Employment Rights Bill passes through Parliament – what do the changes mean?

Employment Rights Act becomes law – what do the changes mean?

The Employment Rights Bill passed its final legislative hurdles before Christmas to become law.

It passed through the House of Lords on Wednesday, December 17 and was granted Royal Assent by King Charles the following day. With that the Bill became the Employment Rights Act.

 

Labour’s flagship reform of workers’ rights includes plans to overhaul zero hours contracts, unfair dismissal protection, and pay gap transparency.

 

It also confirms the introduction of a new Fair Work Agency, which will bring enforcement of workplace rights under the control of one body.

 

Although the proposals have been enacted as law, they will be rolled-out throughout 2026 and 2027 rather than immediately coming into effect with most of the measures introduced requiring secondary legislation.

The act applies to England, Scotland and Wales, but not Northern Ireland.

 

 

Key reforms in the Employment Rights Act:

The Employment Rights Act is a wide-ranging document, covering issues around job stability, family rights and workplace fairness.

Most of the reforms relate to contracted employees, but some will have an impact on freelances and the self-employed.

 

Key reforms include:

 

Zero-hours contracts

 

The act introduces a right for workers to receive a contract with guaranteed minimum hours. This will be based on their regular work pattern, and must include reasonable notice for shifts and compensation for last-minute cancellations. 

 

The government’s aim is to combat the exploitative nature of some existing zero-contracts, offering workers greater protections. However, some employers have expressed concerns that the new legislation will reduce flexibility, while it remains unclear how a worker’s right to guaranteed hours, having worked those hours regularly during a reference period, would operate in practice.

 

 

The Fair Work Agency

 

The Fair Work Agency will see several enforcement powers currently controlled by different agencies brought under one roof. This will include HMRC’s National Minimum Wage team, The Gangmasters and Labour Abuse Authority, The Employment Agency Standards Inspectorate, and Employment Tribunals.

The Employment Rights Act also states that regulatory oversight for umbrella companies will be brought under the remit of the Fair Work Agency. This will give the agency the power to bring action on a worker’s behalf, and even without their involvement. 

It will also mean any organisations which are found to have breached employment laws can be named publicly and may have to pay the cost of any investigation or enforcement action.

 

Protection against blacklisting

 

The act sees blacklisting protections extended to freelancers and self-employed operators. This measure aims to stop discriminatory practices in recruitment and employment through the use of enhanced penalties and a modernised approach to union engagement.  

 

 

Hiring practices

 

The controversial practice of fire and rehire is targeted by measures in the act. This relates to the dismissal of employees, who are then immediately rehired on inferior terms. The practice will be restricted and, in some cases, deemed as unfair dismissal.

 

Furthermore, the right to protection from unfair dismissal after six months of continuous service will be introduced. An original plan to make this a day-one right was scrapped.

 

 

Other measures

 

Further reforms introduced centre around entitlements for paternity and bereavement leave from the first day of employment, while stronger protections to safeguard pregnant employees from dismissal have also been put in place.

 

Measures reforming flexible working, aiming to tackle harassment, and centred on pay gap transparency have also been introduced.

 

 

Concerns around the legislation:

The Employment Rights Act is a wide-ranging and complicated piece of legislation, featuring several different reforms. This leaves the door open for confusion and debate, with several key words still to be defined.

These include important phrases such as ‘low hours contract’, ‘irregular hours’, and ‘inherently temporary’. For the reforms to be effective, these words need to be properly defined. If not, there is a risk that the provisions in the bill will become unworkable.

These definitions are necessary to protect those workers who are at risk of exploitation, with the potential alternative of a blanket approach likely to result in the end of flexible contracting.

There is concern around the rigid nature of the act, with employers worried it will have a negative impact on flexibility within the labour market and economic growth.

 

What happens next?

The Employment Rights Act is a pivotal piece of legislation and the completion of its journey through Parliament is a landmark moment, but there is much still to be done.

Although it has now been passed into law, there will still need to be a series of consultations around individual reforms.

We’ll continue to monitor what the changes will mean to small businesses, the self-employed, contractors and freelancers, and when individual measures will be introduced.