What employers need to know about Labour’s Employment Rights Bill

By Lisa Judd, Head of Employment & HR Advisory

The Labour Party’s Employment Rights Bill represents one of the biggest legislative overhauls in recent history, aimed at improving workers’ rights across the board.

Announced this month, these reforms will impact how businesses operate, from hiring practices to employee entitlements.

While many aspects of the bill will not be enacted for at least two years, employers must start getting to grips with the upcoming changes and understand their legal implications.

What are the key changes?

Day-one employment rights

One of the headline changes is the introduction of day-one rights for workers.

Employees will qualify for protection against unfair dismissal from the first day of employment, as opposed to the current requirement of two years’ service in most cases, although this will be subject to a probationary period.

This will also extend to day-one rights for paternity and unpaid parental leave, broadening the scope of parental entitlements.

Businesses must now be prepared for how they manage new hires, as dismissal processes could face more scrutiny from day one.

Employers should review their onboarding and probation procedures to ensure compliance with these new protections as far as possible with the limited information available. Probation procedures will need reviewing once the regulations (which provide more detail on the process required during probation) have been made available.

Statutory Sick Pay

A major change will be the introduction of Statutory Sick Pay from the first day of illness, without the current lower earnings limit.

This means all workers, regardless of income, will be eligible for Statutory Sick Pay from the first day they report sick.

While the Statutory Sick Pay rate of £116.75 per week remains unchanged for now, the removal of the earnings threshold is expected to impact the financial planning of many businesses. It is believed for those below the current lower earnings limit, a percentage of pay will be paid.

Employers will need to adjust their sick leave policies and be prepared for the administrative and financial implications of providing sick pay from day one.

Zero-hour contracts and fire and rehire

It is estimated over one million people currently on zero-hours contracts will gain the right to guaranteed working hours if they have worked regular shifts over a set period (initially proposed as 12 weeks).

Additionally, ‘fire and rehire’ practices, where employers dismiss workers and rehire them on less favourable terms, will be banned except in extreme circumstances, such as businesses on the brink of collapse.

We can help advise employers on their long-term strategies to ensure that any necessary changes to employment terms are handled lawfully.

Flexible working

It was thought that Labour’s commitment to making flexible working the default option for employees would reshape workplace policies, however the changes are more subtle than originally anticipated.

Employers will only be permitted to refuse on specified grounds (which is the current position) but also only if it is reasonable to refuse on those grounds. Employers will need to explain why they believe the reason applies and why they consider it reasonable to refuse the request. Employers will also be required to create action plans to close gender pay gaps and support female employees experiencing menopause.

These provisions will add further compliance requirements for employers, particularly those with larger workforces.

The Fair Work Agency

A new enforcement body, the Fair Work Agency, will be established to monitor and enforce the expanded rights contained in the bill, including holiday pay and other entitlements.

This agency will combine several existing enforcement bodies and is expected to have wide-ranging powers to inspect and audit employers’ compliance with the new legislation.

Employers should prepare for possible inspections and ensure that all aspects of their employment practices, from holiday pay to flexible working, comply with the new requirements. It is proposed the Agency will support employers who wish to comply with the law.

What do employers need to do now?

While many of these changes will not be fully implemented until 2026, we strongly advise employers to start preparing now.

This means reviewing current contracts, employment practices, and workplace policies to ensure they are in line with the forthcoming legal framework.

Employers should also engage in consultations with their legal advisors to manage risks and minimise potential liabilities.

Our employment law specialists can help you prepare for these new regulations and ensure that your business is compliant well in advance of the bill’s enactment.

For further assistance, please contact us today.

The arrival of a new Government and Chancellor has introduced a fresh approach to the UK’s fiscal policies, impacting both businesses and individuals who may need expert legal advice to navigate upcoming changes.

In her first Budget, Rachel Reeves set forth a bold vision, declaring that her measures would lead to “an economy that is growing, creating wealth and opportunity for all.”

However, with economic growth projected to be slow and a suggested £22 billion gap in the public finances, her strategy emphasises the importance of investment and long-term stability over quick fixes.

For business owners and individuals, her decision to raise taxes by £40 billion, along with policy shifts aimed at strengthening economic stability, means adjusting to a more complex financial landscape, which brings its own nuances to existing and future plans.

Going into this we knew it was going to be a substantial Budget, but the measures confirmed will certainly be challenging for many, as her speech focused on:

• Employment
• Capital Gains Tax
• Inheritance Tax
• Property and Construction
• Final Thoughts

Employment

Going into the Budget many employers suspected that they would be a target for the Chancellor, following Labour’s pledge not to increase Income Tax, VAT, and National Insurance for individual workers.

Unfortunately, their fears were confirmed with a hike in National Insurance Contributions (NIC), which will rise from 13.8 per cent to 15 per cent.

Compounding this, the per-employee threshold at which employers begin paying NICs will drop significantly, from £9,100 to £5,000 annually, further impacting budgets across businesses of all sizes.

At the same time, the National Living Wage (NLW) will increase by 6.7 per cent to £12.21 per hour and the National Minimum Wage (NMW) for 18-20-year-olds by a record 16.3 per cent to £10.00 per hour.

This shift towards a unified adult wage rate means employers should prepare for incremental increases as the Low Pay Commission aims to close the gap between the NMW and NLW rates in the coming years.

It is important that companies ensure their payroll processes remain compliant to avoid disputes and grievances from their team.

During her speech, Ms Reeves also confirmed the Government’s commitment to the first phase of the Plan to Make Work Pay, which aims to modernise the UK’s employment rights framework to align with today’s evolving work environment.

This legislation makes flexible working the default option, introduces a new right to bereavement leave, and provides paternity and parental leave from day one of employment.

Women’s employment rights are also set to be strengthened with the introduction of enhanced dismissal protections for pregnant women and new mothers, supported by measures in the Employment Rights Bill.

Capital Gains Tax

Starting today, the main Capital Gains Tax (CGT) rates are changing. The CGT changes are now as follows:

• Lower rate: Increases from 10 per cent to 18 per cent.
• Higher rate: Increases from 20 per cent to 24 per cent.

For those planning to sell a business or a substantial shareholding, it’s important to consider the revised rates for Business Asset Disposal Relief (BADR).

From 6 April 2025, BADR and Investors’ Relief CGT rates will rise to 14 per cent, reaching 18 per cent by 6 April 2026.

Additionally, the lifetime limit for Investors’ Relief will be capped at £1 million for all disposals from 30 October 2024 onward, aligning with the current limit for BADR.

This sudden tax deadline will likely prompt a rise in business sales as owners look to exit before these increases take full effect.

We expect to see more opportunities for mergers and acquisitions (M&A) activity, as well as management buyouts, creating a window for proactive buyers and investors.

Inheritance Tax

With significant changes looming, it’s more important than ever to proactively manage estates and regularly review and update wills to safeguard wealth for the next generation.

From April 2027, unspent pension pots will become subject to Inheritance Tax (IHT), impacting plans to pass down unused retirement savings. The Government is also scaling back key reliefs, limiting the full 100 per cent benefit of agricultural and business property relief to the first £1 million of combined assets, with relief dropping to 50 per cent beyond that – a move likely to affect family farms and businesses heavily.

Additionally, business property relief will be reduced to 50 per cent for shares “not listed” on recognised stock exchanges, such as AIM. While Income Tax rates will unfreeze from April 2028, IHT nil-rate bands will remain unchanged until 2030, adding to the urgency of carefully planning estates now.

Considering these changes, a proactive review of wills and estate plans is essential to mitigate tax liabilities and protect family wealth.

Property and Construction

From the perspective of a property and construction lawyer, the recent Budget announcements signify notable changes for the property market, particularly for first-time buyers and main home purchasers.

By increasing the rate of Stamp Duty Land Tax for Additional Dwellings from three per cent to five per cent for second homes, buy-to-let properties, and corporate residential purchases, the Government hopes to free up the market for people looking to buy their primary home.

The Government’s commitment to increasing affordable housing is clear, with an extra £500 million allocated to the Affordable Homes Programme and ambitious plans to build 1.5 million homes over the current Parliament.

Initiatives like the National Planning Policy Framework, the New Homes Accelerator, and the potential introduction of a ‘brownfield passport’ promise to streamline development approvals, particularly on brownfield sites.

Further, the £46 million boost for planning authority recruitment and training aims to address planning system delays, which are currently a significant barrier to housing development.

This injection of skilled personnel should help accelerate approvals on large sites and provide greater capacity to meet wider economic growth goals.

Final Thoughts

Whilst the Budget doesn’t often deliver direct changes to key laws, it often has a significant impact on markets and appetites for certain activities that may require legal advice.

In Ms Reeves’s first Budget she has certainly left a lot of measures that will affect the lives of businesses and individuals alike.

If you would like legal advice in relation to any of the matters covered by our summary, please get in touch.

To read the full Autumn Budget document, please click here.