In-House Perspective assesses the potentially ‘seismic’ implications for businesses from the UK’s employment rights ‘upgrade’.

A bill described by its authors as ‘the biggest upgrade in employment rights in a generation’ is currently being debated in the UK Parliament.

The Bill has arrived after a relatively static period in employment legislation in the country and covers many key areas, such as unfair dismissal, trade unions and the gig economy. One of its aims is to promote employment security and tackle the problem of precarious jobs, such as those involving zero hours contracts.

For employees, this could be a positive. For businesses, the impact may be seismic. ‘It will put staffing at the top of the agenda,’ says Nicola Rabson, Global Head of the Employment and Incentives Group at Linklaters. ‘People who have to look at the bottom line will be giving serious thought to recruitment and whether or not they should use alternative models such as outsourcing or agencies.’

The majority of the proposals need ironing out through consultations – which are planned for 2025 – and via secondary legislation before being implemented in stages over the course of 2026. From an in-house perspective, counsel are ensuring that they have a good understanding of the headline points that will have an impact on their organisation, says Ed Mills, Membership Officer on the IBA Employment and Industrial Relations Law Committee. ‘As the proposals have been in the media, boards are asking questions of their legal advisers,’ he says. ‘Given that there are still quite a few unknowns in the detail, it would be premature at this stage to spend time implementing changes to practices, policies or contracts but it’s definitely the moment to be on top of the core changes.’

There are a number of areas that might require heavy lifting by in-house teams. For example, the proposals include an intensification of existing rules around preventing sexual harassment in the workplace. The Bill introduces potential liability for sexual harassment by someone outside of the employer, known as ‘third-party harassment’. Further, the Bill ramps up the employer’s duty to take ‘reasonable steps’ to prevent any harassment, amending it to ‘all reasonable steps’.

That additional word, ‘all’, is crucial, says Peter Talibart, Vice Chair for Communications within the IBA Global Employment Institute. ‘This new “duty of prevention” may be a higher standard than the law’s traditional “duty of care” and will require a careful risk analysis of how, where and in what circumstances such harassment might occur,’ he explains. ‘Any such assessment should almost certainly have some employee involvement in the identification of such risk factors. This is actually a significant, additional process.’

A key component of the Bill is the bolstering of trade union rights and procedures. These haven’t been making the media headlines in the way that commentators believe they should have, however. Under the Bill, the recognition process for establishing a trade union at a workplace is simplified by, for instance, reducing the membership threshold. Additionally, there’s a new duty to inform workers in writing of their right to join a trade union. ‘This might make non-unionised employers somewhat nervous if it is taken as an invitation to unionise,’ says Talibart, who’s also a co-chair of the International department at Seyfarth Shaw.

It's the changes relating to unfair dismissal that have drawn the most attention from employers. Currently, businesses, in effect, have two years to work out whether a new employee is really right for the company before the individual gains the right not to be unfairly dismissed – those practising employment law refer to this as ‘the try-before-you-buy’ period.

The new rules will make that a ‘day one’ right to protection. On the face of it, this sounds radical. However, the new rules preserve an initial nine-month probationary period during which employers would have less onerous procedures to follow if they felt that an employee wasn’t a good ‘fit’. It’s also the case that employers have been here before. The qualifying period for unfair dismissal has, historically, see-sawed between six months and two years, with the period being set at one year in the early 2000s before going up to two years in 2012.

As the Employment Rights Bill enters its third reading in the House of Commons before going to the House of Lords, there’s time for in-house teams to work through the elements of the legislation and assess what’ll have the most significant implications for them. Government consultations should give businesses the time to prepare, though they probably won’t water down the proposals to any great extent, ‘Our sense is that most of the proposals will stay broadly as they are,’ says Mills, who’s also a partner at Travers Smith in London.

Much will depend on an organisation’s business model. If it’s dependent on zero hours contracts, the rules around having to offer new ‘guaranteed hours contracts’ may trigger a complete re-set. The changes are also cumulative, meaning each of the proposals needs to be considered in combination. Further, the Bill has to be viewed in the context of the tax changes already introduced in the UK government’s Budget in late 2024. For some larger employers, the combined impact could be the tipping point. ‘From a board perspective, if you look at the workload plus the costs that the UK’s new Bill could create, alongside the increase in national insurance contributions, it is concerning,’ says Rabson.