Employment law in the UK is about to go through some of the most sweeping changes we have seen for years. The government has described the new Employment Rights Bill as the “biggest upgrade to workers’ rights in a generation”.
That may sound like political rhetoric, but for those in HR the reality is that the way you manage contracts, policies and everyday conversations with staff is going to shift. Some reforms have already landed whilst others are coming over the next two years, and taken together they demand a rethink of how organisations approach flexibility, dismissal, leave and pay.
I’ve been helping HR teams understand these changes and prepare for the changes. Here are the key things to know.
The end of fire and rehire?
One of the most high-profile measures concerns fire and rehire. Until now, the law has broadly allowed employers to dismiss staff who refused changes to their contract and then offer re-engagement on new terms, often as a consultant, provided there was a business reason and consultation had taken place. This practice will soon be heavily restricted.
Under the new rules, dismissals will be automatically unfair if they are linked to refusal of certain contractual changes. These “restricted” variations include pay, hours, pensions and holiday. The ban goes further, capturing “fire and replace” situations where employees are dismissed and replaced with contractors or agency staff doing substantially the same work.
This was a direct response to the P&O Ferries case, when ferry operator P&O Ferries suddenly dismissed around 800 seafarers without consultation. The staff were told via video call that their employment was being terminated with immediate effect, and they were replaced by agency workers on cheaper contracts, many of whom were not UK nationals.
Employers should be thinking about whether their terms and conditions around pay, pensions, hours and time off rights need to be standardised, updated or changed before October 2026. After implementation, contractual change through dismissal is going to be the exception, not the rule. The emphasis now has to be on genuine consultation and agreement, supported by well-drafted flexibility clauses for new hires. Any existing flexibility terms in contracts should be reviewed carefully before the October 2026 start date.
Umbrella companies
In April 2026, new legislation will shift PAYE and National Insurance compliance responsibilities from umbrella companies to recruitment agencies or end clients. This could be a significant change for businesses whose services are provided by workers who are technically employed by umbrella companies. There is also new case law on the status of individuals working under PSCs, which further clarifies the obligations of end user clients.
Guaranteed hours for casual staff
Zero-hours contracts are not disappearing, but employers will be expected to offer guaranteed hours that reflect the reality of what staff have been working. The reference period is expected to be around 12 weeks. In practice, this means that someone who consistently works regular shifts will have a right to guaranteed contractual hours that reflect that pattern.
Agency workers will also be entitled to an offer of guaranteed hours, on terms that are no less favourable than the ones they had before. This will require end-hirers to carry out an audit of agency terms to make sure comparisons can be justified.
This is going to be a real shift for HR and operations teams. Scheduling and payroll systems will need updating, budgets will need to account for guaranteed hours, and managers will need clear guidance on how to give reasonable notice of shifts and how to handle cancellations.
Day one rights expand
Perhaps the most significant theme running through the reforms is the move to make many rights available from the first day of employment, rather than a probationary period which is often the case now.
From 2026, the right not to be unfairly dismissed will apply from day one. There will still be a statutory probationary period, likely nine months with the option of extending to twelve, but the law will prescribe a fairer process for ending employment even during that time. Redundancy payments will continue to require two years of service.
Other entitlements moving to day one include paternity leave, unpaid parental leave and bereavement leave. Statutory sick pay has already shifted so that it is payable from the first day of absence, and the lower earnings threshold has been scrapped. Flexible working is already a day one right, but the balance is changing: employers will need to show not just that there is a reason to refuse but that the refusal itself is reasonable.
For HR, the implication is that probationary periods will carry more weight than ever. Managers need to be equipped with the skills to identify underperformance early, document it carefully, and follow a clear process for reviews. Policies on absence, performance management and family leave will need rewriting to reflect the new position.
National minimum wage
There’s been lots of talk about the impact of wages, especially on the retail and hospitality industry. From April 2025 the national minimum wage will rise to £12.21, with the youth rate for 18–20 year-olds climbing to £10.00. The government has also committed to removing age bands below 21, so everyone aged 18 and over will be paid at the same level.
That means higher payroll costs for many employers, and it also raises the question of pay compression. If junior roles are paid more, organisations may need to look again at differentials with senior positions to avoid resentment or recruitment problems.
Bereavement leave for pregnancy loss
Another important change, with a very human dimension, is the extension of unpaid bereavement leave. At least one week will now be available for pregnancy loss before 24 weeks, including failed implantation. Regulations will clarify who is eligible, but it is expected that partners will be included.
From an HR perspective, this is not just a policy update but a cultural one. Sensitivity, manager training and clear communication will all matter to ensure employees feel supported at a difficult time.
Limits on non-disclosure agreements
Confidentiality agreements have often been used to settle discrimination or harassment cases, but that practice is coming to an end. NDAs covering harassment or discrimination will be void, and the ban extends to preventing disclosure of how an employer handled a complaint.
This is intended to stop the silencing of victims, but it also creates challenges. Employers may be more reluctant to settle claims if they cannot keep the details private, and reputational risks could rise. HR teams should revisit template contracts and settlement agreements now, and think carefully about how grievances are investigated and resolved.
Industrial action and union rights
Restrictions on strikes introduced since 2010 are being rolled back. Minimum service levels during strikes will be repealed, and stronger protection from dismissal for those taking industrial action is being introduced. This combination of measures points to a greater role for unions and a higher compliance burden on employers. HR teams may expect more assertive collective action and should prepare with stronger employee engagement strategies to help mitigate this.
What HR should do next
The scale of these changes is significant, but they can be managed with preparation. A few immediate steps stand out from my conversations with HR teams:
- Audit contracts and update flexibility, confidentiality and family leave clauses. Communicate with everyone what those changes are and why they have been made.
- Train managers on probation reviews, performance management and handling requests for flexible working. As the frontline of these changes they should be up to date.
- Model the impact of guaranteed hours and the higher minimum wage on staffing budgets.
- Consider whether terms and conditions around pay, pensions, hours and time off rights need to be standardised, updated or changed
- Communicate early with staff so they understand new entitlements, reducing confusion and potential conflict. Anxiety may be high, so the more clarity there is, the better for everyone.
Employment law is shifting towards stability, transparency and employee voice. For HR, this is clearly going to be complex, and require some planning. But there’s opportunity too. Getting ahead of the changes will not just keep organisations compliant but can help build trust, improve retention and support a culture that reflects modern expectations of work.
Kate Palka is an experienced employment and commercial solicitor and Chartered Company Secretary with in-house employment, commercial and compliance expertise.
She is skilled in working with executive and leadership teams in multi-disciplinary organisations to advise in a solutions-orientated way and to translate business goals into pragmatic commercial strategies that are legally compliant.
