The Employment Rights Bill (ERB), published on 10 October 2024, primarily enacts the proposals detailed in the Labour Party’s pre-election document from June 2024, Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People. It is described as the biggest upgrade to rights at work for a generation and the government states that the Bill will help “drive growth in the economy and support more people into secure work”.
The Bill is still moving through the various stages of the Parliamentary process, and most of its measures are not expected to come into effect until Autumn 2026. However there has been a lot of talk about the impact of the ERB on employers, particularly following last week’s announcement that the government will table an amendment to the Bill to expand the scope of the Employment Agencies Act 1973 to allow umbrella companies to be regulated for the purposes of employment rights.
This a positive development for those of us in the sector that support effective and proportionate regulation. The government is yet to set out the finer details of their policy proposal, but we can expect future consultation with industry once policy makers attention turns to secondary legislation.
What do we know so far?
On 4 March 2025, the government published a number of amendments to the Bill to be debated at Report Stage. These were intended to demonstrate the government’s commitment to working in partnership with businesses and trade unions to ensure the plan to Make Work Pay is ‘pro-business’ and ‘pro-worker’. Most notably, the government have tabled amendments to:
- Bring agency workers under the provision of zero-hours contracts
- Set the rate of Statutory Sick Pay (SSP) that will be paid up to the flat rate of SSP at 80% of an employee’s normal weekly earnings
- Strengthen trade union rights
In light of these changes, employers should review their current policies and procedures to ensure ‘best practice’ and continued compliance with the law. While this Bill represents a broad framework, with many changes not enforceable until 2026, it is advised that all members make the necessary preparations for these significant changes to UK employment law.
Although the Bill aims to improve pay and conditions for thousands of workers, introduce better parental and family leave, and protect workers against unfair dismissal, the legislation has received significant backlash given the estimated economic impact the Bill will have on businesses, which is projected to cost firms £5 billion a year to implement. It is disappointing that many concerns remain unaddressed.
Where do we stand?
The FCSA is concerned about the impact the legislation will have on employers who will have to quickly adapt to administrative costs and duties. Employment status reform and HMRC’s separate so called “umbrella company regulations” will have a significant impact on freelancers and contractor services; therefore, it is essential that the measures proposed adequately consider the complexities of the temporary workforce and needs to the temporary worker, who play a vital role in the UK economy.
This is why the FCSA has been engaging with policymakers on the legislation and have been pushing for further clarity on the detail of these reforms. Over the coming weeks, as the Bill undergoes Report Stage and its Third Reading, we want to ensure that the government listens to businesses concerns, particularly those who employ workers on a short-term basis. It is in our member’s interest to crack down on non-compliance in other parts of the sector, so the FCSA will continue to engage with the government to ensure they take into account the realities many businesses face when legislating to regulate umbrella companies.
At FCSA we take the defence of our workers’ employment rights very seriously – without us and our members many workers would not enjoy these rights at all. Indeed, HMRC’s current approach will likely remove rights from some workers – despite the ERB. It is therefore clear that helping the most compliant parts of the Umbrella Company market to flourish is firmly in the interest of the worker.
