The Government has confirmed its commitment to significant employment law reform with new amendments to the Employment Rights Bill. While these changes reinforce employee protections, they also introduce additional complexity for businesses.

According to employment law expert Ben Smith, the amendments show ongoing policy uncertainty, adding further challenges for employers navigating the new legislation. “The Bill will require substantial effort from employers to adapt to new rights and processes,” he noted.

Key updates include:

• Minimal concessions for employers – Little relief is offered to businesses in the amendments.
• Major compliance challenges – Employers will face increased legal obligations.
• Stronger enforcement mechanisms – Expanded powers for enforcing employment rights could have significant consequences.
• Higher redundancy penalties – The proposed doubling of the maximum award for failing to consult on redundancies is a major concern, especially for large employers with multiple locations.

As the Bill progresses, businesses will need to closely monitor developments to ensure compliance and prepare for the upcoming changes.

Doubling of penalties for failing to collectively consult on redundancies

Says Ben Smith: “The doubling of the maximum penalty for failing to properly consult on collective redundancies from 90 days’ pay per employee to 180 days’ pay is a significant ratcheting up of the potential liability for employers if they get the thing wrong.”

“This is compounded by the Government’s expansion of the collective consultation obligation already set out in the Bill, which requires that the threshold for triggering collective consultation is assessed by aggregating proposed redundancies by the same employer  across multiple different sites. This means employers will have to be careful to ensure their internal processes are up to speed to ensure they are keeping track of redundancies across their entire business.”

Applying zero hours contract measures to agency workers

Says Ben Smith: “The Government’s proposal to extend the Bill’s measures to end so-called “exploitative” zero hours contracts to agency workers is likely to be very complex for businesses to manage in practice.”

“The amendments place obligations on the end user of agency workers (not the agency itself) to offer guaranteed hours to the agency worker in certain circumstances where average hours pass a certain level (which is to be set in regulations).”

“It is unclear how this is going to work in practice, given that the agency worker does not have a direct contractual relationship with the end user. It may have a big impact on both users of agencies and agencies and will create a lot of new compliance requirements.”

“The change may make agency workers less attractive as an option to fill temporary resourcing gaps for businesses.”

Nine-month probation period

Adds Ben Smith: “This is one point that employers will likely welcome in the Government’s latest announcements. It was reported that unions had been pushing for a maximum of 6 months, so it seems like the pro—business argument has won out.”

“Employers will be able to implement probation periods of up to 9 months, during which there is a promise of  a “lighter touch” dismissal procedure for some, but not all, dismissals. This will likely soften the impact of the removal of the unfair dismissal qualifying period.”

“This probation period change is not one of the amendments tabled yet, so it’s unclear if the Government intends to amend the Bill or will make provision for the probation period in regulation. The Government had previously indicated it would consult on the length of the probation period, but it is unclear if they still intend to do so given yesterday’s announcement.”

Expansion to enforcement powers would give Government body right to bring claims on behalf of employees

Adds Ben Smith: “One of the most surprising amendments announced is a new power that allows the Secretary of State (and this power can be delegated to the new single enforcement body the Bill creates) to bring a claim in the Employment Tribunal on behalf of a worker where it appears the worker is not going to bring that claim.”

“This would be a pretty radical shift in how the Tribunal works. It is not at all clear how this would work in practice, particularly if the worker does not want to bring a claim or be involved.”

“With the Tribunal system overburdened, it is hard to see how the system could cope if the single enforcement body makes a habit of bringing claims on behalf of employees. That could slow the system down, causing delays that are in the interest of neither employees or employers.”

“The impact of this may be minimal however, if the single enforcement body does not have the funding or capacity to use this power fully.”

New power to fine employers who underpay workers in range of areas, including sick pay and holiday pay

Adds Ben Smith: “In another sign that the Government is taking enforcement of employment rights seriously, the amendments yesterday expand the ability for a “notice of underpayment” to be given to employers who underpay employees. This currently only applies to the national minimum wage, but the amendment expands this to include a wide range of potential liabilities, including statutory sick pay and holiday pay. These notices can look back at underpayments for a period of 6 years from the date of the notice. This also has retrospective effect, so a notice could be issued for an underpayment that happened years before the Employment Rights Bill becomes law”

“This power gives the Secretary of State (and this power can be delegated to the new single enforcement body) the discretion to issue a notice of underpayment to an employer. If a notice is given, it must include a penalty of 200% of the underpayment, up to a maximum of £20,000, which is payable to the Secretary of State within 28 days. So effectively that is a 300% cost – the employer has to pay the underpayment and then 2 times that amount as a fine to the Secretary of State.”

“The expansion of this to holiday pay – a notoriously complex area of the law – means that there is a risk of well-meaning employers who make a genuine mistake in how they calculate holiday pay, being subject to a significant penalty. While the policy objective of discouraging underpayments to workers is understandable, this risks being a very blunt tool.”