The UK Employment Rights Bill is set to become law, requiring employers to review their policies and take swift action to ensure compliance.
Key takeaways
- The Employment Rights Bill bans exploitative "fire and rehire" tactics and extends employer liability to third-party harassment, among other far-reaching provisions.
- Employers will soon be required to offer zero-hours workers guaranteed hours and provide reasonable notice of shifts, or face tribunal claims.
- A new Fair Work Agency will have sweeping powers to investigate and fine employers, as well as bring claims on workers' behalf.
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Employers will soon be required to adapt to a range of new obligations introduced by the UK Employment Rights Bill (ERB), which is expected to receive Royal Assent next month. It contains over 30 measures to reform the UK’s employment landscape, addressing issues ranging from unfair dismissal to parental leave rights.
Since it was first introduced in October 2024, the ERB has undergone significant amendments, such as granting agency workers the same protections as those on zero-hour contracts and strengthening statutory sick pay.
The ERB notably tackles “unscrupulous” fire and rehire tactics and extends employers’ liability for preventing harassment in the workplace.
“This means that even well-intentioned restructuring exercises could fall within the ambit of the new rules, triggering obligations such as collective consultation and exposing employers to potential claims,” says Amy Wren, senior counsel at Farrer & Co.
Most of the ERB’s provisions are expected to take effect in 2026 at the earliest. But given the far-reaching and impactful nature of these changes, employers should start reviewing and updating their policies now to ensure prompt compliance.
Lexology PRO explores three major reforms set to take effect under the ERB and the key implications for employers.
Major reforms on the horizon
Preventing workplace harassment
Employers are already required to take “reasonable steps” to prevent workplace harassment under the Equality Act 2010 (EA 2010).
The ERB extends this duty, requiring employers to take “all” reasonable steps. The required preventive measures will be set out in further guidance and legislation yet to be published by the government.
What’s more, the ERB will see employers held liable for harassment their employees may encounter from third parties they interact with in the course of their work – third party harassment is not currently covered under the EA 2010.
Third-party harassment will be enforced in the same way as employers’ existing preventative duty. This means individuals who experience harassment can take their employer to an Employment Tribunal; the Equality and Human Rights Commission could also intervene.
It’s a positive step towards ending harassment in all workplace contexts, but it presents serious legal risk for employers, who may have limited control over interactions between employees and third parties.
No more “fire and rehire”
What is fire and rehire?
Fire and rehire is when an employer dismisses employees who won't accept new contract terms, then re-employs them or others under those terms.
Under existing UK law, employers can use fire and rehire if there is a “sound business reason” for seeking contractual changes.
Companies have come under fire for using these tactics, which are considered exploitative by many. In September 2024, the Supreme Court ruled in favour of Tesco employees, who took legal action against the supermarket in 2021 after it proposed firing staff at some distribution centres and rehiring them on lower pay.
The ERB aims to eliminate fire and rehire by amending the law on unfair dismissal. If employees are dismissed for failing to agree to contractual changes, it will automatically be treated as unfair dismissal, except in a limited number of circumstances. For example, if the employer can show that they were acting in response to financial difficulties affecting their ability to continue doing business.
Legal experts are concerned the bill will result in a significant reduction in flexibility for employers.
“The provision targeting "fire or rehire" in the ERA could make it difficult to implement a lot of changes that are relatively routine at the moment – for example, even to switch the location of the office where employees are based if a place of work clause isn’t drafted broadly enough. This is a real reduction in flexibility for employers, which I fear – in some cases – could lead to people simply being made redundant,” says Colin Leckey, a Lewis Silkin partner.
Strengthened rights for zero-hours workers
The ERB significantly strengthens the rights and protections of workers on zero-hours contracts, but stops short of outlawing these contracts outright.
Zero-hours contracts currently offer one-sided flexibility in favour of the employer, according to the government. Workers have no guaranteed shifts or earnings despite potentially working regular hours.
The ERB will require employers to offer eligible workers guaranteed hours, in line with the hours they regularly worked over a set period. Individuals may reject an offer of guaranteed hours if they prefer to work on a zero-hour basis.
While these measures will give workers more structure and security, there are risks, according to Shoosmiths partner Simon Fennell. It’s not yet known where the minimum hours threshold will be set, with unions likely to push for a high bar versus employers who want to keep it low, the final compromise might be unsatisfactory for all.
“The higher the number, the greater the risk that employers will have to reduce the overall number of workers engaged, in order to counter the cost and administrative burden the change will bring. Employers who rely on a large flexible workforce need to consider their options now,” Simon Fennell adds.
Employers will also have to provide workers with reasonable notice of shifts. If a shift is scheduled unreasonably, workers may raise a tribunal claim. If the employer cancels, moves or reduces a shift at short notice, the worker will be entitled to payment.
Agency workers will also benefit from protections for zero-hour workers. In its current form, the Bill places responsibility on the end hirer, rather than employment agency, to offer guaranteed hours to agency workers.
This provision is likely to hit employers in industries like hospitality and retail particularly hard. These industries benefit from the flexibility afforded by zero-hours contracts and could face substantially higher costs if they are no longer able to make use of them.
Increased enforcement risk
The ERB will establish the Fair Work Agency (FWA), a new state enforcement agency with substantial powers to investigate and sanction companies for employment rights violations, drastically increasing the enforcement risk.
“The establishment of a Fair Work Agency, with powers to bring employment claims on behalf of workers, even if they don't want to raise a claim, marks a big shift. The agency could levy significant fines on employers, similar to a French-style labour inspectorate," says Lewis Silkin’s Colin Leckey.
Initially, the FWA will focus on rights already overseen by existing enforcement agencies, in addition to holiday pay rights, which are not currently subject to state-level enforcement.
The ERB grants extensive and far-reaching powers to the FWA, including the ability to enforce penalties for failures to pay certain statutory payments to workers. Enforcement officers will be able to enter companies’ premises to examine or seize documents and new criminal offences will be established for breaches of employment law covered by the FWA.
This uptick in scrutiny and the risk of substantial penalties underscores the need for companies to ensure compliance with employment rights and law. Much of how the ERB will look in practice remains subject to yet unpublished guidance and secondary legislation. However, it remains vital for companies to closely monitor the progress of the legislation and start preparing for reform.