How your start-up could be affected by the new employment laws

If you’re a start-up owner, it’s important to keep up with changes in employment law to stay legal and attract employees.

The government introduced the Employment Rights Bill in October 2024, which includes some significant reforms to workers’ rights.

The new bill aims to strengthen worker protections, ensure fair treatment, and modernise employment practices in the UK.

The proposed changes to employment law are part of the government’s Plan to Make Work Pay.

In addition to changes in National Insurance Contributions (NICs) and the Employment Allowance that will take effect in April 2025, UK employers will need to know about 28 proposed changes to the law.

These changes still need to go through the legislative process and are unlikely to be in place until after autumn 2026.

However, a start-up owner needs to stay informed – especially if they plan to hire employees.

These proposed changes could affect how you run your business, so it’s a good idea to learn about them now to be ready.

Being as prepared as possible could help you avoid penalties for non-compliance with regulations in the future.

It could also help you become a fairer employer and take advantage of opportunities for business growth.

Read about how to manage the changes to NICs.

What do employers need to know?

We’ve focused on some of the main areas of the new Employment Rights Bill.

Read on for a rundown of the proposed changes in employment law that all employers should know about.

1. Unfair dismissal protection

Current law

Employees must work for two years before claiming protection against unfair dismissal.

This means they might feel uncertain about their job security until they reach that two-year mark.

Proposed changes

All employees will be protected from unfair dismissal starting on their first day of work – ‘day one’ – of employment.

However, there’s also a proposal for an ‘initial period of employment’ (IPE), which is still to be determined.

The government has suggested nine months.

This could make it easier for employers to dismiss their staff during the early months of their employment if the reason is related to a permitted reason, such as their conduct or performance (redundancy is excluded).

Start-up tip

As a new business owner, it’s a good idea to review your hiring process to make sure you’re choosing the best candidates. 

This might include improving your recruitment, checks, and interviews.

You should also examine your onboarding and performance management systems to ensure new employees are well-supported and understand their roles.

Being transparent and fair with your processes could help prevent problems and make complying with the new laws easier.

2. More ‘day one’ rights

Current law

Employees usually have to wait to access benefits like flexible working, paternity leave, or bereavement leave.

For example, paternity leave and paternity pay are only available after 26 weeks of employment.

This can be frustrating for new employees who might need these options immediately.

Proposed changes

Employees will have access to these rights from their first day of work unless the employer has a valid reason to deny their request.

This change means businesses must be ready to handle these requests from the start of an employee’s contract.

Start-up tip

If you employ staff for your start-up, consider having a written policy covering flexible working and leave.

It’s a chance to show potential hires that you offer a supportive work environment.

3. Parental Leave

Current law

Parental leave comes with certain eligibility conditions and can sometimes be inflexible, making it challenging for parents to balance work and family.

Employees who have worked for at least one year with their employer can take up to 18 weeks of unpaid leave for each child until they turn 18.

Proposed changes

The updated rules would make parental leave easier to access and more flexible.

The government is proposing that employees should be able to take parental leave from their first day of work.

Start-up tip

If you have employees or plan to hire staff, think about how you would handle more leave requests.

Consider how you would manage workloads if employees request leave on their first day.

4. Statutory Sick Pay

Current law

Employees must earn at least £123 per week (the ‘Lower Earning Limit’) to qualify for Statutory Sick Pay (SSP).

They also have to wait until the fourth day of sickness before they can start receiving SSP.

This means that some employees may not receive sick pay immediately when they become ill.

Proposed changes

These limitations will be removed, meaning employees would be paid sick pay from the first day of their time off, with no lower earnings limit.

Start-up tip

You might consider reviewing your health and well-being initiatives at work to help support your employees’ health.

Offering benefits like medical insurance, dental insurance, mental health support, or gym memberships could help your team stay healthier and happier.

Read about free resources to boost employee well-being.

5. Restrictions on firing and rehiring or replacing

Current law

Employers can fire an employee and hire someone else on slightly different terms to carry out the same role.

Sometimes, this can lead to unfair practices, where employees are fired and rehired multiple times for the same job.

Proposed changes

The government proposes stricter rules to prevent this practice.

The new rules would make firing and rehiring an employee unfair unless the employer can prove it was necessary, based on strict criteria still being worked out.

For example, an employer may need to show that the change was necessary for financial reasons.

Start-up tip

Think about how you can promote a positive working culture for your team.

You could encourage more openness and have honest discussions when changes are needed.

Maintaining a good relationship with your employees could make for a happier and more productive team.

6. Guaranteed Hours Contracts

Current law

Workers with regular hours might not have contracts that guarantee those hours.

They may work on a ‘zero-hour’ or ‘low-hour’ contract, where employers don’t have to provide set hours.

While this can offer flexibility, it could also create uncertainty and stress for employees about how much they will earn or how many hours they’ll work each month.

The government has found that 84% of zero-hours workers would rather have guaranteed hours.

Proposed changes

The government is proposing that employers should offer guaranteed hours contracts to regular workers to provide more stability.

Contracts will be based on the hours they regularly work over a 12-week reference period.

Start-up tip

If you have employees or are hiring people for your start-up, you may wish to consider how you could make them feel secure in their roles.

Knowing what to expect helps employees feel valued and may encourage them to stay in their jobs longer.

7. Menopause support

Current law

While the Equality Act 2010 already protects against discrimination based on age and sex, there’s very little official guidance about how businesses should support employees going through menopause.

This can sometimes lead to a lack of understanding and support in the workplace.

Proposed changes

Large employers (with more than 250 employees) will be expected to create an equality action plan about supporting employees, including those going through menopause.

For example, they might provide support, flexible schedules, or adjustments to the work environment.

Employers must also address the gender pay gap in their action plan.

Start-up tip

Think ahead about how your business could foster a supportive culture for employees.

You may not have a team of 250 just yet, but training managers and opening up a dialogue about equality could help to make your workplace more inclusive.

Showing that you care about the well-being of all employees could be beneficial for your business.

Read about how to plan for a healthy work environment.

Other points addressed in the amended Employment Rights Bill

• employers must now take ‘all reasonable steps’ to prevent sexual harassment. This is a change from simply taking ‘reasonable steps’, meaning employers could be liable for the harassment of their employees
• updated trade union legislation giving unions more freedom to support workers
• the creation of a new ‘Fair Work Agency’ to enforce employment rights.

For more information, you can read an overview of the Employment Rights Bill provided by government.

Beyond the Employment Rights Bill

Separate rules are being developed to address other possible changes in addition to the changes in the Employment Rights Bill.

These could be useful to know for new business owners:

Planned minimum wage changes

The minimum wage will take into account the cost of living for the first time.

This will be a ‘genuine living wage’.

Discriminatory age bands will also be removed so that everyone will get the same amount.

Read about how to pay employees fairly.

What else can employers do to prepare?

New business owners can take several steps to prepare for new employment laws.

These ideas could help you comply with the law and strengthen the foundations of your start-up.

1. Stay informed about changes to the law

Keep up with legal updates to comply with the law and avoid penalties.

Set aside time to regularly check government updates, train your team, or join business networking groups to stay informed.

2. Audit and review your existing policies

When did you last review your company’s employment policies?

Consider conducting a comprehensive audit to determine whether any points need to be updated to reflect changes in the law.

3. Be flexible where necessary

Even if you are happy with your current operations, new laws might require you to adjust your operations.

Be open to adapting your current strategies to accommodate new regulations to stay productive and compliant.

4. Review your financial planning and update it if necessary

You may need to adjust financial plans to account for increases, like employee benefits or changes in the law.

Revisiting your financial plans could be wise.

This way, you can make adjustments early and easily manage any upcoming changes without disrupting business growth.

As with all financial decisions it’s a good idea to first seek independent specialist advice to help determine what is right for you and your business.

5. Aim to be solvent and maintain good cash flow

With new laws that might affect your business finances, it’s important to ensure your business is financially stable.

Consider implementing robust cash flow management strategies and having a financial buffer for your business to help you accommodate unexpected costs.

Consider setting up cash flow management strategies or saving a financial buffer for unexpected costs.

Alternatively, you might consider a Start Up Loan to help you stay on track or grow.

You can borrow up to £25,000 at a fixed rate of 6% and pay it back over one to five years.

If you need more clarity on how new regulations could affect your business, think about consulting with a legal professional to help you understand the nuances of the law.

Visit our Support and guidance section to find helpful legal tips for your start-up.