Employment Rights Bill – How does it affect Employers?

Running a small business is already challenging enough - managing cash flow, keeping customers happy, and ensuring operations run smoothly. Now, with the Employment Rights Bill introducing some of the most significant changes to employment law in years, you may be wondering how this will impact your business.

While adjusting to new regulations on wages, sick pay, and dismissal rights can feel overwhelming, it also offers an opportunity to strengthen employee relationships and create a more resilient workplace.

Let’s break down what’s coming, what it means for you, and the key steps you should take to ensure compliance while keeping your business running smoothly.

What is the Employment Rights Bill and How Will It Affect Employers?

Unveiled to the UK public on 10 October, the Employment Rights Bill is a 150-page proposal aimed at modernising workplace protections and improving conditions for workers. It introduces 28 significant reforms, covering everything from wages and sick pay to dismissal rights and flexible working.

The Bill is designed to balance the needs of both employees and businesses. However, its potential impact on employers is substantial. With no confirmed date for its implementation, now is the time for businesses to assess how these changes could affect operations and prepare accordingly.

Proposed Changes to National Minimum Wage (NMW) and National Living Wage (NLW) 

One of the most immediate concerns for employers is the rise in the National Minimum Wage and National Living Wage. Starting in April 2025, businesses will be required to pay workers aged 21 and over at least £12.21 an hour. This applies to all workers, including those on zero-hour contracts.

For small businesses with tight budgets, this increase may require careful financial planning. Employers might need to adjust pricing, reduce other costs, or reconsider staffing structures to accommodate higher wages.

Sick Pay

Under the Employment Rights Bill, Statutory Sick Pay (SSP) will be available to all workers from the first day of sickness, regardless of earnings. This change eliminates the current requirement for employees to be sick for three consecutive days before they qualify for sick pay. It also removes the minimum earnings threshold of £123 per week (rising to £125 in April 2025).

For employers, this means an increase in SSP costs, particularly for businesses with a large workforce. Businesses must ensure they have the necessary processes in place to track and manage sickness absences to remain compliant and minimise disruptions.

Unfair Dismissal

Currently, employees must work for two years before they are eligible to claim unfair dismissal. However, the Employment Rights Bill aims to protect employees from unfair dismissal starting from their first day

These changes will not prevent employers from fairly dismissing employees. The Employment Rights Bill will also create statutory probationary period of nine month. This will help employers ensure the job is a good fit for both the employee and the employer.

For small businesses, this change means less flexibility in workforce management. Employers need to ensure that performance reviews, training, and HR processes are well-structured to assess employees effectively within the shorter probation period.

Enhanced Family Rights

The Employment Rights Bill strengthens protections for working parents. Mothers will have additional redundancy protection while on maternity leave and for six months after returning to work, making it unlawful to dismiss them except in specific circumstances.

Furthermore, paternity leave and unpaid parental leave rights will be granted from day one of employment. Employers must prepare to accommodate these new rights by reviewing leave policies and ensuring adequate workforce planning to cover periods of absence.

Flexible Working

Flexible working will become a default right under the Employment Rights Bill, meaning that employers can only refuse a request if they have a reasonable justification.

This change will require businesses to rethink their working arrangements. While flexibility can improve employee well-being and productivity, it may pose operational challenges, particularly for businesses with fixed schedules. Employers should assess how best to balance employee requests with business needs, considering options such as staggered shifts or remote work where feasible.

Zero-Hour Contracts

The Bill introduces new regulations to address what it describes as “exploitative” zero-hour contracts. Employers will no longer be able to impose one-sided flexibility on workers, meaning:

• Employers must offer guaranteed hours to zero-hour workers after a certain period.
• Workers must receive reasonable notice of shift changes.
• Workers will be entitled to compensation if shifts are cancelled, moved, or cut at short notice.

For businesses that rely on flexible, on-demand staffing—such as event management or catering—this could significantly impact operations. Employers should review their reliance on zero-hour contracts and consider transitioning workers to fixed-hour agreements where possible.

Fire and Rehire

The controversial practice of ‘fire and rehire’ will be restricted. Employers can only terminate a worker’s contract and offer re-employment on new terms if the business is facing a genuine financial crisis, such as insolvency risk.

While the Bill does not outright ban fire and rehire, it strengthens employee protections and requires businesses to demonstrate legitimate financial necessity.

Fair Work Agency

A new Fair Work Agency will oversee enforcement of employment laws. This body will have the power to investigate breaches, enforce minimum wage compliance, and ensure holiday pay is properly administered. Enforcement officers will have the authority to inspect workplaces and seize records where necessary.

For small businesses, this means compliance is more important than ever. Employers should keep accurate payroll records, review contracts, and ensure policies align with the new regulations to avoid penalties.

What Does It Mean for You?

The Employment Rights Bill aims to improve workers' pay, protections, and job security. However, these reforms also bring new challenges for employers, particularly small businesses that must navigate higher wage costs, stricter employment protections, and more regulatory oversight.

To stay ahead, businesses should review their policies, update contracts, and seek professional guidance where needed. By preparing now, employers can ensure compliance while maintaining a stable and productive workforce.

How can we help you?

If you need any help or advice regarding how these changes may impact your business get in touch