Tech Insight : How Employment Rights Bill Will Reshape Tech Industry

With the UK’s new Employment Rights Bill expected to become law by 2026, we look at what this could mean for tech employers, the key changes, and practical impacts.

Protections for Workers from Day One 

The UK’s new Employment Rights Bill is set to bring seismic changes to the employment landscape, with major implications for tech industry employers. Introduced by the recently elected Labour government following commitments in their recent manifesto, this legislative overhaul aims to recalibrate the balance of power between employers and employees, enforcing protections for workers from their very first day of employment. The Bill’s provisions, expected to become law by 2026, are poised to reshape the strategies tech companies must employ in managing their workforce.

The Nature of the Tech Industry 

The tech industry, with its reliance on dynamic and flexible workforces, will be among the sectors most affected by these new regulations. Typically known for short-term contracts and high turnover rates due to project-based work, tech businesses are set to face heightened responsibilities to justify employment decisions from the outset. As companies await further details on specific provisions, it’s clear that preparation for compliance with the Employment Rights Bill should start now. With this in mind, here’s a taste of what tech employers can expect from the forthcoming changes and how they can begin to adapt.

The Bill 

The new Employment Rights Bill essentially encompasses 28 individual employment reforms, such as ending zero-hours contracts, prohibiting ‘fire and rehire’ practices, establishing day-one rights for paternity, parental & bereavement leave, plus strengthening statutory sick pay.

Immediate Protection Against Unfair Dismissal 

One of the key changes in the Employment Rights Bill is the introduction of unfair dismissal protection from day one of employment. Traditionally, UK law allowed employers to terminate employees within the first two years without risking unfair dismissal claims, providing flexibility to assess a new hire’s fit within the company. The new Bill abolishes this two-year window, making dismissals riskier and costlier without valid and well-documented reasons.

For tech companies, where rapid hiring and firing is common, this change could be particularly disruptive. Tech firms will need to adopt more stringent hiring processes to avoid costly claims. With the new Bill, therefore, companies may be forced to rethink this approach, adopting more cautious recruitment policies to minimise the risk of tribunal claims.

Changes to Probationary Periods 

Another possible change under discussion is the introduction of a statutory probationary period, which might fall at around nine months. Labour has not confirmed this length, but it signals a potential rebalancing of early employment protections that could impact tech hiring processes. While details are still under consultation, the purpose is to balance the rights of new employees with the flexibility employers need during the early months of employment. A statutory probationary period could provide tech firms with a partial grace period, though still with less leeway than the current two-year standard. Industry analysts predict that tech employers will need to invest more heavily in robust onboarding and training systems to assess new hires effectively within a shorter time frame.

To counter these limitations, many employers are now re-evaluating their recruitment pipelines. For example, extended interview processes and multi-stage assessments are becoming the norm in the sector, with many tech firms planning to introduce enhanced technical evaluations before finalising hiring decisions. Such measures, while potentially beneficial for retaining high-quality talent, will also likely slow hiring speeds, a disadvantage in a field where innovation and speed are essential.

Impact on Flexible and Zero-Hours Contracts 

The Employment Rights Bill, as it stands, could limit the use of zero-hours contracts, compelling employers to offer minimum guaranteed hours that reflect previous work patterns. While some sectors rely heavily on this contract type, the proposed changes aim to offer greater stability without entirely abolishing zero-hours arrangements. For tech employers, who often rely on freelancers and gig workers to address fluctuating project needs, this could lead to significant operational changes. Under the new law, workers with zero-hours contracts must be offered guaranteed hours reflective of their actual working history within a reference period. Additionally, employees working shifts will gain the right to receive reasonable notice for shift changes, with a minimum notice period likely equal to the length of the shift itself.

This requirement has provoked mixed reactions in the tech industry. For example, although proponents argue it brings stability to gig workers who are essential to project-based tech work, critics warn that the added rigidity could make tech firms less competitive. Tech businesses that rely on on-demand skills being forced to offer set hours could, therefore, find that their ability to respond quickly to client demands is more limited, perhaps meaning tough decisions about workforce structure will need to be taken.

Enhanced Flexibility Rights 

The Bill introduces additional rights around flexible working, compelling employers to justify any refusal of such requests thoroughly. In a sector where remote and flexible work has been the norm since the pandemic, this mandate may present less of a challenge on the surface. However, the onus on providing documented reasoning for refusal could add administrative strain, especially for companies managing hybrid or remote workforces across different locations and time zones.

The Bill’s requirement that companies substantiate their grounds for rejecting requests is seen as a progressive step, but some fear it could reduce the industry’s ability to manage work output effectively. For example, with tech work being essentially output-driven, being forced to justify rejecting flexibility could lead to managers feeling micromanaged themselves, thereby reducing productivity.

Implications for Public Sector Contracts and Two-Tier Workforce Rules 

For tech firms involved in public sector contracts, the Bill’s potential inclusion of a two-tier workforce rule could add a layer of operational complexity. This rule is designed to prevent disparities in wages and benefits between public sector employees transferred to private companies and their new private sector colleagues. Under the proposed rule, public sector staff moving to a private contractor would retain their existing terms and conditions, and private sector employees working in similar roles on the same project would be entitled to receive equitable treatment.

This change is especially relevant for tech consultancies partnering with the public sector, such as those handling IT infrastructure or cybersecurity projects. Should this rule advance into legislation, many firms may need to standardise benefits and pay rates across their teams, potentially resulting in significant cost increases. However, some employee advocates within the tech industry support these changes as a step towards fairer treatment, particularly in promoting equal pay for public and private staff working side by side.

Collective Redundancy Reforms 

Collective redundancy consultation, too, will see changes, especially affecting larger tech companies with distributed workforces. Under the Bill, a company with plans to lay off 20 or more employees in a set period will be required to conduct a collective consultation, even if redundancies are spread across multiple locations. Current legislation allows firms to treat individual sites separately for redundancy purposes, but the new rules would mean that all redundancies across a business must be grouped together in calculating whether the threshold for collective consultation has been met.

For tech employers who rely on flexible, location-independent workforces, this could result in higher administrative burdens and longer lead times for making structural adjustments. Industry observers warn that this change could reduce operational agility, especially for multinational tech firms with UK subsidiaries.

Other Considerations for Tech Employers 

The proposed Employment Rights Bill is likely to include several other changes that tech employers may need to seriously consider. Although many details are still speculative, here are some key areas that could have a significant impact if the Bill is enacted as Labour envisions.

Right to Disconnect 

The proposed Bill also includes the possibility of a “right to disconnect,” which would protect employees from work-related communications outside of their working hours. For tech employers, where global operations and multiple time zones often demand constant connectivity, this could present operational challenges. Employers may need to set clear boundaries for communication, reassess expectations for remote and hybrid teams, and introduce policies that respect employees’ work-life balance while preserving productivity.

Enhanced Data Privacy and Monitoring Protections 

Tech firms, especially those managing remote teams, often use productivity monitoring tools to maintain standards. However, the Bill may introduce stricter data privacy requirements around employee monitoring, compelling employers to justify any data collection or surveillance and to maintain transparency with staff. For tech companies reliant on these tools, this could mean a rethinking of monitoring practices to ensure compliance with heightened privacy standards.

Improved Parental and Family Leave Rights 

Under the proposed Bill, parental, paternity, and carer’s leave could become available from day one of employment, thereby broadening family-friendly benefits. For tech employers, this may require adjustments to their standard employment packages, ensuring they offer robust support to attract and retain talent with family responsibilities. Additionally, employers may need to adapt workforce planning to address potential skill gaps when employees take family leave.

Redefining Employment Status for Gig and Contract Workers 

The Bill may bring new definitions for employment status, making it more challenging to classify individuals as self-employed if they perform regular work for a company. For tech employers, this could mean that many freelancers gain employee status, with accompanying rights to benefits like holiday pay, sick leave, and pension contributions. This change could impact the cost structure of tech projects and reduce the flexibility many firms rely on when managing short-term or project-based workforces.

Workplace Equality and Pay Transparency 

Greater pay transparency and equal pay provisions are anticipated, which would likely require tech firms to disclose salary ranges and provide justifications for pay disparities. Although many companies in the tech sector have begun taking steps towards pay equity, formalising these measures under the Bill could make regular pay audits and the publication of gender and racial pay gap data mandatory. This could, in turn, influence recruitment and retention strategies within the sector.

Mental Health Support Requirements 

Given the growing awareness around mental health, particularly in high-stress sectors like tech, the Bill may mandate employers to provide mental health support, such as employee assistance programmes (EAPs) or mental health first aiders. In response, tech firms may need to increase investment in mental health resources, which could involve budgeting for support initiatives and integrating mental health considerations into workplace policies.

Enhanced Protection for Whistleblowers 

The Bill is expected to reinforce protections for whistleblowers, ensuring employees feel secure when reporting unethical or illegal practices. For tech companies handling sensitive data or regulatory compliance-heavy work, this could necessitate more robust reporting frameworks and confidential processes for whistleblower protection.

Additional Support for Skill Development and Training 

Labour’s interest in upskilling and career development, especially in rapidly evolving sectors like tech, is likely to be reflected in the Bill. Employers may need to offer structured training opportunities or upskill workers regularly, potentially with paid training time. For tech employers, this could mean establishing regular training programmes to ensure teams remain proficient with current technologies and compliance standards, possibly including support for certifications or advanced technical skills.

Requirements for Diversity and Inclusion Programmes 

The Bill may also introduce new obligations around diversity and inclusion (D&I), particularly for larger companies. Tech firms, especially those within sectors where diversity remains a challenge, may need to formalise their D&I efforts, establish accountability metrics, and promote fair representation across all levels of their workforce. This could drive positive internal change, fostering a more inclusive and balanced working environment that reflects the full range of available talent.

What Does This Mean for Your Business? 

The Employment Rights Bill, if enacted as anticipated, will mean a substantial shift for tech businesses in the UK. For an industry known for its flexibility, innovation, and rapid adaptation, these reforms could mark a new era of more structured compliance and cultural change. As the Bill aims to enhance security, fairness, and transparency in employment, it brings potential benefits but also significant responsibilities for tech employers.

For example, for many tech firms, the Bill could mean rethinking traditional workforce management. Where rapid hiring, freelance reliance, and flexible contracts have been fundamental, there may soon be constraints requiring more rigorous documentation, justification, and stability in employment practices. Tech employers may need to adapt quickly by implementing stricter hiring processes, formalised leave policies, and a heightened focus on employee rights, whether through enhanced family support, mental health resources, or data privacy safeguards. While some of these shifts align with current social trends, the added administrative burden could prove challenging, particularly for smaller firms or those with dispersed workforces.

That said, these changes could also pave the way for positive outcomes in talent retention and workforce satisfaction. As the industry faces increasing demand for skilled professionals, a commitment to fairer, more transparent employment practices could enhance a firm’s appeal to top talent. Measures such as clearer pay structures, enhanced training support, and stronger diversity and inclusion initiatives might not only ensure compliance but actively contribute to building a more resilient, engaged, and diverse workforce. For businesses willing to embrace these changes, the reforms may well foster a stronger culture of respect, fairness, and employee loyalty.

In preparing for the Bill’s potential enactment, tech firms, thankfully, at least have a valuable window of time to evaluate their practices and strategies. Adjustments made now could mitigate potential disruptions, while proactive planning may reduce operational risk and offer a smoother transition. As the industry braces for these landmark changes, the key for tech employers will be balancing compliance with the need for innovation. A thoughtful approach to integrating these new protections, alongside the flexibility that defines the tech sector, will be essential in navigating this evolving regulatory landscape. Whether these reforms ultimately hinder or help the tech sector’s growth, what is certain is that they demand both readiness and resilience from employers as they prepare for a future where compliance and competitiveness go hand in hand.