What is the Employment Rights Bill (ERB)?
Far reaching changes are coming with the Government's flagship Employment Rights Bill (ERB). At time of publishing the Bill is still making its way through both Houses before gaining Royal Assent (expected Christmas 2025). Our article below summarises the key points that may impact recruitment businesses as the Bill passes into law.
Background
The Employment Rights Bill (ERB) was published in October 2024 as one of the new Labour government's flagship policies to be launched within their first 100 days in office.
The Bill continues to be revised as it passes through the Houses. Following the summer recess, the bill is now in the report stage in the House of Lords, before heading back to the Commons. This is known as Ping-Pong as the bill passes between the houses as they debate amendments before settling on the final bill. With Labour's large majority its not anticipated that too many amendments will be passed.
Once completed it will seek Royal Assent before passing into law.
The bill is a significant piece of legislation, and is a generational change to employment rights. We have selected what we feel are the key points that may impact our recruitment agency partners and cover practical steps to begin preparing for the changes.
As with any legislation, the points below are still potentially subject to change.
We outline the key points that may impact Recruitment Agencies below:
Statutory Sick Pay
Statutory Sick Pay will be applicable from day 1, which will be handled and processed by NASA in any case as it is at present.
Guaranteed Working Hours
A large part of the ERB is the ending of exploitative Zero Hour contracts, by giving the worker a right to guaranteed hours.
We still await the finalisation of the Zero or Low Hour contracts to be defined (how many hours is low hours) to see if Umbrella workers with their guaranteed hours being in scope of this provision or not.
There is also still some debate about what the Guaranteed Hours provision will look like and if it should be requested by the worker or offered by the employer.
Umbrella Regulation
Potentially the largest change in terms of contracts and processes relate to the Conduct of Agency Regulations (2003) and the Opt Out provision in Regulation 32.
The ERB will bring with it the premise of Umbrella Regulation and in order to achieve this, the definition of an employment business is to be amended to include umbrella companies. Perhaps an unintended consequence of this, as there will no longer be a corporate entity between the agency and worker (as in the context ‘Agency’ and ‘Umbrella’ are both Employment Businesses), is that the Opt Out in Reg 32 will no longer be applicable for work seekers using an umbrella company.
We still await confirmation from our legal advisors once the ERB is finalised, but at present this may present some administration headaches with contracts and processes for Opting Out. There may be knock effects to temp to perm fees that can be charged as a result.
Reasonable Notice
For those who provide shift work for their contractors, this part of the ERB will be of interest. There will be a new right to reasonable notice of shifts and for compensation should shifts be pulled at short notice or curtailed early.
Unfair Dismissal
At present the currently qualification period in order to bring an unfair dismissal case against an employer is 2 years. The ERB is due to remove this so a claim may be brought from day 1. However, after significant push back it looks like the government will slightly change their approach and allow for a 9-month probationary period before the day 1 unfair dismissal right becomes active.
Road map for implementation
Several consultations are due to be released through the Summer/Autumn 2025 to finalise policy details, with those relevant ones to our sector as follows:
- Unfair dismissal from ‘day 1’
- Umbrella Regulation
- Ending exploitative Zero Hour Contracts (ZHCs)
There will be a phased approach to deployment of the ERB. This will be from when Royal Assent is gained, then from April or October 2026 with the final elements will be brought in throughout 2027.
APRIL 2026
Fair Work Agency established
Day 1 - Paternity Leave & Unpaid Parental Leave, Statutory Sick Pay
OCTOBER 2026
Prevention of sexual harassment by employees & third parties
2027
Regulation of Umbrella Companies
Flexible working, Ending exploitative ZHCs
Day 1 - protection from unfair dismissal
What should you do prepare?
Opt Out - Begin to consider what post reform contracts will look like with no Opt Out for Umbrella workers.
Contracts – Will contracts or Master agreements need to be reviewed & amended for Conduct Reg changes?
Shift notice & compensation - Do your workers complete shifts? If so, how do you communicate with them?
Low/Zero Hour contracts - Once low hours is defined, consider if your workers may be in scope.
Training - Speak to us about providing training to your consultants & back-office teams as the legislation is finalised.
Dialogue - Keep in contact with your Account Manager who can provide up to date information on developments.