Understanding the New Employment Law Changes in the UK: Implications for Small Businesses Now!
Posted on May 23, 2025
The Employment Rights Bill was published on 10 October 2024 and it has hardly been out of the headlines since. Six months on, the Government has made significant amendments to the Bill but we are still waiting for consultation papers on key topics including implementation of the high-profile unfair dismissal reforms and collective redundancy consultation.
So, six months on, where are we now? We explore the key aspects of the new employment law changes, and their potential impact on small companies, and things that a Business owner should consider.
Flexible Working as a Default:
Currently, employees are entitled to request flexible working arrangements from their very first day on the job. Employers may decline these requests based on one or more of the eight legitimate business reasons outlined in the legislation. If an employer fails to comply with the statutory flexible working regulations, they may face a penalty of up to eight weeks’ pay, currently capped at £5,600.
The Bill mandates that any denial of a flexible working request must be justified as reasonable, although the existing eight business reasons for refusal will remain unchanged. Employers are required to provide a written explanation detailing the grounds for any refusal and the rationale behind deeming it reasonable. The penalty provisions remain unaltered.
This is an interesting proposal given the reality that new employees could make a request anyway on day 1 of employment. Essentially all that has changed is the potential timing of a request and a clearer onus being put on the employer to review a request being made.
For more information on how to deal with a flexible working request please use this link.
Enhanced Redundancy Protections for Pregnant Women and New Parents
The new rules extend the period of protection from redundancy for pregnant women and new parents, ensuring they are not unfairly targeted during organisational restructures.
The Bill aims to empower the Government to establish regulations addressing dismissals that occur during pregnancy, maternity leave, or upon returning to work, beyond just redundancies. Importantly, the Bill extends these protections to various forms of family leave, including adoption leave, shared parental leave, neonatal care leave, and bereaved partners’ paternity leave.
While the exact content of the regulations remains uncertain, an amendment clarifies that they will require employers to provide specific notices to employees, present necessary evidence, and adhere to additional procedural requirements. According to the explanatory notes accompanying the Bill, it will prohibit the dismissal of women who are pregnant, on maternity leave, or within a six-month period following their return to work, except under clearly defined circumstances.
Will It Still Be Possible to Use Zero Hours and Low Hours Contracts?
Workers on zero-hour contracts or those with unpredictable working patterns can now request more stable and predictable contracted hours.
While workers can stay on zero hours contracts if they’d prefer to, the new Bill means they’ll have the right to a guaranteed hours contract if they work regular hours over a defined period. In addition, workers will have the right to reasonable notice if they are required to work a shift, or if a shift is cancelled or changed.
Compensation will also be payable for any shifts which are cancelled or curtailed at short notice.
The issue here is in the detail, i.e. how do you define a regular period of time to review actual hours worked? As yet, we also don’t have any information about what will amount to ‘reasonable’ notice or “proportionate” compensation when considering the impact of shift changes.
Employers can find reassurance in the fact that employees have the option to decline a new offer while still being bound by their current contract. Although this may seem improbable, it’s important to recognise that many workers value the flexibility offered by zero-hours contracts, especially when these positions serve as secondary employment. For some, the requirement to meet a minimum number of hours each week may not be feasible due to personal circumstances.
Unfair Dismissal
Currently employees must have at least two years’ service, known as a qualifying period, to bring a claim for unfair dismissal (subject to a few exceptions where dismissal is deemed automatically unfair, such as discrimination, whistleblowing or trade union membership). There are also no specific statutory restrictions on the length or terms of probationary periods, which tend to be governed by an individual’s contract of employment.
The Employment Rights Bill will remove the qualifying period for unfair dismissal protection altogether and hence it becomes a day 1 employment right subject to some caveats as follows:
- The Government intends to legislate to “introduce fair and proportionate processes for dismissal” during probationary periods.
- What that process will look like isn’t clear, though the Government indicates it will introduce “a lighter-touch and less onerous approach for businesses to follow to dismiss someone who is not right for the job”. As a starting point, it suggests holding a meeting with the employee to explain performance concerns (at which the employee could be represented).
The Government intends to undertake consultation on the details of this proposal, to look at:
o The length of the statutory probationary period, indicating a preference for nine months.
o What “meaningful safeguards” should be put in place during that time.
o How any new process might interact with the Acas Code of Practice on Disciplinary and Grievance procedures.
o What compensation should be available for a successful claim for dismissal during the probation period, with a suggestion it should not be as high as the current compensatory levels.
It is also confirmed that the new unfair dismissal protection will not apply to:
- Employees who have not yet started work.
- Workers – Despite a suggestion in the King’s Speech that protection from unfair dismissal would be available “for all workers”, under the Bill it will be available for employees only (the Government has confirmed a review of worker status will be a longer term aim).
The good news (despite the spin) is that this change is not one which will happen quickly. The Government has indicated that “reforms of unfair dismissal will take effect no sooner than autumn 2026”, in order to ensure sufficient time for detailed rules to be confirmed and for employers to prepare. Until that point the current two year qualifying period will continue to apply.
Extension of time limits for bringing tribunal claims
Most tribunal claims need to be brought within three months of the act complained of (e.g. dismissal, discrimination, deduction from wages).
The Bill has been revised during its passage through Parliament to extend the time limits for filing tribunal claims from three to six months. This extension will apply to all types of claims, including those related to discrimination and unfair dismissal. However, it is noteworthy that this change does not currently apply to breach of contract claims, which appears to be an oversight and may be addressed in future amendments.
Although an amendment has been made it is unclear when this change to legislation will apply.
Fire and re-hire (dismissal and re-engagement)
Dismissal and re-engagement refers to the practice where an employer dismisses an employee and offers to re-engage them on new, often less favourable, contractual terms.
Many employers, specifically larger employers, have flirted with this approach to changing employee terms and conditions. It wasn’t until P&O Ferries sacked almost 800 dedicated seafarers and replaced them with low paid agency workers in March 2022 that this approach became headline news.
In perhaps the biggest change in the Employment Rights Bill, the Government is pushing ahead with its plan to end fire and rehire (and fire and replace).
The Bill will therefore make it automatically unfair to dismiss an employee if the principal reason for the dismissal is either:
- The employer sought to vary the employee’s contract of employment, and the employee did not agree to the variation; or
- To enable the employer to re-engage the employee, or employ another person, under a varied contract of employment to carry out substantially the same duties as the employee carried out before being dismissed.
The Bill does provide an exception to this, if an employer can show:
- The reason for the variation was to prevent or significantly reduce financial difficulties that the business might be experiencing.
- The financial difficulties were affecting the employer’s ability to carry on the business as a going concern.
- In all the circumstances the employer could not reasonably have avoided the need to make the variation.
- In determining fairness, the Employment Tribunal must consider whether any consultation was carried out about varying the contract and if anything was offered to the employee by the employer in return for agreeing to the variation. Although, it’s not so well known that P&O got around this requirement by paying the fired workers the equivalent pay that was equal to the consultation period it would have undertaken anyway.
In the very narrow circumstances when fire and rehire is potentially permitted, the Code of Practice will still apply, but will be updated. The protective award for failing to inform and consult on fire and rehire exercises will be increased from 90 to 180 days, but the Government has confirmed that it will not make “interim relief” available as a remedy.
As drafted, these provisions are likely to have extensive ramifications for employers seeking to restructure or change contractual terms in an unfair way. It’s our view that if you undertake structural or contractual changes properly you are unlikely to be impacted by these changes.
Statutory Sick Pay (SSP)
Currently, employees are only entitled to SSP from the fourth day of sickness and if they meet the lower earnings threshold (currently at least £123 per week). The new legislation removes both the waiting period for SSP and the earnings limit, meaning all workers will be entitled to SSP from their first day of illness.
In addition, the lower earnings limit will be removed, meaning that all eligible employees, regardless of earnings, will be entitled to SSP. As a result of amendments to the Bill, those earning less than the lower earnings limit will become entitled to SSP at a rate of 80% of weekly earnings.
Parental and Paternity leave
The new legislation will remove the qualifying service requirement for paternity leave (currently 26 weeks) and unpaid parental leave (currently one year). Both will become day one rights.
Bereavement leave
In general, there is no statutory right to bereavement leave, except in specific circumstances. Employees are entitled to statutory parental bereavement leave and pay if their child passes away before the age of 18 or is stillborn after 24 weeks of pregnancy. Additionally, employees have the right to take unpaid, reasonable time off to care for family members or dependents in emergency situations.
Current provisions on parental bereavement leave will be extended beyond parents to create a general right to bereavement leave. It will be confirmed in later regulations what conditions about relationship will apply to this leave. Leave will remain as two weeks following the death of a child and will be one week for any other bereavement.
Tips
New tipping legislation came into effect in October 2024, mandating that employers must pass on all qualifying tips to their employees. Additionally, employers are required to implement a written tipping policy that clearly outlines the allocation process for tips.
The Bill enhances current legislation by mandating that employers engage in consultations with trade unions, elected representatives, or directly with workers if no representatives exist, prior to drafting the initial version of their written tips policy. Additionally, it requires that any tips policy undergo a review every three years following its implementation. Employers must also provide an anonymised summary of the feedback gathered during the consultation process.
Conclusion
The new employment law changes in the UK represent a significant shift in the rights and protections afforded to workers. While these changes offer numerous benefits, including enhanced worker protections, increased transparency, and support for vulnerable employees, they also pose challenges for small businesses. The potential burden of implementing new regulations, coupled with the proposed increase in National Insurance contributions, may create additional financial pressure and complicate workforce planning for small companies.
What’s for sure is that employment law continues to evolve, it is essential for small business owners to stay informed and proactive in adapting to these changes.
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If you need support understanding or preparing for the proposed legislative changes please feel free to reach out to us:
+44 (0) 2382 518 004
info@smehrconsultancy.com
www.smehrconsultancy.com
