The Employment Rights Bill, commonly referred to as the 'Make Work Pay Plan', was introduced in October 2024 by the Labour Government. Its goal is to transform employment laws, provide support for both employers and employees, all whilst stimulating economic growth. The bill addresses key issues which include flexible working arrangements, protection against unfair dismissal, zero hour contracts and more. This article aims to explain the bill and what it means for your small business.
Key Provisions In The Reform
Unfair Dismissal
The Government is removing the current two year qualifying period for employee protections against unfair dismissal, guaranteeing that all employees will be protected from day one. Current rights that are already in place will not be affected.
Flexible Working
The new measures are designed to promote access to flexible working by requiring employers to approve reasonable requests. Employers may only decline a flexible working request if it is justifiable based on one or more of the eight business reasons outlined in existing legislation. When rejecting a request, employers must provide the employee with an explanation of why the decision is reasonable. Currently, there is no obligation for employers to give any explanation.
Fire And Rehire
The Bill would significantly limit employers' ability to use fire and rehire practices. Dismissing an employee for refusing to accept changes to their contract will be considered unfair. Additionally, it will be automatically unfair to dismiss an employee if the primary reason is to replace them with another person or to rehire them under new terms.
Protections For Pregnant Women
The Government will strengthen protections through the Employment Rights Bill by making it illegal to dismiss pregnant women and mothers on maternity leave, or within six months of their return to work, except in certain situations. This measure aims to reduce maternity and pregnancy discrimination and help prevent women from leaving the workforce.
Zero Hour Contracts
The Government is dedicated to eliminating one-sided flexibility and unfair zero hour contracts, ensuring all jobs offer a basic level of security so workers can better manage their lives and finances. This includes rights to guaranteed hours, reasonable notice of shifts and payment for cancelled shifts.
Bereavement Leave
The Employment Rights Bill will introduce a right to Bereavement Leave. It will grant employees time off from their first day, allowing them to mourn a loss. It will set a clear standard for employers and ensure that employees who might not have previously been granted time off are protected.
Statutory Sick Pay (SSP)
The removal of the lower earnings limit means that the lowest paid workers will now qualify for Statutory Sick Pay (SSP). For employees earning below the former threshold, SSP will be calculated as a percentage of their usual earnings rather than using the standard flat rate. Following consultation and engagement with stakeholders, the Government has decided that SSP for these workers will be set at 80% of their normal weekly earnings, up to a maximum of £118.75, as specified in the bill.
Potential Impacts Of The Reform
For Employers
The Employment Rights Bill will require UK employers to make significant adjustments to workplace policies and practices. They will need to accommodate flexible working requests from day one of employment, which may involve rearranging work schedules and roles.
Restrictions on zero hour contracts could force employers to offer more stable and predictable hours to workers. Stronger protections against unfair dismissal from day one will also mean employers must handle terminations with greater care and legal compliance.
New requirements around pay transparency will impact how employers advertise roles and structure wages. Additionally, enhanced union rights may lead to increased collective bargaining obligations.
Overall, employers will face higher compliance demands, increased administrative responsibilities and greater scrutiny from regulatory bodies.
For Workers
The Employment Rights Bill is expected to provide employees with stronger protections and greater workplace rights. It will give workers the right to request flexible working from their first day on the job, promoting better work-life balance.
Restrictions on zero hour contracts aim to offer more job security and predictable hours for those in more casual roles. By extending unfair dismissal protections to begin on day one, employees will have increased job security and protection against unreasonable termination.
Greater pay transparency will help workers understand salary expectations and may contribute to reducing pay gaps. Enhanced union rights will also empower employees to have a stronger voice in workplace decisions.
Overall, the bill strengthens employee rights, improves working conditions, and provides greater fairness and stability in employment.
For Trade Unions
The Employment Rights Bill is set to strengthen the role and influence of trade unions in the workplace. It will enhance collective bargaining rights, making it easier for unions to negotiate on behalf of workers.
The Impact On Small And Micro Businesses
According to the Employment Rights Bill Economic Analysis report, small and micro businesses are disproportionately affected by the employment rights regulations because the associated costs are typically fixed, meaning they don't vary with the businesses output. Since small and micro businesses operate on a smaller scale with often tighter margins than large businesses, the cost of complying with new regulations makes up a larger share of their overall costs. Additionally, understanding and complying with new regulations can be more time consuming and resource intensive for small businesses as they are less likely to have teams dedicated to regulatory compliance.
New rights for employees from day one; such as sick pay, parental leave, and protection against unfair dismissal will increase payroll expenses and legal risks for employers. Additionally, limits on zero hour contracts and more rights for flexible working will reduce staffing flexibility, especially in industries such as retail and hospitality. As a result, many small businesses may react by limiting recruitment or rearranging roles to respond to the added regulatory pressure.
The ever evolving nature of the legislation adds a layer of uncertainty, making it more difficult for small businesses to plan for the future with confidence.
What Progress Has Been Made?
As of June 2025, the bill is at the 'committee' stage in the House of Lords. During this phase, the bill is reviewed in detail, with each line examined carefully. The House will then discuss and decide whether each clause should remain.
The 'report' stage is scheduled to begin on 14 July 2025. During this stage, the House reviews the bill and makes any required changes. Members of the Lords will vote on the proposed amendments.
For future updates on the Employment Rights Bill, you can visit the UK Parliament website, which is regularly updated with the latest information.
Looking For Further Information?
I hope this article has helped to explain the Employment Rights Bill and its implications for your small business. To learn more about topics relevant to small and micro businesses, please explore our Knowledge Base. If you have additional questions about any upcoming business regulation changes, please do not hesitate to contact us.
