Employment

Becci Collins
July 2025

The Bill will introduce several significant changes in October 2026. While a number of these changes are still subject to consultation, the aim is clear: to strengthen protection for workers. These changes will drastically alter employers’ obligations towards their staff, increasing the risk of non-compliance if employers fail to educate themselves, which in turn brings financial and reputational risks.

Reforms to ‘fire and rehire’

While there have always been reputational and industrial relations risks associated with the practice of fire and rehire, it is a lawful practice.

The Government had previously indicated that the Bill would abolish fire and rehire. This quickly became so that it would significantly restrict its use.

It is expected that the Bill will make dismissing an employee for refusing to agree to a contract variation about key contractual terms automatically unfair. The key contractual terms are expected to include pay, working hours, pension, time-off rights, and others. It is expected that the regulations which shall accompany the Bill will define ‘key contractual terms’

However, the restrictions will not be all-encompassing. Where there is a genuine need to avoid serious financial issues that may threaten a business, employers may still be permitted, after a detailed and thorough consultation, to exercise the practice of fire and rehire.

The government intends to review the code of practice in the autumn, following an exercise to collect views on the proposed amendments. Following this, the changes are expected to take effect in October 2026.

Fair Pay Agreement – adult social care

The adult social care industry is notoriously a low-paid sector. The Bill aims to enhance the market by introducing the Adult Social Care Negotiating Body (the ‘Negotiating Body’), which will be responsible for negotiating pay and terms and conditions for care workers. The Negotiating Body will comprise trade union representatives and employees working in the sector. The hope is that the introduction of the Fair Pay Agreement will address current recruitment and retention challenges in the industry. However, this change shall come with increased costs for employers who should expect to pay higher salaries and provide better working conditions.

Allocation of tips

From October 2021, over two million workers have seen an increase in the amount of money they take home each month. This was after the introduction of the Employment (Allocation of Tips) Act 2023, which requires employers to ensure that all qualifying tips, gratuities, and service charges are passed on to their workers without deductions (excluding statutory deductions).

The Bill will require employers to consult with trade union or elected representatives (or the workers directly) before publishing the first version of a written policy on the allocation of tips. The policy will need to be reviewed every three years, and employers will need to conduct anonymous surveys on how tips are allocated to ensure that workers feel free to speak up about any issues they consider unfair.

Prevention of sexual harassment

From 26 October 2024, employers have been under a duty to take ‘reasonable steps’ to prevent sexual harassment in the workplace. Reasonable steps include creating a policy on the standards of behaviour expected and what employees can do if this standard is breached, providing training, and undertaking risk assessments. The Bill extends the steps that must be taken to ‘all reasonable steps’ and gives the government the power to define ‘all reasonable steps’ in regulations. We await further information on these regulations.

Third-party harassment

Currently, employers are not explicitly/directly liable for harassment their employees are subjected to by customers/clients/other third parties. The Bill will change this position, making employers liable for third-party harassment, including sexual harassment, unless they took all reasonable steps to prevent it.

Trade union measures

Presently, trade unions do not have the right to access the workplace to recruit or organise members unless an employer agrees to provide access or it is ordered to do so by the Central Arbitration Committee.

The Bill is expected to provide trade union officials with greater access and improve trade unions’ ability to support and advocate for their members by:

  • repealing the requirement of minimum turnouts in strike ballots and minimum service levels during industrial action (which was only recently introduced by the previous conservative government);
  • requiring employers to remind workers in their terms of employment (section 1 statement) that they have the legal right to join a trade union. Employers will also be required to remind workers of this right regularly;
  • providing trade unions with a right to access workplaces in a regulated and responsible manner to meet, represent, recruit, and organise members;
  • reforming various aspects of existing trade union law to:
    • eliminate restrictions on trade union activities;
    • make ballots simpler and more flexible (including electronic votes);
    • stop the replacement of strikers with agency workers; and
    • reduce the threshold of support required for trade union recognition and simplify the statutory recognition process;
  • creating provision for improved resources, time for trade union reps to perform their duties; and
  • introducing new protections for trade union equality reps and against trade union-related intimidation and dismissal.

Extending tribunal time limits

The majority of employment tribunal claims must be brought within three months, minus one day, of the date the act complained of occurred. This has been viewed, for some time, as a relatively short period compared to disputes in civil courts, and potentially prejudicial to the pursuit of justice.

The Bill will extend the time limit to bring claims to six months. It was anticipated that this would apply to all claims. However, breach of contract claims have been omitted from the proposal. This may be a typo and inadvertent omissions, but only time will tell.

The extension of the deadline is expected to result in more employees bringing action against their employers. Therefore, employers must stay up to date with changes in employment law to mitigate the risk of litigation.

If you would like more advice on the changes brought by this Bill and your obligations as an employer, please contact our Employment team