Business groups have raised concerns about the impact of the Employment Rights Bill, as the government sets out how it will deliver its new package of employment legislation.
The government has published a roadmap setting out how it will deliver its package of employment legislation through Make Work Pay, with a timetable that now extends into 2027.
Key reforms, including changes to zero-hour contracts and the ban on fire and rehire, will be phased in over the next two years. Many of the new measures provide new "day one" rights for workers - including paternity leave, flexible working by default and protection from unfair dismissal. In addition, from April 2026, workers will be entitled to Statutory Sick Pay from their first day of illness.
Nine in ten small firms are "seriously concerned" about the Bill
However, business groups are worried about the impact of these reforms on small firms. Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), said: "More than nine in ten small employers are already seriously concerned about this Bill, and the 28 new measures here have not yet been improved during the legislative process. The clock is now ticking, and without listening to proposals from business to improve these reforms, the changes simply add complexity and risk to new hiring and existing employment."
"It's a lot for small employers to take in - from changes to Statutory Sick Pay (SSP), unfair dismissal and how zero hours contracts work - and they don't have HR teams to help them navigate the complex changes." Tina McKenzie, FSB policy chair.
Some of the measures have been delayed. "Putting plans to expand unfair dismissal from day one back to the tail end of this whole process shows the government realises just how complicated and difficult it is," said Tina McKenzie. "But there's no two ways about it; all it's going to do is make small employers more reluctant to recruit and fearful of being open to vexatious claims. It will also open up a tribunal system already at breaking point to a flood of spurious cases."
Impact assessment
The Association of Professional Staffing Companies (APSCo) is calling for a "robust impact assessment" ahead of the Employment Rights Bill moving to Royal Assent.
Tania Bowers, global public policy director at APSCo, said: "It's clear that the government has encountered far greater resistance to the Bill from the Lords and business departments than it had anticipated, so we are glad that there is now some additional breathing room. There is an understandable and correct concern in the professional recruitment market that implementing such a significant reform of employment rights without the full understanding of the impact it will have on business growth and the UK's economic strength simply cannot happen."
A better way to deal with employment disputes
The Federation of Small Businesses has suggested a better way to deal with workplace disputes. Tina McKenzie said: "Small employers want to do the right thing, and crucially, they want to grow. Taking someone on must not mean risking a tribunal claim from day one, with the pressure to settle despite doing nothing wrong, or face two years of expense and worry. Of course, existing protections against unfair dismissal on day one, including for protected characteristics, are and must remain, non-negotiable.
"A practical way forward would be creating a dedicated route outside the tribunal system, handled by the new Fair Work Agency that will now launch next Spring. This would give employees a place to raise concerns while protecting small firms from being pushed into legal action before probation is even complete.
Changes to Statutory Sickness Pay
The new timetable also confirms the date for larger SSP payments to come in, in April next year. This, said, McKenzie, "makes the coming Autumn Budget the key moment to bring in a rebate for small employers, allowing them to manage rising costs and easing the pressure when staff need to take time off when they're sick".
According to the FSB, sickness absences cost an average small employer more than £3,500 per year, or £5 billion across the economy, and this will undoubtedly rise from next April.
Written by Rachel Miller.