The Employment Rights Act 2025: Building a More Inclusive Economy

By strengthening worker protections, the Employment Rights Act 2025 hopes to rebalance power between employers and employees, and address structural weaknesses in the modern labour market, aiming to support a more inclusive economy in a move towards fairness, stability and dignity at work.

The Act presents a significant and positive step in tackling inequality, empowering communities and building a society where everyone can thrive. It directly aligns with the work we, as the Greater Manchester VCFSE Leadership Group, are doing in supporting and advocating for a shift towards a more inclusive economy that will deliver better outcomes for everyone. Below, we have summarised some key features of the Employment Rights Act, shared more about how it is supporting a more inclusive economy and strengthening communities, and why Good Employment is key to this.

Key features of the Act

The Act introduces a wide range of reforms, many of which will be phased in between 2026 and 2027. Among the most significant changes are the following:

Tackling Insecure Work and Zero Hours Contracts

One of the Bill’s central objectives is to address what is describes as ‘one sided flexibility’ in employment relationships. Workers on zero hours or low hours contracts will gain new rights to:

• Guaranteed hours, reflecting their regular working patterns
• Reasonable notice of shifts
• Compensation when shifts are cancelled at short notice

These protections extend to agency workers, closing loopholes that have often enabled insecurity in care and community services.

Day One Rights and Inclusive Reforms

Several employment rights will now apply from the first day of employment, extending protections to low paid and insecure workers who were previously excluded from basic support, including:

• Statutory sick pay, with the removal of the lower earnings limit and waiting period
• Paternity leave and unpaid parental leave
• New rights to bereavement leave, including pregnancy loss before 24 weeks
• Strengthening of existing right to request flexible working  

Additionally, there will be new protections for pregnant employees and people on maternity leave.

Stronger Protections Against Unfair Dismissal

The qualifying period to bring a claim for ordinary unfair dismissal will be reduced from two years to six months, significantly expanding access to legal protection for new employees.

The Act also sharply restricts the use of ‘fire and rehire’ practices that have unfairly been used to force unagreed contractual changes.

Improved Enforcement Through the Fair Work Agency

A new ‘Fair Work Agency’ will bring together enforcement of the national minimum wage, employment agency standards and protections against labour exploitation, helping to ensure rights exist not just in law, but in practice.

Supporting a more Inclusive Economy

Broadly speaking, an inclusive economy is a fairer economy, with equitable distribution of wealth and opportunities for all, not just those lucky enough to find themselves at the top of the food chain (read more in this blog). The Employment Rights Act contributes to this by addressing structural problems that drive exclusion from decent work in a number of ways.

First, the Act extends meaningful protections to groups that have disproportionately experienced insecurity at work such as low paid workers, young people, women, global majority workers and disabled people. These groups are over represented in zero hours work, agency roles and jobs without access to sick pay or dismissal protection.

Second, the Act strengthens worker voice, including new negotiating bodies in sectors such as adult social care and school support staff. These mechanisms will help raise standards in sectors critical to the economy but historically associated with low pay and poor conditions.

Finally, by improving enforcement, the legislation helps create a level playing field between responsible employers and those who undercut standards by rewarding good business practices.

Better work means stronger communities

Inequality in the labour market doesn’t just affect individuals, it weakens communities and increases pressure on public and voluntary services.

By shifting risk away from individual workers and back towards employers and systems, the Employment Rights Act helps address the root causes of in work poverty and insecurity. Measures such as day one sick pay and guaranteed hours are particularly important when it comes to narrowing gaps in income, job security and employment outcomes across regions and demographic groups, making historically lower-paid individuals and communities more resilient to changes to life circumstances and more able to absorb income shocks.  

We know that insecure work is associated with poorer health outcomes, financial stress, and a reduced ability to plan for the future, highlighting the importance of Good Employment in reducing inequality and improving the quality of people’s lives. An increase in wealth and stability due to better employment protection for society’s more affected communities will do much to build a more equal economy for all.

Conclusion

The Employment Rights Bill 2025 is about more than compliance. It is about recognising that secure, dignified work is foundational to social and economic justice. The Bill represents a decisive shift in how work is regulated in the UK, laying the foundations for a more inclusive economy where fairness and security can be found in work.

While implementation of the new measures will be critical, the Act is a clear acknowledgement that reducing inequality and building sustainable economic growth start with how people experience work itself.