Implementing the Employment Rights Act: February Consultation Package

Kate Dearden Excerpts

Wednesday 4th February 2026 Written Statements

[The Parliamentary Under-Secretary of State for Business and Trade (Kate Dearden)]

This Government’s top priority is to grow the economy and improve living standards. We are clear that you cannot build a strong economy while having people in insecure work. For too long, employment law has failed to keep pace with fundamental changes in how, when and where we work. This has allowed some businesses to take advantage of loopholes in the current law via exploitative practices, fuelling a race to the bottom, undercutting responsible employers and eroding the living standards of working people. We are clear that unfair competition is bad for business, bad for workers and bad for growth.

Our plan to make work pay will modernise our employment rights legislation, extending the employment protections already given by the best British companies to millions more workers across the country. Strengthening this underlying framework will help build an economy based on fair competition between businesses, greater productivity in the workplace, job security for workers, and fair reward for hard work.

We are taking a phased approach to engagement and consultation on these reforms. This will ensure that all stakeholders have the time and space to work through the detail of each measure and to help us implement each in the interests of all. Today we are launching consultations on fire and rehire and on trade union recognition, with further consultations seeking views on tipping, flexible working and agency work to follow in the coming days. Alongside a programme of direct stakeholder engagement, these consultations will support us in determining how best to put our plans into practice.

Consultation 1: Fire and rehire

The Employment Rights Act 2025 introduces important new protections to end unscrupulous fire and rehire practices. If an employer uses fire and rehire to change an employee’s contract in relation to core terms such as pay, hours, leave or specified changes to shift patterns, it will be an automatic unfair dismissal, unless they are in, and can evidence, severe financial difficulties that threaten the viability of the business. These are referred to as restricted variations.

Dismissals related to changes in non-core terms, such as location or job role, will not be automatically unfair but will be subject to enhanced protections. This means that for non-core terms certain factors must be taken into account, including whether any consultation has taken place with the employee or a recognised trade union, and whether the employer offered anything in return for the variation.

The Act provides delegated powers for the Secretary of State to set out in regulations which changes to shift patterns will be restricted variations, as well as to limit the scope of the restricted term on pay to exclude specified expenses and benefits in kind. The forthcoming consultation will seek views on these details and inform the regulations so that they strike an appropriate balance between protecting employees from being unilaterally forced into accepting disadvantageous terms and preserving employer flexibility to make reasonable and operational changes.

This consultation will run for eight weeks and will close on 1 April 2026.

Consultation 2: Code of practice on trade union recognition and unfair practices in electronic balloting

The Employment Rights Act makes several changes to the statutory trade union recognition process to ensure that workers have a meaningful right to organise through trade unions. This includes removing the requirement for a union to demonstrate at the application stage that it is likely that there will be a majority for union recognition, and the requirement for a union to have at least 40% of the workforce in the appropriate bargaining unit supporting union recognition.

We have revised the code to ensure that all parties, including employers, workers and unions, understand how these changes affect them.

The code is not mandatory but seeks to advise employers and unions on how they can comply with legal requirements in relation to access and unfair practices during a recognition or derecognition process. The code is admissible in employment tribunal proceedings and therefore can have some legal effect.

The consultation document explains that the draft code follows the settled policy in the ERA and asks questions in relation to the detail as to how changes in the ERA regarding access and unfair practices should be implemented in practice.

In our plan to make work pay, the Government committed to allow unions to use modern and secure electronic and workplace balloting for statutory ballots, bringing union participation into line with modern voting practices that political parties and listed companies already use. There is already a live consultation on the code of practice for electronic and workplace ballots that addresses hybrid and pure electronic ballot methods.

However, before pure electronic balloting is permitted for recognition and derecognition ballots, the Government want to ensure that the necessary safeguards are in place to prevent any interference in these ballots. Therefore, the consultation on the code of practice on access and unfair practices during the recognition and derecognition process seeks views on Government proposals to legislate for new unfair practices to prevent interference in electronic recognition and derecognition ballots.

This consultation will run for eight weeks and will close on the 1 April 2026.

Consultation 3: Tipping

The Government are consulting on our commitment to strengthen the law on tipping. The new requirements will build on the Employment (Allocation of Tips) Act 2023, which introduced the legal requirement for all tips, gratuities and service charges to be passed on to the workers who have earned them.

The Employment Rights Act 2025 goes further by protecting and enhancing the voices of those workers. The Act sets out that, prior to developing a written policy, employers will be required to consult with the representatives of recognised trade unions or worker representatives, or, where there are no such representatives in place, workers likely to be affected by the policy. The Act also sets out a requirement for the written policy to be reviewed at least once every three years.

When reviews take place, employers must follow the same process of consultation with workers. Employers will also be required to make available a written, anonymised summary of the views expressed in the consultation to all workers at the place of business.

This consultation will allow the Government to consider the views of all interested parties and groups about how we can most effectively implement the new requirements. It will also provide an opportunity to review how the existing legislation and statutory code of practice operate in practice, to identify where improvements could be made.

This consultation will launch shortly and will run for eight weeks.

Consultation 4: Improving access to flexible working

We are changing legislation through the Employment Rights Act to make it more likely that flexible working requests are accepted, prompting employers and employees to think creatively about the types of flexible working that might be feasible and suitable in their circumstances.

These changes will require employers to accept flexible working requests where they are reasonably feasible. It will remain the case that employers can reject requests that cannot be accommodated given their specific ways of working.

If employers are considering rejecting a request, they will be required to follow a new process to first consult the employee, creating an opportunity to consider ways to overcome obstacles with the initial request, or explore potential alternatives.

This consultation will:

Gather feedback on a proposed new process for employers consulting with employees if they are minded to reject a flexible working request. By providing enough detail for employers to aid in compliance, without being overly rigid, we aim to help businesses more effectively to navigate the handling of flexible working requests.

Understand what training, resources and support can help businesses navigate flexible working requests, to help us shape future guidance and resources. It will also gather high-level insights on where respondents might like to see further policy development on flexible working.

This consultation will launch shortly and will run for 12 weeks.

Consultation 5: Modernising the agency work regulatory framework

The regulatory framework for the temporary recruitment sector in Great Britain consists principally of the Conduct of Employment Agencies and Employment Businesses Regulations 2003—the conduct regulations—and the Agency Workers Regulations 2010. The sector has evolved significantly in recent years, due to digitisation, new business models, and changes in the ways in which people work and hire. The emergence and rapid growth of umbrella companies—a type of payment intermediary—has created new opportunities but also challenges due to increasing non-compliance with employment law.

The Employment Rights Act 2025 amends the definition of an “employment business” in the Employment Agencies Act 1973 to bring umbrella companies into scope for regulation through the conduct regulations. This consultation contributes to the key objectives in our plan to make work pay on ensuring fair treatment for workers, as well as the wider Government commitment to reduce administrative burdens for businesses by 25%. The consultation therefore seeks views on updating the regulatory framework for the temporary recruitment sector to allow for the effective regulation of all involved in the modern-day recruitment sector, including umbrella companies. It focuses on ensuring security, transparency and choice for workers, while reducing administrative burdens for businesses. Depending on the responses to this consultation, we may consult further on specific proposals to reduce administrative burdens.

Alongside this consultation, we are publishing a post-implementation review of the requirement for employment businesses to provide work-seekers with a key information document before agreement to terms of employment. This review outlines the need to reform the requirements around information provision for workers to improve transparency, and the consultation is designed to aid the development of policy options to facilitate this.

This consultation will launch shortly and run for 12 weeks.

Next steps for consultation

This package of consultations sets out the next steps in delivering our plans. They are critical to shaping the practical implementation of this legislation, helping the Government to deliver reforms that are both effective and inclusive. It is in everyone’s interest to get the relationship between employer and worker right. These consultations will help us make work pay for both.

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