REWARD
unfair dismissal, currently set at two years. This means that workers will be protected against unfair dismissal from day one of employment, and a statutory probationary period will also be introduced, likely to be nine months. Pregnant women and new mothers will also get boosted protection against dismissal, as well as parental leave and bereavement leave being protected from day one. Employees will be able to request flexible working from day one, and bosses will only be able to refuse in certain scenarios. Time limits The time limit for bringing claims to an Employment Tribunal will be extended from three months to six months. This will apply to unfair dismissal, unpaid sick pay and unpaid holiday pay claims, among others. It means that individuals who are slow or indecisive will no longer be filtered out, as they can decide to bring a claim up to six months after the incident occurs. Payroll professionals should review their compliance with sick pay and holiday pay requirements to avoid costly proceedings. Extended time limits will bring a risk of more claims, and higher pressure to resolve matters due to the ongoing litigation risk. This, in turn, will lead to more paperwork and higher costs, more time to negotiate and pursue internal grievance processes and more time for subject access requests. Payroll professionals and employers in general would benefit from reviewing
their document retention and archiving policies. Records will need to be retained for at least nine months following any incident, and perhaps longer if litigation is contemplated. Umbrella regulations From April 2026, recruitment agencies will be responsible for pay as you earn instead of umbrella companies. The Bill will also amend the definition of ‘employment businesses’ to bring umbrella companies within regulatory scope of the Conduct of Employment Agencies and Employment Businesses Regulations 2003. The Fair Work Agency (FWA) The Bill will create a new state enforcement agency for specific employment rights – the FWA. Its function will be to assist workers in employment cases. If the claim succeeds, the FWA’s costs will be recoverable from the employer. The FWA will be able to: l bring Tribunal claims on behalf of workers l chase employers for unpaid sick pay and holiday pay l impose financial penalties on top of any compensation l compel people to attend interviews. In addition, enforcement officers will be given powers of arrest and will be able to access a business’s computers or other equipment. They’ll also be able to enter people’s homes during their investigations, provided they obtain a warrant from a magistrate and have
reasonable grounds to believe there are documents or equipment in the premises that they require. Payroll professionals should regularly review their document retention and compliance procedures in readiness for any enforcement officers and investigations. What do these changes mean for you? The Bill will introduce the most far- reaching changes to UK employment law in a generation, with a large and arguably disproportionate impact on employers. Having successfully passed through the House of Commons, the ERB is making its way through the House of Lords. Some provisions may be in force this year, but it’s expected that most reforms will come into effect in 2026. Payroll professionals and employers in general are advised to keep a careful eye on developments to ensure they’re suitably prepared for when the changes come into force. This will help them avoid major consequences including costly Tribunal claims and reputational damage.
PROFESSI NAL in Payroll, Pensions and Reward
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June 2025 | Issue 111
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