The Employment Rights Bill: What employers need to know

2. Enhanced family-friendly rights

For working parents and caregivers, there are proposed reforms that focus on increasing job security and flexibility to enable them to balance work and wider responsibilities.

1. Paternity Leave and Unpaid Parental Leave: This will be available from day one of employment.
2. New unpaid Bereavement Leave: Employees experiencing the loss of a loved one can access this type of leave.
3. Stronger pregnancy and maternity protections: This will prevent dismissal for six months after a woman returns to work.
4. Day-one right to request flexible working: While flexible working is already a day one right, the Bill stipulates that an employer would be legally required to justify any denial of such requests.

3. Stronger worker protections against harassment and inequality

Greater responsibility is placed on the employer by some provisions that bolster equality in the workplace and are aimed at tackling workplace harassment.

1. Employers must take proactive steps to prevent sexual harassment and will face legal consequences if they fail to do so.
2. New employer duty to prevent third-party harassment, ensuring businesses protect employees from inappropriate behaviour by clients, customers, and contractors.
3. Stronger gender pay gap reporting that includes outsourced workers and requires Equality Action Plans to close pay disparities and support menopausal employees.

4. Ensuring workers get fair pay

Following the EU Directive on Pay Transparency, these provisions reinforce employers’ responsibility to ensure fair pay while enhancing workers’ financial stability through strong wage protections and fair pay agreements.

1. Expanded access to Statutory Sick Pay (SSP) by removing the Lower Earnings Limit and eliminating the waiting period. Sick pay will be capped at 80 per cent of workers’ weekly pay.
2. Fair Pay Agreements introduced in the adult social care sector, setting baseline pay and conditions.
3. Workers guaranteed full access to tips by making tipping laws stricter and requiring employer consultation on policies.
4. Public sector outsourcing reforms, ensuring employees working on outsourced contracts receive terms equivalent to those in the public sector.

“No one should ever have to choose between their health and earning a living, which is why we are making this landmark change."  Liz Kendall, Work and Pensions Secretary

5. Modernising trade union legislation

Paul Nowak, TUC General Secretary, said many of the policies are “long overdue and necessary”. These reforms restore collective bargaining rights and improve trade union protections through the:

1. Repeal of the Strikes (Minimum Service Levels) Act 2023 and the Trade Union Act 2016, restoring stronger collective bargaining rights.
2. New protections for trade union members and a duty for employers to inform workers of their right to union membership.

“Everyone deserves security and respect at work. These common-sense reforms will improve the quality of jobs in this country, boost growth and put more money in people’s pockets.”  Paul Nowak, TUC General Secretary

6. Stronger employment rights enforcement

A new enforcement body is proposed to ensure compliance with employment rights and penalise violations.

1. Creation of the Fair Work Agency to consolidate enforcement of employment agencies, tribunal awards, National Minimum Wage compliance, and Statutory Sick Pay regulation.
2. New penalties for unpaid wages and employment rights violations, ensuring businesses face consequences for failing to uphold legal standards.

The specifics of what these enforcement strategies would be are still to be defined.

The impact of the Bill

Performance-Linked Pay

The Bill may bring about a shift towards performance-linked pay, particularly with the radical reforms expected for the Civil Service, with potential wider applications across sectors. The CIPD’s research into the impact of the Bill revealed that 30 per cent think it is likely that they will have to reduce headcount through redundancies and reduced hiring. Coupled with increases in National Insurance and National Minimum Wage costs, employers are concerned about the cumulative costs they face, giving rise to an understandable focus on productivity.

Employers will need to establish clear and fair performance metrics to ensure pay structures remain transparent and non-discriminatory. With four in five UK employers expecting costs to rise, the CIPD is urging government to consult with the people profession on a clear and phased implementation plan for the new legislation.

Mandatory Training and Upskilling Requirements

Employers are required to provide training on new employment rights and compliance measures to HR teams, line managers, and senior leaders. This initiative ensures that key personnel are well-versed in the latest legal obligations and best practices. Additionally, companies must implement regular employment law updates and conduct internal compliance audits to align with evolving regulations.

These measures not only enhance legal compliance but also reinforce corporate responsibility in managing workforce policies effectively. Furthermore, there is an increased emphasis on employer accountability in addressing workplace grievances, discrimination claims and disputes, underscoring the importance of proactive and informed leadership.

Fair Pay and Job Evaluation Standards

The Bill advances pay transparency and fairness, making a pay framework even more crucial for organisations to justify their approach to pay. Job evaluation and salary benchmarking play a key role in supporting organisations wishing to review and adjust salary structures to ensure adherence to new equal pay regulations and to prevent wage disparities.

This shift places greater responsibility on organisations to foster equitable compensation practices. To stay competitive and mitigate legal risks, HR teams should conduct market salary assessments, ensuring that pay structures remain aligned with industry standards and economic trends. These measures collectively contribute to a more transparent and just employment landscape.

Gaps and challenges in the Bill

While the Bill introduces sweeping reforms and important goals, several critical areas remain unclear, raising concerns for businesses. The enforcement mechanisms and penalties are not yet fully detailed, leaving uncertainty about how compliance will be monitored across industries. Employers need greater clarity on what actions will be required to avoid penalties and litigation.

Sector-specific guidance is also lacking, particularly for industries like retail and hospitality, where gig work and flexible working arrangements are more common. Without clear implementation frameworks, businesses may struggle to apply the changes efficiently and effectively.

A major concern for small and medium-sized enterprises (SMEs) is the financial burden of compliance. Adjusting pay structures, implementing training programs, and ensuring adherence to new regulations could present significant cost challenges. The Federation of Small Businesses has called for more financial support to help SMEs navigate these reforms.

Adding to the complexity is the uncertain implementation timeline. While most reforms will not take effect before 2026, the government has not specified when businesses must make certain adjustments. This uncertainty makes it difficult for companies to plan ahead and allocate resources effectively.

Five steps employers should take now

Need expert advice?

The Employment Rights Bill represents one of the most significant overhauls of UK employment law in recent years. HR professionals who take proactive steps to review policies, enhance training, and align pay structures will be better prepared for the transition. While uncertainties remain, early planning and engagement with HR professionals will be crucial for smooth implementation.