Parliament Moves Forward with Changes to the Employment Rights Bill – What SMEs Need to Know
The Employment Rights Bill 2024-25 is set to introduce the most significant UK employment law changes in decades. Following key amendments on March 4, 2025, the bill is scheduled for its report stage and third reading on March 11-12, 2025 in Parliament. These landmark reforms will impact millions of UK workers and place new compliance obligations on businesses, particularly small and medium-sized enterprises (SMEs).
While these worker protections aim to modernise employment rights, the UK government estimates that they could cost businesses up to £5 billion annually. SMEs must act now to prepare for legal risks, update policies, and manage compliance costs effectively.
What Is the Employment Rights Bill?
The Employment Rights Bill 2024-25 strengthens workplace rights, increases employer responsibilities, and introduces new protections for workers. The bill follows years of legal challenges in the gig economy, post-pandemic employment reforms, and pressure from trade unions and policymakers.
Key Objectives of the Employment Rights Bill:
- Strengthen worker protections (e.g., unfair dismissal, sick pay, zero-hours contracts).
- Enhance workplace flexibility (e.g., flexible working from day one).
- Increase employer responsibilities (e.g., preventing workplace harassment).
- Restrict exploitative practices (e.g., limiting fire-and-rehire tactics).
These employment law reforms affect all UK employers, making it essential for businesses to understand and implement their new legal obligations.
Employment Rights Bill: Key Changes & SME Action Plan
1. Day-One Unfair Dismissal Protection (Effective: Autumn 2026)
- Employees will now have protection against unfair dismissal from their first day, replacing the previous two-year qualifying period.
- SMEs must:
- Update employment contracts to reflect new unfair dismissal rights.
- Strengthen probationary period management and performance reviews.
- Train managers to handle dismissals fairly to reduce tribunal risks.
2. Flexible Working as a Default Right (Effective: Late 2025)
- Employees can request flexible working from their first day, and refusals must be justified in writing.
- SMEs must:
- Revise flexible working policies and decision-making processes.
- Implement a clear, structured approval system.
- Train managers on handling flexible work requests fairly.
3. Statutory Sick Pay (SSP) Reform (Effective: 2025)
- SSP will apply from day one, removing the lower earnings threshold.
- Over 1.3 million additional workers will now qualify for sick pay.
- SMEs must:
- Update sick pay policies to ensure compliance.
- Adjust payroll systems to reflect SSP changes.
- Inform staff about their new sick pay rights.
4. Zero-Hours Contracts & Guaranteed Hours (Effective: Early 2026)
- Workers on zero-hours contracts will have the right to request guaranteed hours after a qualifying period.
- SMEs must:
- Identify affected employees and assess contract changes.
- Plan for payroll adjustments due to guaranteed hours.
- Clearly communicate new contractual rights to staff.
5. Stronger Workplace Harassment Protections (Effective: 2025)
- Employers will be legally responsible for workplace harassment, including third-party harassment (e.g., from customers or clients).
- SMEs must:
- Update anti-harassment policies to cover external parties.
- Train staff on harassment prevention and reporting procedures.
- Implement robust complaint-handling procedures.
6. Expanded Parental & Bereavement Leave Rights (Effective: 2026)
- Employees will have day-one rights to unpaid parental leave and standardised bereavement leave policies.
- SMEs must:
- Revise parental leave and bereavement policies.
- Ensure HR teams understand the new requirements.
- Communicate policy updates to staff.
7. Fire-and-Rehire Restrictions (Effective: 2026)
- Employers cannot dismiss and rehire workers on worse terms, except in exceptional circumstances.
- SMEs must:
- Review dismissal and restructuring policies.
- Ensure any contract changes comply with fair employment practices.
- Clearly communicate changes to employees.
Additional UK Employment Law Reforms to Watch
- Fair Work Agency Enforcement: Employers can now be taken to tribunal by a government enforcement body (even if the worker does not file a claim).
- Stronger Trade Union Rights: Union recognition thresholds have been lowered, making it easier for workplaces to organize.
- Higher Redundancy Penalties: Fines of up to 180 days’ pay per employee for failing to follow collective redundancy consultation laws.
How SMEs Can Prepare for the Employment Rights Bill
With these employment law changes coming into effect over the next 12-24 months, SMEs must act now to avoid legal and financial risks.
✔ Update employment contracts and HR policies – Ensure all documents align with new employment laws.
✔ Train managers and HR teams – Educate leadership on dismissal, flexible work, and harassment policies.
✔ Monitor financial impact – Assess SSP, flexible working, and guaranteed hours costs.
✔ Engage with legal and HR experts – Seek compliance support to manage risks effectively.
Why This Matters for SMEs
By preparing now, businesses can avoid tribunal risks, reduce compliance costs, and improve workplace policies. The Employment Rights Bill 2024-25 is not just about compliance—it’s an opportunity to strengthen employee relations and modernize HR strategies.
✔ Stay ahead of UK employment law changes.
✔ Build a stronger, legally compliant workplace.
✔ Protect your business from financial and reputational risks.
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