Major overhaul of workers' rights approaches

The article was first published on Insurance Business

A flagship piece of legislation, the Employment Rights Bill should make its way onto the statute books later this year. Alan Jappy, Head of New Business, Corporate at ARAG, takes a look at some of its key measures and when they are likely to come into force.

After a challenging few years, business owners are understandably wary of more regulation and the government’s Employment Rights Bill has been described by Unison as “...the most significant piece of employment rights legislation in decades.”

A centrepiece of the government’s plan to ‘make work pay’, some of the bill’s measures have been on the table for years while others are simply designed to codify existing best practice.

Some recent media coverage has suggested the bill is much more radical and imminent than anticipated, but a ‘roadmap’ published by the Department for Business and Trade outlines a measured introduction, with further consultation on key reforms and a timeline stretching out over two years.

Key measures

While all employment related, the bill covers a lot of ground, from industrial action to umbrella companies and zero hours contracts to paternity and bereavement leave.

The most alarmist press reports suggested radical reform around harassment that would transform workplaces across the country and could inhibit free speech. However, the government has given assurances that the bill would not ban ‘office banter’ nor push firms into hiring staff to monitor diversity or workplace language.

The employer duty introduced in October 2024 to take ‘reasonable steps’ to prevent sexual harassment at work will be extended to require ‘all reasonable steps’ but what is needed - policies, complaints procedures and risk assessments - will be set out in regulations.

A sexual harassment complaint will now be protected under whistleblowing legislation and, importantly, it will be illegal for employers to use non-disclosure agreements to gag employees and stop them from talking about allegations of discrimination or harassment. This will have a big effect on the use of settlement agreements where a dispute involves sexual harassment.

The duty to protect staff will also extend to any form of harassment by third parties, such as customers and suppliers. But that will only require ‘reasonable steps’ which might include updating client and supplier agreements with clear and appropriate terms.

Unfair dismissal from day one

Perhaps the most significant change is removal of the qualifying period for unfair dismissal. It’s over 13 years since this was extended to two years of service, though many claims, such as those involving discrimination or whistleblowing, don’t have any qualifying service requirement.

It’s inevitable that this will result in more employment tribunal claims, though how many is uncertain. While claims for unfair dismissal will increase, there may be fewer claims for discrimination and whistleblowing, which are often used to bring a claim inside the current two-year qualifying period.

The original bill includes provision for a statutory probation period during which dismissal over performance or conduct would be easier. However, just as the House of Lords was about to adjourn for its summer recess, an amendment was passed, replacing the day-one right with a six-month qualifying period.

The amendment seems to have broad support, not least because it should mitigate the impact on the struggling employment tribunal system. But it presents a political headache for the government, as the day-one right was a manifesto pledge.

Whichever version is passed when it goes back to the House of Commons in the Autumn, employers will need to review contracts, disciplinary, dismissal and performance review processes before the 2027 implementation.

The timetable

While the bill is nearing the end of its journey through parliament, it will be 2026 before most of the measures will be introduced and some will have to wait until 2027. The government roadmap for implementing the bill promises further consultation on key reforms and a staggered approach to changing the law.

The only changes due to come into force as soon as the bill receives Royal Assent, concern industrial action and protection from dismissal as a result. While it may not be set in stone, highlights of the rest of the timetable include:

April 2026

October 2026

2027

These are just some of the headline measures. Once it becomes law, the Employment Rights Act will undoubtedly tilt the balance of employment law a little further towards workers, especially in areas where employees have been at a disadvantage, such as zero hours contracts, NDAs and during the first months and years of a new job.

For their part, employers would be wise to check and update employment practices, policies and contracts, as well as checking what insurance they have in place against employment risks. All of ARAG’s standard commercial policies include access to a legal advice helpline that can help guide businesses through the changes and insurance against the cost of employment disputes.