The Employment Rights Bill is a major piece of UK legislation introduced by the government to overhaul employment law. Its aims are to modernise workers’ rights, address insecure work, improve fairness in the labour market, and enhance protections for employees. The Bill is currently going through Parliament and implementation is expected around autumn 2026, although many measures will require secondary legislation and/or further consultations.

Key elements of the Bill include the following (but which are not limited to):

• Ending exploitative zero-hours contracts and “fire & rehire” practices;
• Giving employees rights to unfair dismissal from day one of their employment (removing the current 2-year service requirement);
• Strengthening statutory sick pay and removing the waiting period before the same applies, as well as removing the lower earnings and broader eligibility for low‑earning workers;
• Day‑one rights for paternity, parental leave, and bereavement leave;
• Flexible working to become the default unless there is a good business reason to refuse;
• Obligations on larger companies regarding gender pay gaps, menopause support, and protections for pregnant women and new mothers; and
• Establishing a Fair Work Agency to centralise enforcement of rights like holiday pay, sick pay, etc.

Impacts on employers

We detail, below, some of the main considerations that employers should begin considering.

Cost of labour and employment costs:

One of the most immediate impacts of the Employment Rights Bill on employers will be the rise in employment costs. By introducing statutory sick pay (SSP) from day one, removing the lower earnings limit for SSP, and broadening eligibility, many businesses (especially those employing low-paid or casual workers) will face significantly higher costs. Additionally, workers on zero-hours contracts will be entitled to request more predictable hours based on their work history, while new entitlements like statutory bereavement or parental leave will increase the financial and administrative burden. Sectors like hospitality, retail, and social care are likely to be hit the hardest. Employers will also likely need to invest in better absence tracking systems, revise payroll policies, and plan ahead for the budgetary impact of these changes.

Flexibility and workforce planning:

The Bill also affects how employers plan and manage their workforce. With flexible working becoming a day-one right and employers required to accommodate requests unless there is a strong business justification, staffing decisions will need to become more structured and transparent. For those relying on short-notice shift pattern (again, common in hospitality and retail), this will create a significant challenge. New requirements for reasonable notice on shift changes, and compensation for cancellations, will reduce employer flexibility. Employers will likely need to adopt better forecasting tools and shift planning systems to manage these demands.

Unfair dismissal and probationary periods:

The introduction of unfair dismissal rights from the first day of employment marks a significant change from the current two-year qualifying period. While the Bill is proposed to introduce a nine-month probationary period to help employers assess new hires, businesses will still need to exercise far greater caution during onboarding and performance management. The risk of legal claims will increase, particularly for early terminations, which will likely mean that detailed record-keeping and well-structured performance reviews will be essential. 

Compliance and enforcement:

A new Fair Work Agency will be established to centralise enforcement of workers’ rights such as sick pay, holiday pay, and fair scheduling. This means employers will face more active oversight and potentially harsher penalties for non-compliance. Companie (especially SMEs without large HR departments) will need to stay up to date with complex and evolving legal standards. This will likely require increased legal or HR consultancy, more frequent training for managers, and a review of employment policies and systems to avoid exposure to fines or reputational damage. Larger employers may need to appoint dedicated staff or teams to manage compliance.

Recruitment, retention, and productivity:

Although the Bill introduces new challenges, it could also yield benefits in terms of staff retention and productivity. A more secure and fairly treated workforce may result in lower turnover, better morale, and improved performance. Employers who adapt early and embrace the new framework may see competitive advantages. On the other hand, the increased cost and complexity of hiring could make some businesses more risk-averse, particularly regarding new recruitment. This may lead to slower hiring, a shift to automation, or more outsourcing. However, well-implemented changes could improve employer reputation and attract top talent.

Impact on SMEs (Small and Medium Enterprises):

Smaller businesses are expected to feel the effects of the Employment Rights Bill more acutely. They often operate with tighter margins, less administrative capacity, and limited HR expertise. The fixed costs of compliance (such as implementing new sick pay policies, responding to flexible working requests, and handling legal risks) may disproportionately burden SMEs. Some may need to pause hiring, scale back operations, or seek external HR/legal support. It’s expected that the government will provide phased implementation or support schemes to help SMEs transition, but early planning and risk assessment are crucial for small employers to remain compliant without sacrificing growth.

Potential risks / challenges:

• Legal uncertainty / grey areas: Because many measures depend on secondary legislation or consultations, some of the exact rules aren’t yet fixed. Employers might find themselves in difficult positions if guidance is delayed or ambiguous;
• Tribunal claims: With day‑one rights for unfair dismissal, more claims are likely, especially during probation or early terminations. Tribunal system capacity and employer legal costs could rise;
• Higher operational overheads: HR, payroll, compliance, scheduling and shift patterns will all need review and possible overhaul. There are therefore likely to be increased initial costs in labour, systems and staff time; and
• Impact on business models: this will be especially so for sectors relying heavily on casual labour / zero‑hours workers (hospitality, retail, care, gig work etc.), or those needing high flexibility in staffing. Certain practices may become less viable, and some employers may respond by reducing hours, limiting hiring, or pushing more work onto fewer employees.

Potential benefits / positive impacts:

While much of this commentary is about costs and risks, there are also some likely benefits:

• More stable, engaged workforce: Greater security, fairness and better protection will likely improve staff morale, reduce turnover and reduce recruitment / training costs;
• Health & wellbeing improvements: With better sick pay, reduced pressure to work when ill, perhaps better working‑conditions / flexible work, employees’ wellbeing may improve, leading to fewer absences and better productivity;
• Level playing field: Firms that already do the “right thing” may benefit if exploitative competitors are curbed. If all employers have to meet more or less the same standards, unfair competition on labour costs is reduced; and
• Improved employer reputation: For many organisations, being seen as “good employers” helps with recruitment, public perception and retention.

What employers should do now to prepare:

To avoid being caught “off‑guard”, employers should consider the following:

• Auditing existing employment contracts and practices: consider reviewing zero‑hours contracts, probation clauses, sick‑pay arrangements, leave policies and flexible work policies. Identify where contracts or practices may be out of line with the proposed new rules;
• Evaluating the likely financial impact: Estimate what the changes may cost your business in terms of Statutory Sick Pay, guaranteed hours, leave etc. (including the administrative / HR compliance costs);
• Updating HR / Payroll systems: Ensure that systems can handle day‑one sick pay, track hours properly (especially for zero‑hours / casual workers) and flexible work requests, etc;
• Training managers and HR staff: Managers will need to understand the new rules (especially around unfair dismissal, flexible work, shift scheduling) to apply them properly;
• Planning workforce / scheduling differently: If flexibility is limited, build more predictable schedules. Implement forecasting and buffer capacity, etc;
• Monitoring legislation and guidance: Stay on top of secondary legislation, government guidance and consultations. Some details will change, and early implementation may require changes in policy first; and
• Engaging with stakeholders: Communicate with employees, and possibly trade unions, about changes. Where possible shape implementation in ways that maintain morale, avoid surprises.

Conclusion:

The Employment Rights Bill is a major shift in UK employment law. For many employers, especially those in sectors with many flexible / low paid workers, the changes will mean higher costs, more regulation, and the need for greater operational discipline. However, there is also a potential upside in terms of staff retention, morale, fairness, and competitiveness in the long run. The success of the Bill (for employers as well as employees) will depend greatly on the details (secondary legislation and guidance), how well businesses adapt, and whether there is sufficient support (especially for smaller firms) to manage the transition.

How can we help:

With the Employment Rights Bill set to transform UK employment law, employers face significant changes to contracts, workforce management, and compliance obligations. Early preparation will be key to minimising risk and managing the transition smoothly.

At TV Edwards, our employment law team can help you review your current practices, assess the potential impact on your business, and implement practical steps to ensure compliance ahead of time.

Contact us on 020 3440 8000 or email abigail.williams@tvedwards.com to discuss how we can support your organisation.

Please note that the Employment Rights Bill is still in the Parliamentary consideration phase and therefore may develop and change as this proceeds. The above should therefore not be construed as legal advice and merely considerations as to what could be implemented.