Employment Rights Bill Passes

The Government’s Employment Rights Bill has now completed its passage through Parliament, having cleared its final stages in the House of Lords. While the Employment Rights Bill has not yet received Royal Assent, this is expected before the end of 2025. Until that point it remains a Bill, but its substantive provisions are now settled and will form the basis of the most significant reform to UK employment law in a generation.

Employment Rights Bill

With the Employment Rights Bill having completed its parliamentary passage, bar Royal Assent, it marks the end of a prolonged period of legislative uncertainty and the beginning of a transition phase for employers from monitoring proposals to preparing for implementation.

For employers, the key issue is no longer whether reform will occur, but how and when the new rights will be brought into force.

Although Royal Assent will formally transform the Employment Rights Bill into an Act of Parliament, most of its provisions will not take effect immediately. The Government has made clear that commencement will be phased, with different elements coming into force across 2026 and 2027 through a combination of primary provisions and secondary legislation.

This staged approach is intended to give employers time to adapt policies, contracts and workforce planning to the new legal framework. It also means that organisations must track not only the content of the legislation, but the sequencing of its implementation.

Unfair Dismissal Changes

One of the most consequential changes introduced by the Employment Rights Bill is the reduction of the qualifying period for ordinary unfair dismissal claims. Earlier policy proposals for full “day one” unfair dismissal rights have been abandoned. Instead, the Bill provides for a six‑month qualifying period, replacing the current two‑year threshold.

The Government has indicated that the revised qualifying period is expected to be brought into force during 2027. Once implemented, it will significantly expand the category of employees eligible to bring unfair dismissal claims, increasing the importance of structured probation processes, early performance management and defensible decision‑making from an early stage of employment.

Alongside expanded eligibility, the Employment Rights Bill also makes a fundamental change to compensation for unfair dismissal. The version of the Employment Rights Bill that has passed Parliament removes the statutory cap on compensatory awards, which currently limits compensation to the lower of either 52 weeks’ pay or £118,223.00.

This reform was one of the most contested aspects of the legislation during its passage, particularly in the House of Lords, but it is now reflected in the text approved by both Houses. The precise commencement date for the removal of the cap will be set through commencement regulations, but the legislative position itself is now clear.

The removal of the cap materially alters the risk profile of dismissal decisions. It increases potential exposure in higher‑paid roles, affects settlement strategy and insurance planning, and heightens the financial consequences of procedural or substantive unfairness.

Zero‑Hours Reforms

While unfair dismissal has attracted significant attention, many employers regard the reforms to zero‑hours working as the most operationally complex elements of the Employment Rights Bill.

The legislation is intended to address what the Government has described as “one‑sided flexibility” by increasing predictability of work and income. It introduces rights to reasonable notice of shifts and an entitlement, in defined circumstances, to be offered a contract reflecting hours regularly worked over a reference period.

The framework for these rights is set out on the face of the Employment Rights Bill, but much of the practical detail, including reference periods, thresholds and exemptions, will be defined through secondary legislation. The Government has indicated that these provisions are expected to come into force in 2027, giving employers a limited window to assess their impact on workforce models and contractual arrangements.

Statutory Sick Pay And Family‑Related Rights

The Employment Rights Bill also brings forward a number of employment rights to day one of employment. Day one entitlement to statutory sick pay, paternity leave and unpaid parental leave is expected to take effect in April 2026.

These reforms form part of the Government’s broader objective of modernising workplace protections and addressing labour‑market insecurity. While individually less complex than dismissal or working‑hours reform, they will require updates to payroll systems, policies and manager training.

Practical Implications For Employers

With parliamentary passage now complete and Royal Assent imminent, employers should move from observation to preparation. Key areas to focus upon include:

• Reviewing probation, performance management and dismissal procedures in anticipation of earlier unfair dismissal protection;
• Reassessing termination risk and settlement strategy in light of the removal of the unfair dismissal compensation cap;
• Auditing contracts and workforce models that rely on zero‑hours arrangements; and
• Ensuring HR teams and line managers are trained to apply policies consistently within a more regulated framework.

Conclusion

The Employment Rights Bill has now passed Parliament and is on course to receive Royal Assent before the end of 2025. While it has not yet formally become law, its core provisions are settled and the direction of reform is clear.

For employers, the challenge is no longer uncertainty about legislative intent, but readiness for implementation. The phased introduction of new rights across 2026 and 2027 provides an opportunity to review policies, adapt workforce strategies and manage legal risk in a measured way. Employers that engage early with the implications of the Employment Rights Bill will be best placed to navigate the transition once the legislation formally comes into force.