Update on Employment Rights Bill

Employment Law Changes for 2026

The much-anticipated Employment Rights Bill has recently been passed by the House of Commons and has become the Employment Rights Act 2025 and is now before the House of Lords for consideration.  

Below are some of the main amendments that have been made to the Bill since it started its journey through the legislative system.   

Collective Redundancy Consultation

Currently, if an employer fails to comply with its obligations to collectively consult with employees in a redundancy situation, the employer can be liable for a protective award of up to 90 days’ pay for each affected employee.   This limit has now been extended to 180 days’ pay under the Bill.    This is quite a substantial increase and is aimed at trying to ensure that employers comply with their collective consultation obligations when proposing to make 20 or more employees redundant within a 90-day period.    Proposals to get rid of the protective award cap of 90 days entirely have, however, been scrapped.  Every cloud, as they say…

Another amendment proposed is to the requirement to collectively consult where 20 or more redundancies are proposed at “one establishment” within a period of 90 days.   

Originally it was intended to remove the reference to “any one establishment” so that employers would have to engage in collective consultation if planning to make more than 20 redundancies within 90 days across the whole company, not just at a certain location.   This proposal is no longer going ahead, but it is still intended to expand the situations in which collective redundancy consultation will be required.  

Under the new amendments, it will remain the case that collective redundancy consultation will be required if an employer proposes to make 20 or more redundancies at one establishment but, in addition, collective consultation will also be required if the employer meets a new threshold test which will involve counting proposed redundancies across the employer’s business as a whole (i.e. regardless of location).   

The details of these new thresholds have not been published yet.  It is likely that the threshold is going to be based on a set number of, or on a percentage of the employer’s workforce.   Either way, the obligation to engage in collectively consultation is going to be extended to far more redundancy situations than before and many businesses will find themselves in previously unchartered territory as a result. 

Statutory Sick Pay extended

As has been widely reported, under the amended Bill, those who earn less than the lower earnings rate (currently £123 increasing to £125 in April 2025) will receive the lower of the Statutory Sick Pay Rate (currently £116.75 per week increasing in April to £118.75 per week) or 80% of their average weekly earnings.    This will extend the right to receive SSP to over a million employees who currently do not receive anything if they are off sick from work.  

Plans to make SSP payable from the first day of sickness are also still going ahead.  Currently SSP is only payable from the fourth day of sickness – the first three days being “waiting days”. 

Introduction of the Fair Work Agency

The Bill is going to introduce a new government body which will be responsible for the enforcement of certain employment rights.   New details have been published in the draft Bill of the – surprisingly broad – powers that the Fair Work Agency (FWA) will have.  These include the power to send a notice of underpayment to an employer that has failed to pay contractual sums due to employees such as holiday pay, the national minimum wage or Statutory Sick Pay.   These notices will require the employer to pay the amounts owing within 28 days or face a hefty financial penalty.    Notices will not be issued in situations where there is litigation underway – in other words where the payments are disputed.

The Fair Work Agency will also be able to pursue certain employment claims on behalf of workers – even if they do not intend to pursue such claims themselves.  There is also a proposal that the government may provide legal assistance to workers to pursue such claims, with the ability to recover such legal costs if the individual is successful.   

No right to switch off

We can confidently report – by its absence in the Bill – that the plug has been well and truly pulled on the proposed “right to switch off” which would have given employees the right not to answer work calls or reply to other work communications outside normal working hours.  

Agency Workers included in new right to Guaranteed hours

One of the major legislative changes planned by the government from the outset is to give zero hours or “low hours” workers the right to request guaranteed hours.   The amended Bill now extends this right to agency workers.   The effect of this change is that it will prevent employers from attempting to get around the new right by hiring agency workers instead of directly employing staff.   The responsibility for offering guaranteed hours to qualifying agency workers will lie with the “end hirer” as opposed to the employment agency.  

Agency workers will also have the right, like zero hours workers, to be given reasonable notice of shifts.  The employment agency and the end hirer will be responsible for giving such notice.   Further, if agency workers’ shifts are cancelled, curtailed or moved at short notice, they will have the right to claim compensation, the same as zero hours workers.     Responsibility for paying any compensation will be on the employment agency, who will likely seek to recover such costs under their terms of business with the end hirer. 

Plans for major overhaul of employment rights continue

The government continues to press ahead with its other major employment law reforms which include:

1. the removal of the 2-year qualifying period for unfair dismissal and the introduction of a statutory probationary period during which a “light touch” dismissal process can be followed.    The government is consulting over how long this initial period will be…

2. The banning of firing and re-hiring practices unless the changes are required to prevent or significantly reduce financial difficulties affecting the business. 

3. The right of zero hours/low hours workers to request a “guaranteed hours” contract that reflects the hours worked by them over a 12-week period.

What next

It is expected that the Act will undergo further changes as it moves through the House of Lords although any amendments are unlikely to be dramatic.  It is anticipated that the Employment Rights Act 2025 will receive Royal Assent later this year although most of the amendments are unlikely to come into force until October 2026.  

If you have any questions about these changes and how they will affect your business, please get in touch with us.   We will keep you abreast of significant developments as and when they are announced.