The Employment Rights Bill clears the Lords: four key takeaways from the final package

After a protracted passage through Parliament and an array of amendments, the Employment Rights Bill is to become law. Here we set out some of the key changes the legislation will bring to the employment law landscape, and how they differ from the initial proposals.

The Employment Rights Bill has completed its passage through Parliament, clearing the House of Lords on 16 December 2025, and entering the final formalities before it becomes law. The Bill is expected to receive royal assent today, Thursday 18 December 2025, at which point it will become the Employment Rights Act 2025. Most measures are to be phased in across 2026 and 2027 rather than taking effect immediately.

The passing of the Bill comes after a prolonged period of “ping-pong” between the Houses, with pressure from the House of Lords to water down the proposals leading to a number of last-minute concessions. These included dropping day one unfair dismissal rights in order to secure passage of the Bill before Christmas.

Notwithstanding these changes, the passing of the Bill heralds the most significant change to individual employment rights in a generation. Below we set out some of the most important provisions, each of which have been the subject of much debate in Parliament, and outline where the finalised legislation lands in comparison to the Government’s initial proposals.

INITIAL PROPOSALS VERSUS THE FINAL PACKAGE – HEADLINE POINTS

1. Unfair dismissal

The headline change is the abandonment of the original promise of day one unfair dismissal rights in favour of introducing a six month qualifying period. Currently employees require two years’ service to obtain these rights. The Government has signalled the six-month qualifying period will be introduced from 1 January 2027.

The removal of the compensatory cap for unfair dismissal awards was, however, pushed through. In practice, relatively few awards get close to the 52-week salary cap and/or monetary cap (which currently sits at just over £118,000) so, whilst a headline grabbing change, the full impact of this change remains to be seen. What will change however is the commercial risk profile for dismissals of high earning employees.

2. Fire and rehire

Initial suggestions that dismissals of employees for refusing any contractual changes would be automatically unfair have not come to pass. Rather, only changes that are considered “restricted variations” of core terms, which broadly relate to pay (including pensions), hours and holidays, will result in such protection.

The exception to this protection remains limited to employers whose business is facing serious financial difficulties and where it could not reasonably avoid the need to make the variation.

Crucially, the protection still extends to “fire and replace”; dismissing and substituting employees with non‑employees (e.g., contractors, agency workers) to do substantially the same work will be automatically unfair in most cases.

3. Guaranteed hours and zero-hours work

The Lords’ effort to convert the guaranteed hours duty into a mere “right to request” did not survive. Under the finalised Bill, employers must monitor and offer guaranteed hours to qualifying workers whose regular working time exceeds the contracted minima in each set reference period. The changes also include rights to reasonable notice of shifts and compensation for short notice cancellation/curtailment. The detail on what may constitute “reasonable”, “short notice” or appropriate compensation levels are expected to follow in regulations and after consultation.

The scope of these provisions has also been expanded to agency workers – a significant strengthening relative to early drafts.

4. Collective redundancies

The Bill originally proposed to keep the current requirement on employers making over 20 employees redundant to consult collectively, but also introduced a new requirement to count redundancies across the employment entity as a whole, regardless of the location of the redundancies (effectively scrapping the “one establishment” test).

The finalised Bill retains the “one establishment” test but adds a second alternative trigger for employers with more than one establishment who are making a significant number of redundancies. The specifics of what this threshold will be is to be defined post consultation.

The immediate change is the doubling of the maximum protective award to 180 days from 90 days from April 2026.

WHAT HAPPENS NEXT?

Royal assent is anticipated today, 18 December 2025. Whilst a limited set of trade union measures will take effect at or shortly after royal assent, the vast majority of reforms require secondary legislation and staged commencement through 2026–27.

In parallel, the Fair Work Agency, set to be established in April 2026, will consolidate enforcement, with powers to bring claims on workers’ behalf and to recover penalties and enforcement costs.

In the short term, a raft of consultations is scheduled, whilst the Government will work to draft regulations and statutory codes to flesh out some of the details of the changes. It is important that employers actively engage with consultations, and start implementation planning now to shape outcomes and ensure readiness to the new regime.

If you would like advice in relation to any of the above, would like to discuss your current employment practices, policies or procedures, or would like to discuss how your business may best navigate this period of major change for worker rights please contact Richard Freedman, Dermot Neligan or Grace England, or your usual contact in our Employment team.

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