Revolutionary Employment Rights Bill passed in parliament

The Employment Rights Bill (ERB), which will bring about the most significant changes to UK employment law in a generation, was published on 10 October 2024. Since then it has been subject to several rounds of parliamentary “ping-pong” in an attempt to reach a compromise between the House of Commons and the House of Lords on the most contentious proposed changes to UK employment law. The ERB finally passed the parliamentary process on 16 December 2025, and is expected to become an Act of parliament before the end of the year. The key aspects of the ERB which are bound to be of key interest to the hotels and hospitality industry are outlined below.

Unfair dismissal rights

Currently, employees need to work for two years (known as the qualifying period) before they acquire the right not to be unfairly dismissed. The ERB substitutes the two-year qualifying period with a period of six months, meaning employees will only need to work for six months before they acquire this right (this was originally planned to be a day one right however this promise was scrapped following significant backlash from the House of Lords). Employers will need to place increased scrutiny on their hiring practices, and those inclined to give candidates the benefit of the doubt in the past may no longer feel comfortable doing so. The first six months of employment will be crucial to assess an employee’s suitability for the role, and we expect to see more prescriptive approaches to probationary periods once this new law comes into force (currently expected to be from the start of 2027).

Unfair dismissal compensation cap

To further bolster unfair dismissal protection, the current compensation cap which limits compensation for successful unfair dismissal claims to 52 weeks’ gross salary or a statutory cap (currently £118,223), whichever is lower, will be removed. This places unfair dismissal claims on a par with discrimination and whistleblowing claims, where compensation is already uncapped. Valuing the financial risks of claims, and approaching settlement discussions, will become more challenging in the absence of the well-established cap which has historically guided approach for employers (and managed expectations for employees).

Ban on “exploitative” zero-hours contracts

The ERB is set to introduce a comprehensive (albeit complex) set of rules requiring employers to make an offer of guaranteed hours to a qualifying worker after the end of every reference period (yet to be defined) if the worker’s hours exceed the minimum number set out in their contract. This will also target those with a “low” number of guaranteed hours, although a definition of this is yet to be set out. The ERB will also introduce a right to reasonable notice of required shifts as well as any shift changes and cancelled shifts. Again, “reasonable notice” is yet to be defined, however, a worker will have entitlement to payment for any short notice cancellations. Zero-hours contracts are a common practice in the hotels and hospitality industry to address business fluctuations during the year – they’re an attractive option due to the flexibility they provide employers with, and indeed, are often sought after by the demographic of the workforce balancing work alongside studies etc. While administratively burdensome, most employers using zero-hour contracts will no doubt implement a system to notify employees in compliance with the new notification requirement. However, the key difficulty will be the requirement to offer a contract reflecting hours worked in a specific reference period. If an offer is accepted, the guaranteed hours become a permanent fixture of the worker’s contract, and the employer will be under an obligation to sustain that level of work and pay (although there will be specific circumstances where it may be reasonable to offer a “limited term” contract as well). Of course, it will be a worker’s choice as to whether they want a more stable working pattern – for those content working on a zero hours basis, they can continue doing so. Employers may instead consider turning to fixed-term contracts instead in an attempt to manage fluctuations in business.

The ERB will also introduce a host of changes to trade unions, protection from discrimination, sickness, and family rights.

If you have any questions about the Employment Rights Bill, please contact a member of our Employment team.

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