The Employment Rights Bill (ERB) was first published in October 2024, back in the early months of the new Labour Government which was keen to fulfil a key manifesto commitment to ‘make work pay’. We provided a summary of the initial proposals here.
Since last October the ERB has been working its way through a detailed Committee Stage in the House of Commons and last week Parliament announced that the Bill’s House of Commons Report Stage and Third Reading would take place next week on 11 and 12 March 2025. After the Third Reading in the Commons the Bill will pass to the House of Lords.
Committee Stage – new tribunal claim time limits amendment
The most significant new provision introduced to the ERB during the Committee Stage was an increase in the time limit within which employment tribunal claims can be brought, from 3 months to 6 months. This development comes after we had already predicted that employee litigation was on the rise and that the ERB could trigger a surge in claims from 2025.
The stated aims of this proposal are to simplify the employment tribunal system by reducing complexity and rigidity and increase access to justice by allowing for a more 'realistic' timetable for employees. In an updated impact assessment published on 4 March, the Department for Business and Trade (DBT) found that this proposal has the potential to increase the costs of managing new employment tribunal cases as more employees would have the time to file their claims with the tribunal. The DBT estimates that the annual direct costs to businesses could be £13.6m, including an estimated 5% increase in cases and an initial familiarisation cost of £13.1m. It will be interesting to see if the increased time limits in fact lead to more cases being resolved via internal dispute resolution systems or informal settlements, a possibility the DBT also suggests in the impact assessment.
Report stage – Government amendments
Collective Consultation and fire and rehire
Alongside the Committee stage the Government has been running 5 related consultations on proposals not yet set out in the ERB. On 4 March 2025 it published responses to all five which we consider in more detail below.
On 5 March 2025 the Government published a Report Stage Amendments paper running to some 200 pages. The paper contains the amendments it has decided to take forward as a result of the 5 consultations and a few bonus amendments too. As we explained in October, the ERB contained proposals for an unexpected change to collective redundancy consultation obligations: making the obligation to carry out collective consultation apply where there is a proposal to dismiss as redundant 20 or more employees within a period of 90 days or less, regardless of whether these 20 are at the same establishment or different establishments. This could have significantly increased the circumstances in which employers would need to carry out collective consultation.
In what appears to be a concession to employers collective consultation will still be required if there are 20 or more redundancies at one establishment, or if a different threshold is met over multiple establishments, 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 than 20.
A new provision also provides 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.
Following the consultation on collective redundancy and fire and rehire the Government has confirmed that it will be tabling an amendment to increase the cap on protective awards in collective redundancy situations from 90 days to 180 days to encourage employer compliance. The Government will not however be taking forward its proposal that interim relief should be available in claims for protective awards and/or claims for unfair dismissal on grounds of fire and re-hire. Further guidance on consultation processes for collective redundancies will be produced in due course.
The Government passed legislation in 2024 that means in a collective redundancy scenario, where an employer has also not followed the Code of Practice on Dismissal and Re-engagement (commonly referred to as ‘fire and rehire’), if relevant, the employment tribunal may apply an uplift in compensation of up to 25% to a protective award. The tribunal may apply the uplift if it considers the employer’s failure to comply with the Code was unreasonable, and it considers it just and equitable in all the circumstances to do so. This provision came into effect on 20 January 2025. As the protective award will now be doubled from 90 to 180 days the 25% uplift could now increase the protective award by up to the equivalent of 45 days. The Government’s view is that this combination provides an effective remedy to strengthen compliance with collective consultation obligations. However, it intends to monitor the level of compliance. The Code of Practice on Dismissal and Re-engagement will be updated to reflect the updated law. Some may be reassured by the Government’s statement that it plans additional discussions with employers and employees to review the impact and implementation of these changes before additional remedies, such as interim or injunctive relief, can be considered.
The Government noted that employers should not be able to pick and choose when to fulfil their legal obligations, nor should it be financially beneficial to ‘buy-out’ employees from their rights or “price in” the cost of non-compliance and that increasing the maximum period of the protective award to 180 days is the most proportionate response to address these scenarios. Employment tribunals will continue to have discretion to vary the length of the protected period, up to a maximum of 180 days, as they consider just and equitable in all the circumstances, having regard to the seriousness of the employer’s actions, as well as any mitigating factors. This will provide an increased deterrent against deliberate breaches of the collective redundancy requirements, whilst also ensuring tribunals can continue to consider the circumstances of the breach when making awards.
Zero Hours contracts - Agency workers and Collective agreements
The Government has tabled a number of amendments which set out the framework for the application of the new zero hours contract measures in the ERB to agency workers. The Government acknowledges the need to apply these measures to agency workers differently, because of both the generally temporary nature of agency work and the tripartite relationship between the agency worker, the temporary work agency, and the end hirer.
There is also a new proposal which allows for 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 would enable an employer and an independent trade union to reach an agreement that excludes the new provisions 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. This provision is being heralded by some as an incentive for employers to enter into union recognition agreements.
Fair Work Agency
The ERB creates a new enforcement agency, the Fair Work Agency (FWA) to bring together the existing enforcement functions for minimum wage, statutory sick pay, labour exploitation and modern slavery with new responsibilities for holiday pay enforcement. A number of additional provisions outlining more detail on the FWA’s remit will be tabled at the Report stage next week. The proposal which has attracted the most interest will enable the FWA to 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 do so. The FWA will also have the power to provide legal assistance for employment-related proceedings. We will be exploring the powers of the new agency in a future blogpost.
Trade Unions
The Government has tabled a lengthy list of detailed amendments to the ERB to update the legislative framework in which trade unions operate. These include proposals designed to improve the process and transparency around trade union recognition and strengthen protections against unfair practices, as well as proposals for simplifying ballot and notice processes. We will be exploring these proposals in a future blogpost. The Government has also committed to consulting further on modernising the trade union landscape following Royal Assent of the ERB.
Statutory sick pay
The Government has confirmed that eligibility for statutory sickness pay (SSP) will be widened and SSP will be paid from the first day of work missed due to sickness. For some lower earners their rate of SSP will be calculated as a percentage of their earnings instead of the flat weekly rate. The Government will introduce an amendment to the ERB to specify the percentage rate payment which it has decided to set at 80% taking into consideration the need to provide employees with financial security, whilst ensuring that employees are better off in work than on sick leave.
Umbrella companies
The Government will introduce an amendment to the ERB to define umbrella companies, to allow for their regulation and to bring them within the scope of the Employment Agency Standards Inspectorate’s (and subsequently, the Fair Work Agency’s) remit.
As announced at Autumn Budget 2024, where an umbrella company is used in a labour supply chain to engage a worker, the Government will bring forward legislation to move the responsibility to account for PAYE from the umbrella company that employs the worker, to the recruitment agency that supplies the worker to the end client. Where there is no agency in a labour supply chain, this responsibility will sit with the end client. This will take effect from April 2026.
Report stage – non-Government amendments
There is a further paper detailing amendments proposed by non-Government MPs. The Speaker of the Commons is able to call on any of these at the Report stage but given the sheer number of amendments already tabled by the Government and the Government’s large majority it seems unlikely that many will get a hearing. These include:
- A proposal for statutory leave and protection for victims of domestic abuse.
- A proposal to reintroduce statutory discrimination questionnaires.
- A proposal to introduce protected paternity/parental partner leave.
- A proposal to introduce paid carer’s leave.
- A proposal to make caring a protected characteristic.
- A proposal to require companies with over 250 employees to publish information about their parental leave and pay policies.
- A proposal to introduce a new duty on employers to protect their workers from gender based violence and harassment.
- A proposal to increase SMP and SSP.
- A proposal for the new bereavement leave to include those bereaved by pregnancy loss.
- The establishment of a Working Time Council to consider issues relating to a move to a four-day working week.
- A proposal that the statutory probationary period be between three and nine months.
If you would like to discuss in further detail any of the points raised in this blog post, please get in touch with your usual Freshfields contact.
