Employment Rights Bill: What SMEs Need to Know About the Latest Changes
Posted on July 30, 2025
As consultations continue on the Employment Rights Bill (ERB), several key amendments are beginning to take shape — and they could significantly impact how small and medium-sized businesses manage contracts, staffing, and compliance.
In this post, we break down the most important proposed changes and what they mean for your business.
Fire and Re-Hire: Narrower Grounds for Unfair Dismissal
The ERB now restricts when changing an employee’s contract could lead to automatic unfair dismissal. Only “restricted variations” will trigger this — including changes to:
- Pay (excluding expenses)
- Pensions
- Working hours
- Holiday entitlement
- Shift patterns and durations
- Any terms set by future regulations
- Any change made without employee consent (anti-avoidance)
Other changes will be subject to standard tribunal tests for fairness — but these new definitions raise the bar.
✔ SME Action Point: Review your employment contracts now. You may want to make planned changes before the ERB takes effect to retain flexibility under the new rules.
Replacing Employees with Contractors? Risky Business
Under the proposed rules, it will be automatically unfair to dismiss an employee and replace them with a non-employee, such as a contractor or agency worker, in a like-for-like role.
There are limited exceptions for employers facing genuine financial hardship — but this move strengthens redundancy protection and limits cost-cutting via outsourcing.
✔ SME Action Point: Rethink redundancy strategies that involve replacing permanent roles with outsourced ones.
NDAs: No More Silencing Harassment or Discrimination Claims
The government is clamping down on the use of non-disclosure agreements (NDAs) that prevent workers from speaking out about harassment or discrimination.
Under the ERB, NDAs will be void if they:
- Prevent a worker from reporting wrongdoing
- Prevent witnesses from supporting a report
Confidentiality clauses for commercial reasons or to protect whistleblower anonymity remain valid.
Interestingly, “discrimination” under the ERB excludes victimisation and failure to make reasonable adjustments, which may be addressed in future updates.
✔ SME Action Point: Review settlement agreements and employment contracts to ensure your confidentiality clauses remain compliant.
Bereavement Leave to Cover Pregnancy Loss
Bereavement leave will be extended to cover pregnancy loss within the first 24 weeks — including miscarriages and stillbirths.
- Expected rollout: 2027
- Paid or unpaid? TBC (currently assumed unpaid)
- Further consultation due Autumn 2025
✔ SME Action Point: Consider updating your policies early to offer support in these sensitive situations — many progressive employers already do.
⏱️ Zero-Hour & Agency Workers: Shift Toward Stability
Several proposed amendments could reshape how zero-hour and agency workers are managed:
Zero-Hour Workers:
- Workers could request guaranteed hours after working just 8 hours over a 26-week period.
- Employers may cancel shifts with 48 hours’ notice without paying — this flexibility could help businesses, but may frustrate workers.
Agency Workers:
- Employers must offer guaranteed hours based on prior working patterns.
- If accepted, the agency worker becomes a “worker” (not an employee), triggering certain legal protections.
✔ SME Action Point: Start planning how to handle guaranteed hour requests and ensure your systems can support fair comparison for agency worker offers.
Whistleblowing: A New Era of Protection?
Proposed (but not yet government-backed) changes call for a new Office of the Whistleblower, which would:
- Set and enforce whistleblowing policy standards
- Run a national reporting service
- Issue fines and redress orders
- Limit the use of NDAs to silence whistleblowers
Penalties could include:
- Individuals: Up to 10% of gross income, capped at £50,000
- Companies: Up to 10% of global turnover
Even if this isn’t enacted right away, it shows clear momentum toward greater transparency and protection.
✔ SME Action Point: Audit your settlement agreements and contracts and prepare for future expectations around whistleblower protections.
SSP Rebate Scheme for SMEs
Another proposal would allow the government to launch a Statutory Sick Pay (SSP) rebate scheme for SMEs.
If passed, this would let eligible small businesses claim back part of the SSP paid to employees who are off sick — a lifeline for businesses struggling with rising costs.
Details (e.g. eligibility, reclaimable amount) would be outlined in future regulations. However, this proposal currently lacks government support.
✔ SME Action Point: Monitor developments — if introduced, this could significantly reduce absence-related costs.
Final Thoughts: What Should SMEs Be Doing Now?
While many of these amendments are still under review, they point to a clear shift: stronger employee protections, stricter rules for dismissals and contract changes, and increasing scrutiny for workplace practices.
Our top 5 SME takeaways:
- Review employment contracts now, especially regarding pay and working hours.
- Update NDAs and confidentiality clauses to ensure compliance.
- Revisit redundancy planning if you use contractors or agency workers.
- Prepare internal systems to handle guaranteed hour requests fairly.
- Stay ahead of whistleblowing expectations — even if not yet law, change is coming.
Need help reviewing your contracts or preparing for these changes?
At SME HR Consultancy, we’re here to support you with clear, practical advice tailored to your business.
Contact us today to book a free 30 minute consultation or get support with policy updates. If you need further help please don’t hesitate to contact us:
+44 (0) 2382 518 004
info@smehrconsultancy.com
www.smehrconsultancy.com
