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Legislation paving the way for the biggest overhaul of workers’ rights in Britain in a generation is set to become law after clearing its final hurdle in the House of Lords.
The employment rights bill includes sweeping provisions including earlier protection against unfair dismissal, wider eligibility for sick pay, a big upgrade of union powers and a ban on exploitative zero-hours contracts.
While the Labour government has championed the legislation as a big step forward for workers’ job security and associated rights, many business leaders are concerned about the package, which the government’s own analysis estimates will cost British companies up to £5bn a year.
Peter Kyle, business secretary, said he was “delighted” that months of parliamentary wrangling over the bill was drawing to a close and the measure was heading for the statute book.
“This landmark legislation, now soon to be in law, will drag Britain’s outdated employment laws into the 21st century and offer dignity and respect to millions more in the workplace,” he said.
But Neil Carberry, chief executive of the Recruitment and Employment Confederation, said: “Businesses are clear — there is a lot to sort out in the implementation of these worrying new regulations. Got wrong, there is a risk to job creation and economic growth.”
The breakthrough came on the day that Sir Keir Starmer told an end-of-year cabinet that 2026 would mark a turning point for his government, when promises of national renewal turned into “reality”.
The prime minister’s allies said “stability is returning to the government” and insisted that the Budget — delivered in chaotic circumstances — had helped.
“It had a stabilising effect on Labour MPs and was well received by the markets,” said one ally. “It has laid the foundations for growth next year.”
Peers had been seeking to amend the employment legislation for weeks but finally capitulated on Tuesday, allowing Labour to proceed with a bill that was one of the main pledges in the party’s 2024 general election manifesto.
However, business leaders and unions are braced for further haggling, with no fewer than 26 consultations promised by the government in the coming months over the fine details of the package.
Some changes will come into effect as soon as the bill becomes law, including measures making it easier for unions to take industrial action with the reversal of Tory anti-strike legislation from 2016.
Protections stopping workers from being dismissed for taking industrial action will also begin immediately. In a boost for Labour, union members will now have to opt out of financial contributions for political parties, rather than needing to opt in.
Some other measures will kick in from April, including broader coverage of statutory sick pay for workers, to be paid from the first day of absence; paternity leave and unpaid parental leave for workers from the first day of their employment; and new whistleblowing protections.
But employers and unions still face a months-long battle as they try to influence consultations into the details of many of the measures.
The hardest-fought area is expected to be the implementation of the ban on “exploitative” zero-hour contracts. This takes the form of a new right for workers on zero or low hours to be offered a contract reflecting their regular working pattern.
But there has been no decision yet on how to define low hours, nor how to assess regular hours in sectors that often have seasonal spikes in demand.
Some of Britain’s biggest business groups said this week they were still concerned about several other powers in the bill and were seeking “workable agreements” on them.
“These include issues related to guaranteed-hours contracts, seasonal and temporary workers, thresholds for industrial action, and the practical application of union rules,” said the six groups, which include the CBI, the Federation of Small Businesses and the British Chambers of Commerce.
Ministers were forced into a compromise last month under which they dropped their promise of a right to protection from unfair dismissal from day one of a job, replacing it instead with a six-month qualifying period.
In return, business groups agreed that an existing annual salary cap would be excised and a separate compensation cap of £118,000 would be removed.
But business leaders are still concerned about the idea of limitless compensation and will seek to persuade ministers to bring back some form of cap.
Trades Union Congress chief Paul Nowak called the legislation an “early Christmas present for working people across the country” that would “bring the UK closer to the European mainstream”.
But the Conservatives condemned the legislation and promised to reverse “damaging” provisions that they claimed would cost jobs and make life harder for employers.
