company market 4 March 2025.

Whistleblowing, Discrimination & Harassment

Policy

The Government has previously laid out some policy intentions in respect of strengthening protections for whistleblowers and in respect of third-party harassment and sexual harassment. It also proposed to bring into force certain provisions that are in the Equality Act 2010, but not (fully) in force. These are dealt with in turn below.

Whistleblowing and non-disclosure agreements (‘NDAs’)

The Government previously promised to strengthen protection for whistleblowers, “including by updating protection for women who report sexual harassment at work.”

Currently, there are already protections against victimisation at work for raising a complaint of sexual harassment under the Equality Act 2010.

The Employment Rights Bill amends the list of disclosures qualifying for protection under whistleblowing laws to include sexual harassment. Workers who make a disclosure of information about sexual harassment that has occurred, is occurring, or is likely to occur will now be explicitly covered by whistleblowing protections (such as protections from detriment or dismissal), if they have a reasonable belief that their disclosure is in the public interest.

The change also means that NDAs will not be able to prevent such protected disclosures from being made, something which has been a hot topic in the press for some time.

Third party harassment

In a significant change, the Employment Rights Bill (re)-introduces protection against third party harassment relating to all the protected characteristics covered by harassment (so not just sexual harassment). Employers will be liable if a third party harasses an ’employee’ (a broader definition under the Equality Act 2010 including employees, workers and apprentices) in the course of their employment and the employer failed to take all reasonable steps to prevent the third party from doing so.

On the current drafting, an employer could be liable for a single act of third party harassment – unlike the previous third party harassment provisions in the Equality Act 2010 that were repealed in 2013, which provided that employers were not liable for third party harassment unless there had been at least two other incidents of harassment by a third party.

Notably, provisions seeking to introduce third party harassment were previously dropped during the passing of the Worker Protection (Amendment of Equality Act 2010) 2023 (the ‘Worker Protection Act’) under the previous Conservative Government given some of the practical difficulties that this could have for employers.

Sexual harassment

The Worker Protection Act, which came into force on 26 October 2024, introduces a legal duty on employers to take reasonable steps to prevent sexual harassment of employees (under the broader Equality Act 2010 definition) in the course of their employment. The Employment Rights Bill will increase this new obligation so that employers must take “all reasonable steps” to prevent sexual harassment.

What will entail “all reasonable steps” awaits to be seen.  If the requirement for these steps is akin to the “all reasonable steps defence” for employers to avoid vicarious liability, then this is a high hurdle, as an employer will not be considered to have taken all reasonable steps if there are any further steps that they could reasonably have taken. However, the Employment Rights Bill includes new powers for regulations to be made to specify what steps are to be regarded as ‘reasonable’. A call for evidence launched on 7 April 2025, is seeking evidence of effective steps employers can take to reduce and/or prevent sexual harassment to feed into these regulations. This may help employers have a better understanding of what will be required to satisfy this higher duty.

In addition, the call for evidence is looking at extending legal protection from sexual harassment to volunteers, which are not currently covered by such protections in the Equality Act 2010.

Public sector socio-economic duty and dual discrimination

The Government has previously said it would bring into force certain provisions in the Equality Act 2010. A call for evidence launched on 7 April 2025 confirms that the Government is committed to bringing into force the following:

  • Protections against dual discrimination, i.e. where discrimination is because of a combination of two relevant protected characteristics, in section 14 of the Equality Act 2010 (which has never been brought into force since the Equality Act 2010 became law).
  • Public sector socio-economic duty in section 1 of the Equality Act 2010 in England (it is currently in effect in Scotland and Wales and some councils in England have voluntarily adopted it). This requires specified public authorities when making decisions of a strategic nature about how to exercise its functions, to have due regard to the desirability of exercising them in a way that is designed to reduce the inequalities of outcome which result from socio-economic disadvantage.

Timing and developments

Whistleblowing, third party harassment and sexual harassment

Included in the Employment Rights Bill. Further regulations are awaited to specify what steps are to be regarded as ‘reasonable’ in respect of the duty to prevent sexual harassment. It is unclear whether this is one of the targeted areas on which the Government plans to consult in 2025.

Implementation currently anticipated for no earlier than 2026, though firm details on timing have not yet been provided.

Public sector socio-economic duty and dual discrimination

Not in the Employment Rights Bill. Subject to a call for evidence launched on 7 April 2025. As these are essentially lying dormant on existing statute books, these could be enacted quickly via. the Equality (Race and Disability) Bill.

Await developments.

Sources

Plan to Make Work Pay, Employment Rights Bill, Next Steps to Make Work Pay, Call for evidence 7 April 2025.

Health & Safety

Policy

There are no provisions in the Employment Rights Bill, but the Next Steps document indicates that the Government will:

  • consult on how to extend health and safety protections for the self-employed; and
  • review health and safety guidance and regulations to modernise them, looking at neurodiversity awareness in the workplace, how to update with respect to extreme temperatures, whether existing regulations and guidance is adequate to support and protect those experiencing the symptoms of long COVID, and to ensure health and safety reflects the diversity of the workforce.

Timing and developments

Not included in the Employment Rights Bill.

Some early changes to health and safety guidance could potentially be delivered earlier as part of the Government’s non-legislative delivery of reforms if the Government were minded to do so. Although, a review of the guidance and regulations is promised ‘in due course’ as part of the longer-term delivery of reforms. The Government has also promised to consult on extending protections to the self-employed.

Await developments.

Sources

Plan to Make Work Pay, Next Steps to Make Work Pay.

Data Privacy & AI

Policy

AI

The King’s Speech said that it will “seek to establish the appropriate legislation to place requirements on those working to develop the most powerful artificial intelligence models” – this is not included in the Employment Rights Bill but has been anticipated in as a separate AI Bill.

The Plan to Make Work Pay, also included some comments about AI in the workplace, saying:

  • it recognises the importance of new technologies including AI but that it sees that it can also pose risks to jobs and livelihoods;
  • it wants to ensure rights and protections keep pace with technological change, safeguard against discrimination and put the worker voice at the heart of digital transition;
  • it would work with workers and unions to safeguard against the invasion of privacy through surveillance technology, spyware and discriminatory algorithmic decision making; and
  • at a minimum, it will ensure that proposals to introduce surveillance technologies would be subject to consultation and negotiation, with a view to agreement of trade unions or staff representatives (see the Collective bargaining and trade unions section).

The Government may perhaps look to the TUC’s draft AI Bill for inspiration for any domestic rules here on the use of AI systems by employers in relation to workers, employers and jobseekers.  

Since the King’s Speech and the Plan to Make Work Pay’s publication, there have been some developments to AI (although not all directly employment-related) which demonstrate the Government’s ever-changing position in respect of AI. These include:

  • On 5 September 2024 the Government and the EU announced their signature of an international convention in respect of Artificial Intelligence and Human Rights, Democracy and the Rule of Law.  As part of the Government’s announcement on this, it confirmed that it will work closely with regulators, the devolved administrations, and local authorities as the convention is ratified to ensure it can appropriately implement the new requirements.
  • In December 2024, the Government has also launched a new consultation relating to AI and copyright, which also includes consideration on the regulation of deep fakes, transparency of AI systems and labelling of generative AI outputs. The aim of the consultation is to set out the “plan to deliver a copyright and AI framework that rewards human creativity, incentivises innovation and provides the legal certainty required for long-term growth in both sectors” – clearly seeking to balance innovation and regulation. This consultation closed 25 February 2025.
  • On 13 January 2025, the Government published its AI Opportunities Action Plan, with which it hopes to “position the UK to be an AI maker.” Although it is not yet clear what (if any) specific actions will arise from this plan at this stage, the Government sees AI as a way to achieve economic growth and improve skills.  
  • In February 2025 it was reported that the UK (along with the US) refused to sign a declaration on the international AI statement at the global AI summit in Paris. Signatories to the statement affirmed priorities such as reinforcing international co-operation and ensuring that AI is open, inclusive, transparent, ethical, safe, secure and trustworthy, considering international frameworks.
  • Recent press reports from late February 2025, have now also indicated that the Government’s plans to introduce an AI Bill “to place requirements on those working to develop the most powerful artificial intelligence models”, is on hold (or dropped) in an alignment with the US’s position on the regulation of AI under President Trump’s government. Perhaps indicating more of a political alignment with the US on AI regulation more generally.
  • As a final note, the new Data (Use and Access) Bill (the ‘DUA Bill’) is currently making its way through the Parliamentary process. Although much of this Bill relates to data protection (see below), it does propose to relax the restrictions on automated decision-making resulting in current restrictions only applying in relation to special category data.

Data Privacy

As mentioned above, the DUA Bill separately proposes some reforms in respect of data privacy and AI that, although not necessarily linked to the Plan to Make Work Pay, may be of interest to employers.

Although much of the DUA Bill is not employment related, there are some key changes that are of note from an employment perspective, including:

  • Introducing an exhaustive list of ‘recognised legitimate interests’ on which businesses can rely by default as a lawful ground for processing ordinary personal data.
  • Relaxing the test for data transfers to third countries where the standard of protection is ‘not materially lower’ than that of the UK.
  • Clarifying the principles relating to DSARs (specifically in respect of timing, extensions and stopping the clock), and confirmation that complaints must first be sent to employers before escalating to the Information Commissioner.
  • Replacing the ICO with the Information Commissioner and clarifying its powers.
  • Finally, as mentioned above, relaxing the restrictions on automated decision-making resulting in current restrictions only applying in relation to special category data.

Note that the EU-UK adequacy decision on data transfers (allowing for the transfer of data between the EU and the UK) was due to expire on 27 June 2025, but is likely being extended by six months to 27 December 2025 to allow for the passage of the DUA Bill. Accordingly, the EU will need to reconfirm that the UK continues to provide an equivalent level of data protection as the EU. It has been suggested that the changes recommended by the DUA Bill may undermine the UK’s adequacy status, which could result in companies needing to implement alternative measures to transfer data from the EU to the UK, but this has not been confirmed.

Timing and developments

AI

Partly mentioned in King’s Speech. To be considered further in the new consultation and AI Opportunities Action Plan. Small changes to automated decision-making in the DUA Bill. AI Bill reported to largely be on hold.

Await developments on key reforms.

Data privacy

The DUA Bill was published on 23 October 2024 and is currently going through the House of Commons (having started in the House of Lords). It is expected to be passed before Summer 2025. EU-UK adequacy decision due for renewal on 27 June 2025.

Sources

Plan to Make Work Pay and King’s Speech, Announcement on 5 September 2024, AI Opportunities Action Plan, Copyright and Artificial Intelligence consultation, Data (Use and Access) Bill.

Immigration

Policy

The Labour Party Manifesto promises to reduce net migration by reforming the points-based immigration system “with appropriate restrictions on visas and by linking immigration and skills policy.”

The Government is planning to publish an immigration White Paper on legal migration policy. It was announced that this would be published in early 2025 and had originally been expected before Parliament rose for the Easter recess, but it is now not expected until after the local elections in May 2025.

Current policy proposals include:

  • Review of IT and engineering roles – In August 2024, the new Government asked the Migration Advisory Committee (‘MAC’ – the independent expert body which advises the Government on immigration policy) to review UK employers’ reliance on international recruitment for engineering, IT and telecommunications roles. This is expected to be the first of several reviews focusing on sectors heavily dependent on business immigration. MAC will report on engineering, IT and telecommunications roles in nine months’ time (June 2025) to allow for stakeholder input and industry feedback.
  • Regional differences – MAC has also been asked to explore differentiated regional immigration approaches in the tech roles review.
  • Sponsoring Skilled Workers – The Home Secretary delivered a statement to the House of Commons, which promised to keep most of the previous Government’s five-point plan to reduce immigration to the UK including the recent increased to the general salary threshold of those arriving on Skilled Worker visas.
  • Skills review linked to immigration – A new body called Skills England will be introduced via the ‘Skills England Bill’, which will “work with industry, the Migration Advisory Committee, unions and the Industrial Strategy Council to build and maintain a comprehensive assessment of current and future skills needs.” Skills England is currently set up in shadow form within the Department for Education (DfE) with plans to be fully established in 2025.
  • Sponsor licence compliance – The Government has promised stricter enforcement against employers who abuse the visa system. In 2024, UK Visas & Immigration revoked 1,620 licences to sponsor workers and temporary workers, compared with 347 in 2023 (an increase of 367%).  Suspensions of licences for workers and temporary workers also increased 215%.
    • Increased sponsor licence enforcement has particularly affected the care sector as part of a crack down on worker exploitation.  Revocation of sponsor licences has left approximately 39,000 care workers without sponsorship or work.  The Government has therefore introduced a new requirement that employers seeking to sponsor new care workers from outside the UK must have tried and failed to recruit first from the existing pool of those workers already in the UK who need new sponsorship.
  • Graduate visas and the Youth Mobility Scheme – The previous Government ruled out changes to the Graduate route after consultation with the MAC, a conclusion that was agreed by Labour.  However, there are suggestions that the Graduate route could face changes in the upcoming White Paper, including restricting them to working in higher skilled/paid occupations.  Meanwhile, although the Government has not confirmed any proposals, media reports suggest that a short-term Youth Mobility option for EU citizens is being discussed.
  • Family visas – The current income requirement to sponsor a partner on a family visa is likely to stay at £29,000 while the MAC reviews financial requirements. The MAC is expected to report in July 2025.

Timing and developments

Partly mentioned in King’s Speech and more recent communications. Not included in the Employment Rights Bill.

White Paper expected after 2025 local elections.

Await developments but some areas likely to be higher priority than others.

Sources

Labour Party Manifesto, King’s Speech, Statement 30 July 2024, Department for Education, Sponsorship transparency data, New rules to prioritise recruiting care workers in England and Wales, 12 March 2025.

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News & Analysis

We set out the Employment Rights Bill's proposed changes to enforcement and consider if they will lead to a fundamental shift in the way employment rights are enforced.

Employment Rights Bill: Will the Establishment of the Fair Work Agency Lead to a Fundamental Shift in the Enforcement Landscape?

  • April 24, 2025
  • 15 min read

News & Analysis

We examine the Government's proposed changes to the collective redundancy consultation framework and the significant impact this could have for employers.

Employment Rights Bill: What Employers Need to Know About the Proposed Changes to Collective Redundancies

  • April 24, 2025
  • 10 min read

News & Analysis

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

Employment Rights Bill: The Latest Developments

  • March 31, 2025
  • 15 min read

Global Guide

The Global Guide Quarterly is designed to provide high-level coverage of recent labour and employment law developments.

Littler Global Guide – United Kingdom – Q4 2024

  • January 21, 2025
  • 5 min read

News & Analysis

The Employment Rights Bill (the “Employment Rights Bill”), has been making its way through Parliament and is currently going through the Commons Committee Stage.

UK Government seeks to extend Tribunal claim limitation periods from 3 to 6 months

  • December 11, 2024
  • 1 min read

News & Analysis

We look at the facts of the case, its history through the courts and its impact on employers.

Small-scale redundancies do not require “general workforce consultation”

  • November 27, 2024
  • 10 min read

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