UPDATED: The Employment Rights Bill has received Royal Assent today (December 18, 2025) and will become The Employment Rights Act 2025.

Though the Bill as a whole has passed, a lot of the measures will need to be introduced via secondary legislation. The government is planning to issue guidance throughout 2026.

What do we know about the Employment Rights Bill?

The most notable update is the abandonment of unfair dismissal rights from day one, with a six-month period being put in its place. It’s still a significant reduction from the 24-month period, which could make it less appealing for employers to take the risk on hiring staff. The lifting of the compensation cap is also causing concern. This rule is coming into force from January 2027.

However, workers will get sick pay and parental pay from day one on the job. Pregnant women and new mothers will also have enhanced protections.

The government has not banned fire and rehire or zero hours contracts as they had hoped, but proposed rules have been softened. For fire and rehire, it’ll only be deemed unfair if certain core terms are changed, including:

• Required number of working hours
• Pay
• Pension
• Right regarding time off
• Shift times and length

Fire and replace practices are set to be banned should the employee be replaced by contractors, agency workers or individuals who will be doing largely the same work.

There is an exception is the company is under sever financial distress. These measures are expected to come in during October 2026.

As for zero hours, employers will be expected to give qualifying workers an offer of guaranteed hours if the hours that are worked regularly exceed the number of hours in the contract. The parameters for ‘qualifying’ are set to be laid out at a later date.

Many workers will also have the right to reasonable notice of a shift, as well as changes or cancellations. These rights are set to be extended to agency workers.

Mixed responses

Unemployment rose to 5.1 per cent, as figures released on December 16 show. That’s up from 4.3 per cent at the same time last year. Some see this figure increasing with the introduction of the Bill. Others say that it’s becoming too expensive or risky to hire staff which stifles growth and lowers overall employment levels.

Both the Federation of Small Business and the British Chambers of Commerce have expressed continuing concern over the Bill.

That said, more certainty for employers and employees has been broadly welcomed. Here are some experts in the small business space with their thoughts.

Tina McKenzie, policy chair of the Federation of Small Businesses, said:

“We’re pleased to have been in the room with unions and the government to successfully negotiate the six-month concession on day one unfair dismissal rights, because hiring is about finding the right fit for your business.

“However, with 65 per cent of small employers worried about the sheer number of changes the Bill will bring, the government must clearly communicate what’s changing, phase in the implementation sensibly and give small firms adequate time to prepare.

“We can’t have a situation where small firms are scrambling to implement numerous changes at once, as it will cause chaos and have a huge impact on hiring. A staggered rollout, with the detailed rules being negotiated with FSB and other business groups, would show they understand the reality small firms are facing.

“There is also major work needed to soften the financial hit the Bill will deliver from bringing in the right to Statutory Sick Pay (SSP) from day one of employment, especially because SSP costs will rise in April. Small employers will be left completely exposed without knowing what they’ll owe from one month to the next. The government needs to announce a rebate urgently.”

James Townsend, employment partner at law firm Payne Hicks Beach, said:

“At a time where employers are already facing ever increasing numbers of claims, rather than re-balancing the existing framework by placing further burdens on business, the government would have been better focussed on modernising dispute resolution practices to cut current delays in cases being heard and re-introducing industrial juries, which were previously abolished in favour of Judges sitting alone in the majority of cases.

“Making a sensible reversal of earlier government policy on industrial juries would have brought back workplace reality and common sense to the employment tribunal system.”

Phil Coxon, managing director at Breathe HR, said:

“The Employment Rights Bill will enhance workers’ rights and wellbeing, and the majority of SME HR leaders believe it will boost productivity and retention.

“However, we cannot underestimate the financial, administrative and legal challenges it will bring. Many SMEs lack dedicated HR functions and the deep resources of larger companies. As a result, almost two-thirds of SME leaders say the new changes will disproportionately affect smaller businesses. With rising operational costs and the challenging economic climate already pushing many small businesses to the brink, the government must provide robust support, resources and guidance to ensure SMEs can survive and see these changes through successfully.

“In the meantime, employers should take a proactive approach by strengthening their core HR processes, reviewing policies and employment contracts, and using technology to streamline essential HR administrative tasks. This will free up capacity, enabling leaders to focus on strategy, compliance, and ensuring the changes benefit everyone.”

Ben Harrison, director of the Work Foundation at Lancaster University, said:

“Ending the Parliamentary impasse on the Employment Rights Bill is a critical moment for UK workers. The Bill has the potential to lift 1.2 million people out of severe insecurity at work, and improve job security for nearly four million workers.

“The Bill will align a number of key UK employment laws with the kind of standards that we see internationally. Work Foundation analysis has shown that women, disabled people, ethnic minorities and young people all stand to gain most from changes to unfair dismissal, zero-hour contracts and day one rights.

“But in many ways, the hard work starts now as important decisions on new codes of practice and secondary legislation remain. It’s vital that as Government works with employers and unions to shape these, the reforms deliver on the spirit of the Bill as originally intended. Only then will as many workers as possible benefit from two-sided flexibility, extra protections and security at work in the coming years.”

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