How will the Employment Rights Bill affect reward and benefits?
At a glance: the impact of the Employment Rights Bill on reward and benefits
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The relationship between agencies, employers and zero hours employees will affect who is responsible for pay and other benefits for agency workers
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Changes to statutory sick pay (SSP) rules could increase sickness absence costs for employers
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SSP changes could also increase focus on preventative health and wellbeing strategies to reduce absence
- Firing and rehiring employees under different terms and conditions will only be possible in unavoidable circumstances, such as threat of insolvency.
The government has described its Employment Rights Bill as the "biggest upgrade in employment rights for a generation".
There is a long road ahead before it becomes law, with reforms likely to take effect no earlier than 2026.
Most consultations related to the Bill will appear in 2025, with four already in progress:
- Management of zero hours contracts for agency workers
- Strengthening statutory sick pay
- Collective redundancy, and fire and rehire
- Creating a modern framework for industrial relations.
Management of zero hours contracts for agency workers
The government wants to ban exploitative zero hours contracts. The Bill explores the right to guaranteed hours based on a 12-week reference period, reasonable notice of shifts, and compensation for short-notice cancellations.
This consultation looks at a specific area of zero hours: the relationship between agencies, employers and employees, including:
- Who is responsible for reimbursement of employees on zero hours contracts, including if work is cancelled at short notice: the employer or the agency?
- How should the amount of work that an agency employee is entitled to be calculated?
Industry insight: Nick Vernon, partner, and Jo Tunnicliff, senior associate, Shoosmiths
At present, agency workers are paid for the hours they work as needed. If they must be offered a guaranteed number of hours on a permanent basis this could significantly increase the amount they are paid.
If the agency has to offer these hours, but the employer does not need them to be worked, the agency could be left footing the bill.
If the employer is required to offer the agency worker guaranteed hours, this could result in them being deemed employees of the employer.
This would increase the potential cost to the employer in terms of their wages, and employees could become entitled to additional employee benefits beyond those under the Agency Worker Regulations where they are engaged in the same role for more than 12 weeks.
Tips for employers
- Review use of agency workers over the past two to three years to identify which areas of the business they were used in, for how long and at what times of the year.
Industry insight: Stephen Simpson, acting employment law and compliance content manager, Brightmine
The proposals are still at an early stage, but there are some steps that employers can take now, including:
- Review the workforce to identify individuals who may be entitled to guaranteed hours to begin assessing the impact of the change
- Consider workforce strategies to address increased administrative costs, higher payroll costs and reduced flexibility for employers
- Communicate with staff to keep workers well informed and address any misconceptions
- Keep up to date with progress of the Employment Rights Bill
Strengthening statutory sick pay
There are three key proposed changes to SSP:
1. Eligibility to SSP from day one of employment
2. Eligibility from first day of sickness (rather than after three qualifying days)
3. Removal of the lower earnings limit (LEL) for SSP.
The Department for Work and Pensions’ analysis suggests the changes will cost employers around £400 million per year.
REBA’s Benefits Trends for 2025 research found that 16% of employers said removing the three-day waiting period for SSP could cause difficulties, and the same number said that the right to SSP from day one of employment could do so.
Only 7% of all respondents said that removing the LEL for SSP would be an issue.
For some low earners, SSP of £123 per week could be higher than their regular earnings. The consultation explores options for a taper that would mean employees are eligible for the lower of SSP or a percentage of their average weekly earnings.
Industry insight: Clare Lusted, head of product proposition, Unum
We wanted the government to go further and review the standard rate of SSP, as well as encouraging and incentivising employers to support employees’ health. Potentially higher SSP costs have to be coupled with strategies to keep sickness out of the workplace.
This is an opportunity to explore how to support employees to be happy, healthy and productive at work. Unum commissioned research last year that found taking action to boost wellbeing and reduce unhappiness at work had an impact of £6.4bn per year.
The current proposals won’t directly affect health and wellbeing benefits. However, there could be an indirect impact of sacrificing benefits to pay for the extra cost of SSP. In the long term, that would be detrimental to wellbeing.
Tips for employers
- Plan ahead to understand the cost of change. Consider introducing SSP from day one of sickness, even without legislation
- Engage with employees about taking a holistic approach to workplace health
- Explore opportunities to review benefits and potentially offer new choices for employees
- Identify the indirect impact of SSP costs on future health and wellbeing budgets
- Maximize value from current workplace wellbeing benefits.
Other consultations
The other two consultations have wider relevance to HR, with some key points for reward and benefits.
Collective redundancy, fire and rehire
- A proposed increase to the maximum protective award period for failing to carry out collective consultation requirements. This is currently capped at the equivalent of 90 days’ pay, but the consultation proposes increasing this to 180 days or removing the cap completely.
- At present, employers can fire then rehire employees on different terms and conditions - including pay and benefits - if they give a sound business reason. That could include economic conditions or harmonising employee terms and conditions. The consultation proposes that fire and rehire will only be permissible if changes are unavoidable, for example to prevent insolvency.
Creating a modern framework for industrial relations
The consultation identifies four principles for an industrial relations framework: collaboration, proportionality, accountability; and balancing the interests of workers, businesses and the wider public.
- The last of these has the most relevance for reward and benefits, with focus on decent pay and conditions, as well as in-work security and improving the lives of working people.
