The Employment Rights Bill 2025: What Is Changing and Why It Matters

The Employment Rights Bill (often referred to as the future Employment Rights Act 2025) is a wide-ranging reform of UK employment law. While it is still progressing through Parliament, it is expected to receive Royal Assent in 2025, with most provisions taking effect gradually between 2026 and 2027.

For foreign employers hiring remote employees based in the UK, this Bill is particularly important. UK employment law generally applies based on where the individual works, not where the employer is incorporated or where payroll is processed. This means overseas companies can be directly affected even without a UK entity.

The Bill aims to modernise employment protections, reduce insecure work, and improve enforcement consistency. For employers, the intention is clarity and fairness, but it also raises the bar for documentation, process, and compliance.

Does This Apply to Foreign Companies Without a UK Entity?

In most cases, yes.

If you engage someone who:

• Lives and works in the UK
• Performs their duties primarily from the UK
• Is treated as an employee or worker under UK law

then UK employment rights are likely to apply, regardless of where your company is headquartered.

This is where many foreign employers encounter risk.

Worker, Employee, and Contractor Classification

The Bill signals a long-term move toward a single “worker” status, although for now the legal distinction between employees and workers remains. What is clear, however, is that enforcement around misclassification is tightening.

Foreign employers often label UK talent as “independent contractors” when, under UK law, they function like employees. Under the strengthened framework, misclassified contractors may be reclassified, bringing statutory rights such as sick pay, holiday pay, and unfair dismissal protections into scope.

This makes correct classification and compliant engagement structures more important than ever.

What Changes for Your Business in 2026?

April 2026: Immediate Action Items

Day-One Employment Rights Expand
Several rights will apply from the first day of employment, including:

• Parental leave
• Paternity leave
• Bereavement leave

For employers, this means contracts, policies, and onboarding processes must be compliant from day one, not after probation.

Statutory Sick Pay from Day One
Statutory Sick Pay will be payable from the first day of illness, and the lower earnings limit will be removed.

In practical terms, employers should:

• Review payroll systems and SSP logic
• Update absence and sick leave policies
• Ensure managers understand reporting requirements

Higher Redundancy Consultation Penalties
Protective awards for failures in collective redundancy consultation will increase, making proper process essential even for remote restructures.

Expanded Whistleblowing Protection
Disclosures relating to sexual harassment will qualify for whistleblowing protection, requiring clear reporting channels and internal escalation procedures.

Fair Work Agency Established
A new Fair Work Agency will bring together enforcement of SSP, holiday pay, minimum wage, and other rights.

Why this matters for foreign employers:
A centralised enforcement body makes oversight more consistent and reduces the likelihood that overseas employers remain “under the radar.”

October 2026: Stronger Process and Documentation Expectations

Fire and Rehire Becomes Effectively Prohibited
The practice of dismissing and rehiring employees on worse terms will, in most cases, be automatically unfair. Only extreme financial distress scenarios are expected to justify it.

For foreign employers, this affects:

• Compensation changes
• Contract amendments
• Restructuring or role redesign

Careful consultation and documentation will be essential.

Proactive Harassment Prevention Duties
Employers must take all reasonable steps to prevent harassment, including third-party harassment from clients or customers. This elevates training, policy design, and reporting processes.

Extended Tribunal Claim Time Limits
Employees will have more time to bring claims, increasing the importance of consistent records and fair procedures.

2027 and Beyond: Structural Workforce Changes

Zero-Hours Contract Reform
Workers with regular working patterns will gain rights to predictable hours, notice, and compensation for cancellations. This impacts flexible, project-based, and on-demand roles.

Unfair Dismissal and the New Statutory Probation Period
The government is consulting on a new statutory probation period, likely around nine months, replacing the current two-year qualifying period.

During this probation period:

• A “light-touch” dismissal process would apply
• Employers would still need a fair reason and basic process
• Good documentation remains critical

This should reassure employers that day-one rights do not mean day-one dismissal risk, but it does require structure.

What Foreign Employers Should Do Now

Key Takeaway Checklist

1. Audit UK Engagements
Review whether UK team members are employees, workers, or contractors under UK law.

2. Review Payroll and SSP Setup
Ensure systems can handle SSP from day one and updated statutory rights.

3. Plan Your UK Hiring Structure
Decide whether managing compliance internally is realistic or whether an Employer of Record is the right long-term solution.

Hiring with Confidence: Where an EOR Fits In

As UK employment law becomes more structured and enforcement more centralised, many foreign employers are choosing an Employer of Record (EOR) model.

An UK Employer of Record (EOR) like Tarmack:

• Employs UK talent locally on your behalf
• Ensures contracts, payroll, and statutory benefits are compliant
• Manages evolving legal obligations as the Bill becomes law
• Allows you to focus on growth rather than regulatory change

In a landscape where documentation and process are becoming non-negotiable, an EOR is increasingly a strategic choice rather than a stopgap.

Final Thoughts

The Employment Rights Bill is not about discouraging hiring. It is about clarity, consistency, and fair standards.

For foreign employers, the opportunity remains strong, but success now depends on preparation, structure, and local expertise. With the right approach, and the right support, hiring remote talent in the UK can remain both compliant and competitive as these reforms take effect.