Back in October 2024 we published a blog looking at upcoming proposed employment changes in the new UK Employment Rights Bill (ERB) which will have a major revamp on employment law. The Bill is currently passing through the House of Lords, so now is a good time to update on its progress.

The proposed ERB promises to reshape foundational workplace rights from sick pay and leave entitlements to protections from unfair dismissal.

But what exactly is in store?

The Bill aims to modernise working life and strengthen protections for employees, particularly those in flexible or insecure roles. At its core, the Employment Rights Bill introduces day one rights to several key entitlements such as statutory sick pay and parental leave by removing the usual waiting or qualifying periods.

The long-standing two-year service requirement for unfair dismissal claims is also set to be phased out, meaning all employees could have protection from the first day of employment. Meanwhile, amendments to zero-hour contracts and greater control over fire and rehire practices are designed to promote job stability and predictability for workers.

So what does this mean for employers when it comes to payroll?

If the Employment Rights Bill passes in its current form, the biggest shift will be around statutory sick pay (SSP). Employees will qualify for SSP from the first day of absence, and the lower earnings limit, which currently excludes some lower paid or part-time staff, is expected to be removed. That means more people will be entitled to SSP, and from an earlier point in their employment. For employers, this could mean increased payroll costs and the need to budget for higher short-term absence pay.

The extension of day-one rights to parental leave will also have a financial impact. Staff will be able to take parental or paternity leave as soon as they start a new role, which could affect staffing levels and cash flow for smaller businesses. Ensuring payroll budgets account for these changes will be essential once the reforms take effect.

For those who employ zero-hour or variable-hours workers, the Employment Rights Bill seeks to give employees greater control and security. That could mean more predictable hours and more predictable pay but also less flexibility for employers to adjust staffing based on workload. Reviewing how you structure contracts and plan rotas now could help prevent pay disputes later.

Another key change is the proposal to extend unfair dismissal protection from day one, removing the current two-year qualifying period. This won’t directly affect payroll calculations, but it could influence overall employment costs if disputes increase. Employers may wish to take a closer look at their onboarding and probation policies to make sure they align with the new framework once it’s introduced.

Although many details of the Employment Rights Bill are still being debated, the direction is clear: stronger protections for employees and greater consistency across the workforce.

As always, preparation will make the difference. Reviewing your payroll budgets, leave policies, and employee contracts ahead of these changes can help you stay compliant and avoid surprises when the new rules come in.

How can we help?

At CT, our Payroll team will continue monitoring the Employment Rights Bill’s progress and supporting our clients through the transition ensuring your payroll remains accurate, compliant, and ready for whatever comes next.

If you have any questions, please contact your usual CT contact or email our Payroll Senior Manager Claire Proctor at claire.proctor@ct.me.