Key employment law changes HR needs to know

Labour’s Employment Rights Bill 

Prior to Labour’s victory, changes to employment rights in the form of a new Employment Rights Bill were a key part of Labour’s manifesto. Now, following the King’s Speech, we have some clarity on the proposed employment law changes it’s likely impact on HR.

As with any new legislation, the Employment Rights Bill is subject to parliamentary approval, yet with Labour holding a majority share of seats, it’s safe to say that HR can expect considerable employment law changes sooner rather than later.

Employment law changes in 2025

There are several changes to employment law that will significantly disrupt the way many businesses recruit here in the UK. Whilst Labour initially promised to deliver industry-changing HR and employment laws in the first 100 days of their victory, we’re not expected to see any real changes until April 2026. 

But that doesn’t mean HR can sit back and wait for spring 26. The time to act is now, so businesses are as prepared as possible to react.

Here are some of the headline impacts HR will experience following these employment law changes from 2025.

• Potential hiring freezes due to increased employer National Insurance contributions​
• Potential squeeze on annual salary increases​
• A rise in the National Living Wage​
• A rise in the National Minimum Wage

Below we have summarised some of the most important changes to employment law in 2025 and beyond, and what you can do as a business to stay ahead of the curve. 

Zero-hour contracts 

The 2024 budget was unlike any other, with wholesale implications for employees, no more so than the proposed changes to zero-hour contracts. The first to be announced in The King’s Speech, and one that really took HR by surprise, is banning abusive zero-hour contracts. 

Current legislation

Currently, under zero-hour contracts, employees have no guaranteed working hours, yet are required to work when called upon, often resulting in an unsustainable work-life balance and high turnover for businesses, especially in the retail and hospitality sectors. 

Under Consultation: 

Labour has laid out a new employment law to ensure workers have a right to a contract that reflects the number of hours they regularly work. 

While zero-hour contracts are an ideal solution for employment agencies, the idea behind the HR and employment law change is to end the one-sided flexibility abused by some businesses offering zero-hour contracts. Here are the proposed employment law changes for zero-hour contracts:

• Workers have a right to guaranteed hours offered 
• An offer of work must reflect the reference hours 
• Workers will be given a guaranteed hours contract 
• Workers are given reasonable notice of shifts and cancellations 
• For agency workers, the obligation to offer guaranteed hours will rest with the end user of the worker’s services 

The updated zero-hour contract legislation change is under consultation in Autumn 2025 and expected to be implemented in 2027.

How will this impact HR?

Is this change to zero-hour contracts a cause for concern? If you are currently exploiting zero-hour contracts, then yes, this is certainly a cause for concern, but for the majority of employers, it will just mean a closer inspection of the latest employment law when placing workers on zero-hour contracts.

It’s important to note that this new law won’t end all zero-hour contracts, but it will cause a considerable shift in the way some businesses operate. For the 3.1% of UK workers on zero-hour contracts, this will provide the right to regular hours and notice of changes in working patterns, bringing a balance between employer and employee. 

“The Budget provided very welcome support to many working people and for our hard-pressed public services. However, the increases in business costs…will create significant headwinds to growth…” 

“The Budget provided very welcome support to many working people and for our hard-pressed public services. However, the increases in business costs…will create significant headwinds to growth…” 

Ben Willmott, CIPD

Fire and rehire ‘ban’

Another change to UK employment law that has HR talking is the updated code of practice on dismissal and re-engagement, essentially firing and rehiring. 

The purpose of this HR and employment law change is to ensure an employer takes all the necessary steps to explore alternatives to dismissal and engages in meaningful consultation with employees to reach an agreed-upon outcome, and avoid the ‘Fire and Rehire’ loophole. 

Current legislation

‘Fire and Rehire’ is the process of firing and rehiring staff on new, less favourable terms, which employers can abuse. It is typically a last resort option, but employers use this initiative to reduce salaries, minimise redundancies, and reduce employees’ working hours.

Under consultation

A dismissal for failing to agree to a contract variation will qualify as an unfair dismissal, with the only exception being if the contract variation was necessary for the survival of the business.

Following the upcoming employment law changes, employers must be careful when considering changing staff and making redundancies. 

Labour’s proposed change to employment law and ban of ‘Fire and Rehire’ practices is under consultation in Autumn 2025 and expected to be in practice as early as October 2026.

How will this affect HR?

Where it is impossible to avoid the fire and rehire practice, decision-makers will have to check existing codes of practice and ensure they are operating within the new HR and employment law. 

If contractual changes are required to an employee’s terms and conditions, HR must approach this through consultation and agreement with everyone involved.

Parental leave 

A small but important change outlined in Labour’s employment law proposals is the update to parental leave. Often mistaken for maternity leave, parental leave is unpaid leave taken by new parents to care for children and support partners. 

Current Legislation

Currently, those wishing to take parental leave must have at least one year of service under their belt. But no more. The new Government has proposed that the ability to take parental leave will become a day-one right.

Under consultation

The new Government has proposed that the ability to take parental leave will become a day one right, with Labour expecting this new hr and employment law to come into effect no sooner than Autumn 2026. Labour’s changes to parental leave legislation in the UK are as follows

• Paternity and parental leave are set to be day one rights​
• Expanding eligibility for bereavement leave​
• Six months of protection for return-to-work mothers

How will this affect HR?

Ahead of the change, employers must look at their current parental leave policy and update it where necessary to comply with employment law changes before they come into force. 

Statutory sick pay

Statutory sick pay (SSP) is another area of employment law that is set to see some significant reform following Labour’s changes to employment law in 2025, with the proposed removal of waiting days. 

Current Legislation

Currently, statutory sick pay is a cost for employers, yet it acts as a state benefit for employees. 

Under consultation

The King’s Speech made clear that Labour wants to reform the rules and provide statutory sick pay as a day-one right. But that’s not all. Following the new employment law changes, employers must provide sick pay from day one of absence instead of the current four.

Following approval from parliament, statutory sick pay will be available to all employees, including agency workers and those on worker contracts.

In addition, according to GOV.UK, the bill will seek to extend eligibility to those earning below the lower earnings limit.​ This change to the Employment Rights Bill means that:

• All workers will be entitled to SSP from their first day of illness​
• The rate of pay will be consulted on, especially for those below the earnings threshold​

The government’s latest proposal is that employees will either receive 80% of their average weekly earnings or the current rate of SSP, whichever is lower.

How will this affect HR?

As good as day one sick pay sounds, it does raise some questions about how upcoming changes to employment law will work. For example, will those on contracts earning less than the statutory sick pay of £116 per week receive the full amount, or will it be altered? For employers, this is certainly one to keep an eye on… 

Working right from day one 

When Labour announced the upcoming changes to UK employment law in 2024, this was the one that really caught the attention of HR teams.

Labour is set to make a historic change to employment law, introducing employees’ right to claim unfair dismissal from day one. The HR and employment law change will bring heightened job security for employees, but will also put more pressure on HR and internal recruitment teams to get their hires right the first time.

Current Legislation

Under current Employment Law, employees can only pursue claims for unfair dismissal after two years. Currently, employees can claim unfair dismissal if:

• There was no fair reason for the dismissal​
• The reason wasn’t enough to justify dismissal​
• The employer did not follow a fair procedure

Under consultation

Giving employees protection from unfair dismissal from ‘day 1’, including the dismissal process, in the statutory probation period. The new UK employment law legislation proposes: 

• Day 1 right​
• An initial period of employment with a lighter touch process​
• Employers can give up to 3 months’ notice​
• Dismissal will now have to be qualified as lack of capability,  qualifications, conduct, illegality, or some other substantial reason​
• Regulations will set out steps for dismissal to be fair ​
• The length of this light touch will be somewhere between 3 and 9 months

The current unfair dismissal rights are due to be consulted in Autumn 2025 and expected to be implemented in 2027. 

How will this affect HR?

With all workers able to claim unfair dismissal, recruiters must ensure the people they bring in are suitable for the role. With this change on the horizon, businesses are already looking for alternative ways to hire, with many considering skills-based hiring. 

By leveraging candidate assessments, employers can make a more data-driven hiring decision, hiring candidates that meet the role’s requirements. If you are looking to steal a march on the upcoming changes to employment law, this is definitely one to consider. 

Flexible working from day one

While 94% of UK employers currently offer some form of flexible working, the popular benefit is not available to all workers. That is something Labour looks to change in their next batch of employment law changes in 2025. 

Current legislation

Under current UK employment legislation, employees may make two requests for flexible working a year. However, employers have eight reasons why they might refuse: 

1. Burden of additional costs,​
2. Detrimental effect on the ability to meet customer demand​
3. Inability to reorganise work among existing staff,​
4. Inability to recruit additional staff​
5. Detrimental impact on quality​
6. Detrimental impact on performance​
7. Insufficiency of work during the periods the employee proposes to work​
8. Planned structural changes​

Under consultation

Labour has promised that employees will have the right to request flexible working from day one. With the changes to the employment rights bill, the reasons to refuse will still apply for employers, but to remain compliant, employers will have to state why they consider it reasonable to refuse. 

How will this affect HR? 

Following this change, employers will find it harder to resist flexible working requests and must accommodate reasonable, flexible working options if required.

If your business doesn’t currently offer flexible working, it’s a good idea to put flexible working rules in place. Not only will this put you in good stead once the employment law changes are in place, but offering flexible working can help you attract top talent in your industry. 

While this proposed legislation may change, this is still one to watch.

Protection for new mothers 

Another considerable HR and employment law change proposed by the Labour Government is the reformed protection for new mothers. 

Current legislation

The current protective period ensures that a woman is protected against redundancy while pregnant and is entitled to be offered another role if there is a suitable role available. 

Under consultation

The updated employment rights bill in 2024 proposes a new change to employment law that will make it unlawful to dismiss a woman within six months of her return to work following maternity leave. 

How will this affect HR? 

Labour’s employment law changes will ensure that mothers will be protected against redundancy for six months after returning to work. Employers expect to adopt a new process for returning new mothers to ensure they remain in the law now and in the future. 

Sexual harassment

The new UK employment rights bill has already ensured employers have a duty to take reasonable steps to prevent sexual harassment, but now this is to be expanded to ALL reasonable steps​.

Current legislation 

Under current employment law in 2025, there has been a duty on all employers to take reasonable steps to prevent sexual harassment since October 2024. But this is about to change… 

Proposed change

Under new government proposals, reasonable steps will be changed to all reasonable steps, as well as additional moves to reintroduce employer liability for third-party harassment.

From 26 October 2025, employers need to be aware:​

• That they’re responsible for the actions of their employees – known as vicarious liability​
• There is likely to be a 25% uplift in compensation​
• They’ll be liable if they permit third-party harassment [unless they’ve taken all reasonable steps to prevent it…]

Consequences of breaching employment law

As with any employer legislation, failure to comply with Labour’s changes to employment law will result in financial penalties. 

Depending on the breach of legislation, employers can expect to face anything from employee tribunals to expensive fines and fees. Here is what you can expect if you breach the Labour employment law proposals:

• Employee tribunals 
• Court hearings 
• Damaged employer brand
• Lowered stakeholder trust 
• Expensive legal fees 
• Fines and employee compensation 

How to remain compliant with Talos ATS

Ahead of the expected changes to UK employment law, employers must look ahead, prepare, and invest in their recruitment process to ensure they are compliant with everything they do. 

At Talos360, we have helped hundreds of businesses streamline their recruitment process, implement powerful AI technology and useful automations to ensure a seamless hiring journey, and secure, compliant talent attraction. 

Thanks to our AI-driven applicant tracking system and powerful features, including Candidate Assessments, Talent Analytics, Interview Insights and a fully automated employee onboarding suite, you can be sure to hire the right talent, first time. 

Recruit securely and with confidence with Talos ATS.