Employment Rights Bill: Delays and compromise

After first appearing that it would steamroller through parliament, the Employment Rights Bill ran up against a significant obstacle when it reached the House of Lords. This opposition was most welcome for SMEs like you, bracing to be hit hard by additional red tape and costs on top of all the other burdens this government has put on business.

The Bill was due to receive royal assent this autumn, but objections from the Lords puts in doubt whether this will happen at all this side of Christmas. However, a significant government concession may now clear the path.

It is a changing picture, but let’s look at the state of play at this time, and how you can prepare.

The Employment Rights Bill sticking points

We have been keeping you up to date with the proposed changes since before Labour were elected to power in 2024. For the original proposals, check here.

When it reached the Lords a few weeks ago, they strongly objected to a number of these proposals.

Two of the objections relate to zero-hour contracts. 

The Government wants there to be provision for guaranteed hours to be offered without fail for zero-hour contracts. The Lords want some form of opt-out for employees where they are not desired. Additionally, the Lords would like seasonal work to be separately defined and catered for in relation to the offer of these guaranteed hours.

Another two points of contention relate to trade union activity. The bill states that trade union members are automatically opted in to contribute to a union’s political fund. The Lords do not want this to be the case. And they also object to the removal of the requirement for an industrial action ballot to have a turnout of at least 50% to be binding.

The government has not indicated they are willing to budge on any of these measures. However… 

The Employment Rights Bill – new compromise on unfair dismissal

The biggest, most sweeping reform which the Lords took issue with, was the complete removal of the two-year protection employers enjoyed from unfair dismissal claims.

Us too!

The additional risk that this puts on employers, especially SMEs, is significant. For the government, it could have unintended consequences including discouraging hiring, short-term distortions in firing, and economic slowdown through businesses becoming mired in spurious tribunals.

Last Thursday, the Government announced that this two-year protection against unfair dismissal claims will not be completely removed, but instead reduced to six months. Far shorter than two years, but more reasonable than zero. And more workable; with it now aligning with having a decent probation period too, for example. So it is a welcome compromise.

Next steps

Nothing is set in stone yet, and we hope that no complicated probation review process is added. The bill will be discussed in the Commons and sent back to the House of Lords on 8th December, and everyone expects it to pass, but let’s wait and see. 

If it does, it will go on to receive royal assent, with many of the changes coming into force in April 2026 in line with the Government’s intention. We would advise keeping abreast of the bill’s detail as it is finalised, and the consultations surrounding it. The sheer number of these take away clarity for employers like you, which is an ongoing concern.

If you want specific help planning for these seismic changes, please get in touch with us. We have local offices and experts all across the country.