Following a compromise agreed with six leading organisations, including the CIPD, the Employment Rights Bill was passed by Parliament and has now become law as the Employment Rights Act 2025.

Having a direct operational impact on HR professionals and businesses, the legislation will balance worker protection with business sustainability, giving employers ample time to prepare for the changes.

Prime Minister Sir Keir Starmer proclaimed that the development marks a major victory for workers in all parts of the country.

Starmer said: “We have just introduced the biggest improvement in workers’ rights in a generation.

“Today our plans have been adopted by Parliament and will soon become law.”

Advancing new worker laws

It should be noted that most of the measures in the Bill will require further consultation and secondary legislation.

Implementation will therefore take place in stages, with the final measures being completed in 2027.

Additionally, the bill will apply to England, Scotland and Wales, but not Northern Ireland.

Northern Ireland is in the pre-legislative phase of developing its own ‘good jobs’ labor rights bill.

Unite Union general secretary Sharon Graham commented: “Unions must now stop being hampered by these new pro-worker laws.

“The bill had already been watered down far too much, particularly with regard to the ban on dismissal, rehiring and zero-hours contracts.”

What does this mean for businesses?

The Employment Rights Act 2025 will introduce 28 major employment reforms aimed at modernizing the workplace, improving job security and strengthening worker protections.

It is the most significant overhaul of UK employment law in decades.

However, some reforms have been scaled back or delayed, raising questions about their practical implementation.

Here are some of the key changes and what they mean for your business:

Unfair dismissal

Initially, the bill proposed giving workers the right to claim unfair dismissal from day one, replacing the current two-year waiting period.

Following opposition, this duration was extended to six months, from the start of 2027.

The bill completely removes the cap on compensation for financial losses in the event of unfair dismissal.

Zero hour contracts

Under the new rules, eligible zero-hours workers will be eligible to apply for a guaranteed hours contract.

To be eligible, working hours must exceed the guaranteed minimum over a defined reference period, which should be 12 weeks, unless an exemption applies.

Those who prefer the flexibility of zero-hours contracts can keep them.

Employers will also be required to provide reasonable notice for shifts and compensate workers for canceled or shortened shifts.

Flexible working

Flexible working will become the norm rather than the exception.

Employers can only refuse a request if it is reasonable to do so, citing one or more of the eight commercial reasons already set out in the primary legislation, such as additional costs or an impact on customer requests.

However, the grounds for refusal remain broad and the consultation process unclear, raising doubts about the extent of changes in practice.

Statutory Sick Pay (SSP)

The waiting period and income threshold for statutory sick pay (SSP) will be removed, meaning employees will no longer need to wait until the fourth day to claim sick pay.

Additionally, theLower Earnings Limit (LEL) This threshold will be abolished, which will make the PAS accessible to a greater number of employees.

Parental and bereavement leave

Unpaid parental leave will become a right from the first day of employment, thus removing the current one-year reference period.

The bill will also establish a right to bereavement leave.

It will be a good day for ‘protected leaveemployees to mourn the loss of a loved one, the right being provided for in secondary legislation.

Fire and rehire

The bill will largely ban fire-and-rehire practices, in which employers fire workers and rehire them under worse conditions.

Exceptions will apply if a company faces insolvency.

Preparation of the draft law on labor rights

The Employment Rights Bill introduces significant changes that will impact both employers and employees.

Preparing for these reforms is crucial to ensuring compliance.

At IRIS, we are here to support you every step of the way, providing you with the tools and guidance you need to navigate these changes with confidence.