As the Employment Rights Bill progresses through Parliament, the government has put forward a set of amendments ahead of the report stage on 11 and 12 March. Responses to five consultations have also been published. This comes right after the publication of a report by the Business and Trade Committee which suggested that some of the key reforms did not go far enough.

We are updating our Employment Rights Bill dashboard with a full analysis of all the provisions in the Bill, including the latest developments. 

Here are the key points from the amendments and consultation responses.

Unfair dismissal 

The new right not to be unfairly dismissed from day one is subject to an “initial period” of employment, when a lighter touch procedure for dismissal can be used. Although the government has expressed a preference for nine months, the period is not confirmed in the amendments, and will be subject to consultation before being set. 

Guaranteed hours

The biggest change here is the inclusion of agency workers in the new right to be offered guaranteed hours if they are on a zero hours or “low hours” contract. Trade unions had been campaigning for this in order to prevent employers from avoiding the new rule by hiring agency workers. The amendment will place this responsibility on the end hirer, on the basis that they are best placed to forecast and manage the flow of future work (although with power to make regulations placing obligations on agencies/other entities instead in certain scenarios).

Agency workers will also be included in the right to reasonable notice of shifts. This responsibility will be placed on both the employment agency and the end hirer, on the basis that either party might be responsible for giving notice. Like other workers, agency workers will be entitled to compensation if shifts are changed at short notice. Responsibility for paying this compensation is placed on the employment agency as the more “efficient” option (as the individual will be on the agency’s payroll). Agencies will have a temporary right to recoup this cost if it is the hirer’s responsibility - but for any agreements reached more than two months after the Bill is passed, any recovery of costs needs to be dealt with in the relevant agreement between agency and hirer.

The other major change is a new provision which allows a collective agreement to contract out from the rights to guaranteed hours and reasonable notice of shifts in their entirety, for both workers and agency workers. This means that the employer and an independent trade union can reach an agreement that excludes the new rights and replaces them with something else, so long as these new terms are incorporated into the contract. For agency workers, the collective agreement can be with the person who has the contract with the agency worker. 

The reference period for calculating average hours has still not been defined, although a period of 12 weeks has previously been mentioned. There is greater clarity, however, around the previously vague obligation to “make work available”. Proposed amendments tighten this point up by referring to the hours that the employer must provide and the worker would be required to work. 

The amendments also sharpen the teeth underpinning these new rights: to avoid employers attempting to “work the system” to avoid triggering these obligations, there is a new potential claim which applies when an employer has tried to manipulate or avoid their obligations – of course, save as agreed in a collective agreement (further bolstering the general trend to empower and give increased relevance to trade unions). 

In terms of the shift scheduling provisions, there is still no definition of what “short notice” means in relation to shift cancellation, but amendments do clarify how the notice provisions operate when a shift has been offered to more workers than are needed to do it. 

Statutory sick pay 

The Bill already proposed scrapping the four-day waiting period for SSP, so that it becomes payable from day one of sickness. As was widely reported earlier this week, a new amendment and related regulations will give those earning below the lower earnings limit a right to sick pay at 80% of average weekly earnings. This means that all employees will be entitled to the lower of the SSP weekly flat rate or 80% of average earnings as soon as they are off sick from work.

Miscarriage bereavement leave

A new provision for leave after miscarriage looks likely to be introduced. This amendment is actually put forward by Labour MP Sarah Owen, but press reports indicate that it is being backed by the government. Mothers and their partners will be given the right to two weeks of bereavement leave if they have suffered a pregnancy loss before 24 weeks.  This is an extension of the current law on parental bereavement leave, which applies where a child dies or there is a stillbirth after 24 weeks.

Dismissals during/after pregnancy

The government has given further insight into its plans to ban dismissals of employees who are pregnant, on maternity leave or during a six month return to work period. A new amendment specifies that regulations will set out specific notices will need to be given to the employee, the evidence the employer will need to produce and “other procedures” that will need to be followed. The explanatory notes confirm the intention to ban such dismissals except in specific circumstances. We will need to await the regulations for the precise detail of what this will require in practice. 

Collective redundancy consultation 

Under the current law, employers proposing 20+ redundancies “at one establishment” within a period of 90 days must go through a process of collective consultation before making any redundancies. The Bill initially proposed removing references to "at one establishment” altogether, which would have meant that all redundancies across the employing entity must be counted. In a major change, collective consultation will now be required if there are 20 or more redundancies at one establishment OR a different threshold is met, with details of that threshold to be set out in further regulations.  The alternative threshold is likely to be based on redundancies across the employing entity as a whole and could be a percentage, or a higher number (e.g. the lower of 10% or 100 employees across the business as a whole).  

This marks a significant (and possibly the only material) concession from the government in favour of employers. The original plan to scrap the establishment test altogether and require collective consultation for 20 redundancies across the employing entity could have put large multi-site employers in near-constant collective consultation over business-as-usual and unrelated redundancies. Much will depend on where the government now sets the alternative threshold. 

The Bill has also been amended to state that, in carrying out collective consultation, the employer does not need to consult all employee representatives together, or try to reach the same agreement with all of the representatives. This addresses a concern raised by many employers that the Bill would require representatives to be brought together and consulted as a central group over batches of unconnected local redundancies. 

Another major amendment (this time, not in favour of employers) is a doubling of the maximum protective award for failure to collectively consult on redundancies, from 90 to 180 days. This will materially increase the risks associated with not handling collective redundancy processes correctly.  The majority of the respondents to the consultation on this issue were against an increase, but the government has gone ahead with what it describes as a “balanced approach”. The doubling of the penalty will potentially deter some employers from choosing not to comply with these obligations, although it is unlikely to make any difference in insolvency cases (which is when most non-compliance takes place). The move will also make it materially more risky to “buy out” collective consultation or allow the early release of employees (even if requested by employees themselves).

The government has dropped plans to make interim relief available as a remedy to employees dismissed in breach of collective consultation requirements but says it will consult on other ways to strengthen the regime (trade unions will be calling for longer consultation periods, so watch this space). The government has also promised further guidance on the legal requirements. Details are unclear, but this could potentially cover how employers should run consultations impacting several batches of unconnected redundancies in a rolling 90-day period.

Fire and rehire

The government has also dropped plans to make interim relief available as a remedy to employees affected by “fire and rehire”, but is pressing ahead with the severe restrictions on this practice included in the Bill.

The Bill makes the practice of fire and rehire/replace automatically unfair except in situations where the business is in extreme financial distress. In those (narrow) situations, an employer would need to comply with the Code of Practice on dismissal and re-engagement, which the government has promised to update. 

Fair Work Agency enforcement

The Bill creates a new state enforcement agency, the Fair Work Agency (FWA). This brings together existing enforcement functions, including minimum wage and statutory sick pay enforcement, labour exploitation and modern slavery, and adds holiday pay enforcement. There are a number of amendments which significantly increase its remit. The FWA will be able to:

• Enforce failure to keep adequate records of holiday pay. The amended Bill imposes a new obligation on employers to keep records demonstrating compliance with holiday entitlement (including the amount of leave and pay). There’s no set format for these records, but they must be kept for six years and failure to comply will be a criminal offence punishable with (potentially unlimited) fines. 

• Enforce failure to pay certain statutory payments to workers – including holiday pay and statutory sick pay. The FWA can issue a notice of underpayment to employers, which specifies the amount payable within 28 days. This is combined with a penalty of 200% of the sum due, payable to the Secretary of State. These provisions are based on the existing regime for minimum wage enforcement, and have major implications for employers who get holiday pay wrong across a workforce (although enforcement will depend on the FWA’s resourcing).

• Bring Employment Tribunal proceedings on behalf of a worker, if the worker has the right to bring a claim but it appears they are not going to. The FWA will also have the power to provide legal assistance for employment-related proceedings.

• Recover enforcement costs incurred by the Secretary of State from employers who are not complying with the law. The method for calculating and charging these costs will be set out in regulations. 

Umbrella companies

The government is taking action to regulate the use of umbrella companies (a company that employs individuals as part of a chain in which their labour is supplied for the benefit of an end client).  This is based on concerns expressed in the government’s response to the consultation on this issue that umbrella companies can deprive workers of employment rights, distort competition in the labour market and cause significant tax loss.

An amendment to the Bill will define umbrella companies and bring them within the definition of employment businesses. This means that they will be regulated by the Employment Agency Standards Inspectorate (which will eventually be taken over by the Fair Work Agency once that is up and running), with this regulatory oversight aiming to address concerns about exploitation and non-compliance.

Another associated change relates to tax compliance. Under separate legislation, responsibility to account for PAYE/NICs for umbrella company employees will shift from the umbrella company that employs that worker to the agency that supplies the worker to the end-client (or to the end-client where no agency is involved). This will take effect from April 2026. End users and agencies not outsourcing payroll must therefore be ready to operate this function in a year’s time. 

These changes are likely to have significant implications for the industry – for example, we may see agencies and end clients moving away from using umbrella companies and instead operate payroll in-house or use payroll agencies. Umbrella companies will need to adapt their business models to comply with the new regulations and look likely to face increased scrutiny and due diligence requirements.

Collective rights 

The Bill makes some significant changes to the trade union recognition framework and the ability of unions to take industrial action. Following consultation, the government has put forward a number of additional amendments. Some of the key provisions are:

• The new right of access of trade unions to the workplace can include digital/virtual access (with detail on what this involves to be set out in regulations).  This is a long-standing goal of the trade union movement, which could potentially help them to modernise the ways they organise and campaign in workplaces. 

• A detailed framework for fines by the CAC if there is a breach of the union right of access, which will be consulted on before it is introduced.

• 10 days after the CAC receives a recognition application from a union, the number of workers in the proposed bargaining unit cannot be increased for the purposes of the recognition process. This is designed to stop the recruitment of new workers for the purpose of diluting union membership during recognition campaigns (though this would already be a highly unusual tactic in practice).

• Reforms to make it easier for unions to bring complaints of unfair practices during recognition applications. 

• A 10 day notice period from trade unions on industrial action (down from 14 days).

• Extension of the expiry of a mandate for industrial action from 6 to 12 months.

• E-balloting will be consulted on before being introduced, and repeal of the 50% industrial action ballot turnout threshold will commence on a date to be specified in regulations in order to align with this change.

• A reduction in the information required in ballot notices, and a reduction in the information unions are required to provide employers in notices of industrial action. 

The amendments do not, however, cover the membership requirement for an application for union recognition. This is currently 10% of the bargaining unit. The Bill gives the government the power to reduce the required threshold for union membership to as low as 2% of the proposed bargaining unit through future secondary legislation, but the consultation response does not provide any more information.

Right to disconnect 

The right to disconnect has not been added to the Bill, and press reports have quoted a government source as saying it is “dead” – which suggests it will not now be taken forward at all. 

Implications for employers 

This set of amendments is important but not the end of the story. Some of the key aspects of the Bill remain unaffected - importantly including the right to unfair dismissal from day one. Employers are already reeling from rising costs due to the impact of changes to NICs and the National Minimum Wage, along with an uncertain economic climate more generally, and many will be disappointed to see that the concessions to employers in the government’s tabled amendments are relatively minor. 

It is clear that the government is not just pressing ahead with the reforms announced in October, it is strengthening them. 

The fact that employers are having to get to grips with a huge number of amendments at this stage is not ideal, and is an inevitable consequence of the government rushing the first draft to meet a self-imposed deadline. Leaving the amendments to one side, the biggest impact for employers from this Bill remains the introduction of day 1 unfair dismissal rights, on which we still await further detail.

It is increasingly clear that the FWA is considered the future model of enforcement, given the extreme delays in the Employment Tribunal system. Although its effectiveness will depend on its funding, it will generate its own revenue to a certain extent through its power to impose penalties and recover enforcement costs.  The power to recover enforcement costs is new and could be very significant. How the costs will be calculated and capped will be set out in regulations but these extra powers are likely to make the FWA a more interventionist regulator.  Risks of non-compliance with rules on minimum wage, sick pay and holiday pay will materially increase.

Things will be clearer when the Bill is passed and the consultation documents are published, although some key issues will remain subject to the outcome of consultation and future regulations.  A lot now turns on the detail of accompanying regulations and whether some compromises can be found there. The timing of implementation is crucial.

We will be setting out all the key planned reforms in our Employment Rights Bill dashboard and will be commenting in more detail over on our Labour policy impact hub. 

To find out more about the Bill and its impact (and other recent developments in employment law) do join us at our webinar What’s Happening in Employment Law on 20th March.