Collective redundancies – increase to protective awards, but no interim relief, and slight softening on "establishment"

• Concession on "one establishment": The ERB initially proposed to remove the words "at one establishment" from the legislation that sets the collective redundancy consultation threshold. This would result in employers having to consult collectively whenever they are proposing to dismiss 20 or more employees for redundancy in a 90 day period anywhere across their organisation. This change to the current law was a particular concern to large multi-site employers.

Fortunately the government appears to have taken those concerns into account, and has proposed a notable change to the ERB on this topic. Its proposed amendments to the ERB would mean that:

• Where dismissals are proposed "at one establishment", the current threshold of 20 or more dismissals in a 90 day period would be retained, and
• A different, higher threshold will be set for collective consultation where employees are to be made redundant at more than one establishment (effectively, aggregating dismissals across establishments). Further details will be set out in future regulations, with one potential approach being to set the threshold based on a particular percentage of total employees (e.g. if the employer were proposing to dismiss 10% of employees across the business as a whole).

The amendments also specify that, where collective consultation requirements apply to dismissals at more than one establishment, the employer would be required to consult with all appropriate representatives. However, it need not consult all of them together, nor with a view to reaching the same agreement with all of them. This recognises that it may be difficult to convene a consultation meeting with representatives in geographically distant locations, and that different establishments may have different concerns, making it more appropriate for consultation to take place at the local level.

• Doubling of protective award: Following consultation on collective redundancies, the government has confirmed that the maximum amount of a protective award will double – from 90 to 180 days' pay per affected employee. The consultation response describes this as a "balanced approach", as it represents the middle ground between making no change to the cap on protective awards and removing the cap entirely. It emphasises that employment tribunals will continue to have discretion to vary the amount of the award, "as they consider just and equitable in all the circumstances, having regard to the seriousness of the employer's actions, as well as any mitigating factors". Nonetheless, this change represents a significant increase in the potential financial risk to employers of getting collective redundancy consultation wrong.

• Interim relief: Employers will, however, be relieved by the government's confirmation that the proposal to make interim relief available as a remedy where an employer breaches its collective consultation obligations is not being taken forward (albeit the government has said this will be kept under review).

The government has also committed to providing additional guidance for employers on what they must do to comply with collective redundancy consultation obligations.

"Fire and rehire" – increase to protective awards, but no interim relief

In relation to "fire and rehire/replace", the ERB will make it automatically unfair to dismiss an employee for refusing to agree to a change to their terms and conditions of employment, albeit that there will be a very narrow exception if the employer can demonstrate that the change in terms was necessary to alleviate serious financial difficulties and could not reasonably have been avoided. In those circumstances an employer would need to comply with the Code of Practice on dismissal and re-engagement, which will be updated. So, there has been no change to the high bar for dismissals and re-engagements which the ERB will introduce.

When the provisions prohibiting dismissal and re-engagement take effect, employees bringing an automatic unfair dismissal claim will be able to seek a protective award, so the confirmation that the maximum amount of a protective award will increase from 90 to 180 days' pay per affected employee (see above) will impact in this area as well.

The government has, however, confirmed that the proposal to make interim relief available as a remedy in automatic unfair dismissal claims in a dismissal and re-engagement scenario is not being taken forward. This will come as a relief to employers, although the government has said this will be kept under review.

Extension of provisions on zero and low hour contracts to agency workers

The ERB includes provisions requiring employers to offer contracts for a guaranteed number of hours to zero-hours workers and low-hours workers. The number of hours to be offered will have to reflect the number of hours that the worker regularly works during a reference period (to be specified in regulations, but expected to be 12 weeks). Employers will also be required to provide workers with reasonable notice of shifts, and of cancellations or changes to scheduled shifts, as well as compensation for cancelling or changing shifts at short notice.

In late 2024, the government consulted on extending these protections to cover agency workers, and it has now confirmed its intention to amend the ERB to provide for this via regulations, so as to ensure that employers cannot use agency workers as a "loophole in the plans to end exploitative zero hours contracts".

Under the proposed amendments, the starting point is that the end hirer will be responsible for making an offer of guaranteed hours to its agency workers, as end hirers are considered to be best placed to forecast and manage the flow of future work. Regulations will also allow for the obligation to make a guaranteed hours offer to be placed on the agency instead in certain circumstances. The government acknowledged in its consultation response that businesses had raised concerns about the impact of these provisions on temporary and seasonal work. The government has confirmed that, where work is genuinely temporary, end hirers will be able to offer temporary contracts, and has said that it is "also keen to discuss other ways in which it believes the legislation can cater for seasonal work". This does not address the fundamental concerns employment businesses and their clients have raised about these changes and will represent a real limitation on employers' ability to use flexibly engaged agency workers to meet unpredictable and seasonal demands.

Responsibility for providing an agency worker with reasonable notice of shifts, shift cancellations and changes to shifts will sit with both the end hirer and the agency, but responsibility for making payments to workers where shifts are cancelled, moved or curtailed at short notice will rest with the agency – since the worker will already be on the agency's payroll. In the case of pre-existing contracts (entered into before or within the two-month period after the Bill is passed) agencies will be permitted to recoup these costs to the extent the hirer was responsible. Thereafter, the parties are expected to provide in their contracts for how they wish such costs to be apportioned.

Another major change to flag is that employers may be able to contract out from the rights to guaranteed hours and reasonable notice of shifts, for both workers and agency workers, by using a collective agreement. The government's proposed amendments to the ERB include a provision that would allow employers expressly to exclude the requirements to make a guaranteed hours offer, provide reasonable notice of shifts and shift changes/cancellations, and make payments to workers to compensate them for short notice changes/cancellations, where this is done via a collective agreement which expressly excludes and replaces those requirements, and the relevant term of the collective agreement is incorporated into individual contracts. This would apply in respect of both directly engaged workers and agency workers.

The government's consultation response expresses a commitment to "retaining necessary flexibility for employers in how they manage their workforces"; the detail of the provisions (on which the government has said it will consult) will be key to determining how this can be achieved, and the government has also confirmed that it will develop guidance to assist workers, agencies and hirers in understanding the new rights before they come into force.

Statutory Sick Pay – available from day one of sickness, and payable to lowest earners

Under current rules, Statutory Sick Pay (SSP) is only payable from an employee's fourth day of sickness absence, and employees are only eligible if they earn at least the lower earnings limit (£123 per week, increasing to £125 per week from April 2025). The ERB proposes to broaden rights to SSP by making it payable from the first day of sickness absence and removing the lower earnings limit for eligibility.

The government consulted on both of these proposals and has now confirmed in its consultation response that they will be taken forward. The government has confirmed that, for employees earning below the lower earnings limit, SSP will be payable at the normal rate or 80% of their normal weekly earnings – whichever is lower. The consultation response explains that this should strike an appropriate balance between providing the financial security that employees need, ensuring employees are incentivised to return to work when they are able to, and limiting additional costs to businesses.

The consultation response flags that these changes will only apply in England, Wales and Scotland, as SSP is a transferred matter in Northern Ireland. However, the devolved government in Northern Ireland has agreed to bring forward equivalent amendments in the Northern Ireland Assembly so that parity can be maintained in relation to SSP.

Industrial relations

The proposed changes to trade union law set out in the ERB and the consultation paper on reforms to trade union law, which was described as a consultation on "creating a modern framework for industrial relations", are far-reaching and have the potential to lead to greater union presence in many workplaces and an increase in the number of employees whose terms are determined by collective bargaining.

The consultation sought views on a wide variety of possible reforms, and the government has now confirmed in its consultation response that it intends to take the following changes forward:

• The amount of information unions must include in ballot notices and industrial action notices provided to employers will be reduced, although not to the same extent, as the government considers that employers need more specific information at the point when industrial action is being called, as opposed to merely being a potential outcome of a ballot.
• The notice of industrial action that unions must provide to employers will be reduced from the current 14 days. However, whereas the original draft of the ERB proposed to reduce this to seven days, following feedback from employers the government is instead proposing a 10 day notice period.
• The period for which a ballot in favour of industrial action provides a valid mandate is to be increased from six months to 12 months.
• E-balloting will be introduced to make ballots more accessible. This does not need to be provided for in the ERB, and the government has confirmed that it will convene a working group of union and employer representatives to progress this imminently.
• Greater protection will be introduced to prevent unfair practices during the trade union recognition process.
• Trade unions' rights of access to the workplace will be expanded to include digital as well as physical access. There will be a fast track process for approval of access agreements that meet certain criteria, as well as an appropriate mechanism to enforce penalties for non-compliance with access requirements.
• The requirement for trade unions to ballot their members every 10 years on whether they wish to maintain a political fund will be removed, although unions will be required to remind their members every 10 years of their right to opt out of contributing to the union's political fund.

One further proposed government amendment that will provide some initial relief for employers is that the repeal of the 50% turnout requirement for industrial action ballots should no longer come into force automatically two months after the ERB receives Royal Assent, but should instead be commenced separately by regulations. The government's consultation response explains that the intention behind this is to align as closely as possible the removal of turnout thresholds with the introduction of e-balloting (see above).

On the important question of the union membership threshold to make a request for statutory recognition, the government has not provided clarity. The ERB will give a power to amend the law to state this threshold may be between 2% and 10%. For now, the 10% threshold holds, but whether it will be replaced, and with what, is not known.

Fair Work Agency

Also noteworthy are the proposals to give real teeth to the Fair Work Agency (FWA) as an enforcement body. This new enforcement agency brings together existing enforcement functions, such as SSP and minimum wage enforcement, labour exploitation and modern slavery as well as adding holiday pay enforcement. Under the new proposals, the FWA would have the power to impose notices of underpayment on employers who have failed to pay certain statutory payments (such as the national minimum wage, or SSP) to their workers. A notice of underpayment could cover a period of six years of underpayments and would require the employer to pay the worker the underpaid amount (with provision for uprating if the applicable statutory rates have changed since the underpayment occurred) and impose a financial penalty payable to the FWA. The FWA will also have the power to apply for court orders to enforce compliance with notices of underpayment and to bring employment tribunal proceedings on workers' behalf. It will also be able to provide, or arrange for provision of, legal advice and representation for any person who is or may become party to proceedings relating to employment or trade union law.

Umbrella companies

The government has also published a response to the consultation on umbrella companies (companies which employ individuals as part of a chain in which their labour is supplied for the benefit of an end client). This was a consultation launched by the previous government to address concerns of non-compliance in the umbrella company market depriving workers of their employment rights, distorting labour market competition and leading to tax losses for the government.

The government has proposed an amendment to the ERB which will define umbrella companies, to allow for their regulation and to bring them within scope of the Employment Agency Standards Inspectorate’s (and subsequently, the FWA’s) remit. The intention is to ensure those working through umbrella companies will enjoy comparable rights and protections to those who are directly engaged by a recruitment agency. For example, protection against non-payment of holiday pay and lack of clarity about pay rates.

As announced at the Autumn Budget 2024, the government will also legislate so that, from April 2026, where an umbrella company is used in a labour supply chain to engage a worker, responsibility to account for PAYE will pass from the umbrella company that employs the worker to the recruitment agency that supplies the worker to the end client. Where there is no agency in a labour supply chain, this responsibility will sit with the end client.

With workers engaged via umbrella companies having the same rights as those working through recruitment agencies, end clients may reconsider their use of umbrella companies going forwards. Meanwhile, umbrella companies themselves will need to adapt their operations to ensure compliance with this additional regulation.

Right to switch off

Although not part of government consultations or amendments, it has been reported that the government will not proceed with plans to provide workers with a “right to disconnect”, a proposal which had formed part of their pre-election pledges. 

Miscarriage bereavement leave

Another proposed amendment which has been covered by the press is an extension to parental bereavement leave to cover pregnancy loss before 24 weeks. Mothers and their partners will be given the right to two weeks' bereavement leave in these circumstances. This amendment is not a government amendment but has been put forward by a Labour MP and it is reported to be backed by the government, so it is quite likely to be introduced.

What does this mean for employers?

Without a doubt, the ERB represents the biggest change to employment rights for decades, and employers will have significant work to do to comply with the new provisions it will introduce. The government has, however, reiterated its promise that the most substantive changes will not take effect before 2026, and has confirmed that it will consult further over the details of the regulations that will be needed to implement them.

We will continue to monitor the progress of the ERB and will keep clients updated on any significant developments.