Employment Rights Act 2025 Consultations

What do the Employment Rights Act 2025 Consultations mean for Employers and Employees?

With the Employment Rights Act 2025 slowly being introduced into the realm of Employment Law, the Government has launched new consultations for employees and employers to engage with to assist with its implementation. This article explores three key areas under consultation: tipping, flexible working, and fire-and-rehire practices

Tipping

The Employment (Allocation of Tips) Act 2023 introduced obligations on employers to ensure that workers receive tips, gratuities, and service charges in full, and that these should be allocated in a fair and transparent manner. Where qualifying tips, gratuities, and service charges are paid at an employer’s place of business on more than an occasional or an exceptional basis, the employer must have a written policy explaining how tips are distributed amongst staff.

On 1 October 2024, the Statutory Code of Practice on the fair and transparent distribution of tips came into force. The Code comprises five sections addressing qualifying tips and workers, the factors and methods relevant to fairness, transparency, and the handling of such disputes or concerns.

The Employment Rights Act 2025 seeks to strengthen protections to ensure hospitality workers receive their tips in full and can have a say in how tips are allocated. These changes will be implemented under section 14 of the Employment Rights Act 2025, which amends section 27I of the Employment Rights Act 1996. Under the amended provision, employers will be required, before publishing the first version of a written tips policy, to consult with any recognised trade union or worker representatives representing those likely to be affected by the policy. If no representatives exist, employers must consult workers directly.

What is this Consultation looking to achieve?

The consultation opened on 5 February 2026. It invites views from employers, workers, trade unions, legal professionals, and the public on implementation and possible improvements.

Employers:

• For employers, the consultation explores current tipping practices. This considers whether there have been previous attempts to consult workers on tip allocation, and whether written tipping policies are in place and accessible to workers. It also seeks information on how tips are currently allocated amongst staff and whether different allocation methods apply to different categories of workers.

Employees:

• Employees are asked similar questions on tipping practices and how allocation operates in their workplace. The consultation also asks for feedback on any issues experienced by workers under current arrangements, such as employers retaining tips, unfair allocation, workplace disputes, or the absence of a written policy. The consultation encourages views on preferred methods of consultation, whether that be in writing or verbal.

The consultation will close on 1 April 2026. A government response is expected to follow, alongside publication of an updated statutory Code of Practice. It is anticipated that section 14 of the Employment Rights Act 2025 will come into force in October 2026.

The proposed reforms aim to promote fairer allocation of tips and, in turn, it should create greater trust and confidence within the workplace. Once these changes take effect in October 2026, employers will need to ensure that appropriate policies are in place and kept under review to remain compliant with the evolving legal framework. Failure to prepare may place employers at a disadvantage in retaining staff, particularly in a hospitality sector where transparency and fairness in tipping practices are increasingly expected.

Flexible Working

The Government has also opened a consultation on proposed amendments to the flexible working framework under current legislation. The statutory right to request flexible working is set out in sections 80F to 80I of the Employment Rights Act 1996. The Employment Rights Act 2025 will introduce a number of changes, including:

• a new test of reasonableness where an employer refuses a statutory flexible working request;
• a requirement for employers to explain why it was reasonable to refuse the request; and
• regulations, to be made by the Secretary of State, setting out the steps employers must follow to consult with employees before refusing a flexible working request.

The aim of these changes is to ensure employers engage in meaningful consultations with employees before rejecting any flexible working requests. This is intended to encourage both parties to consider alternative arrangements where the original request is not deemed practicable by the Employer. In recent years, we have noticed that there has been a significant increase in flexible working requests, particularly in relation to homeworking, and concerns have been raised that refusals have not always been handled fairly or consistently across UK employers.

The consultation seeks to introduce a clear reasonableness test. Where an employee believes their flexible working request has been handled unreasonably by their employer, they may bring a claim to the attention of an Employment Tribunal. If successful, this could result in the employer being required to either reconsider the request or make a financial award of compensation of up to eight weeks’ gross pay. Reasonableness will be assessed by reference to the existing eight statutory business grounds for refusing a flexible working request, namely:

• The burden of additional costs.
• Detrimental effect on ability to meet customer demand.
• Inability to re-organise work among existing staff.
• Inability to recruit additional staff.
• Detrimental impact on quality.
• Detrimental impact on performance.
• Insufficiency of work during the periods the employee proposes to work.
• Planned structural changes.

What is the Flexible Working Consultation looking to achieve?

Employers:

• Part one of the consultation seeks views on the impact of the changes made to the statutory flexible working framework in April 2024. These changes included making the right to request flexible working a day-one entitlement for employees, requiring employers to respond to requests within two months, and removing the requirement for employees to explain the potential impact of their request on the employer.
• The employers are also asked about handling statutory flexible working requests, including the training and resources provided to staff responsible for managing such requests.

Employees:

• The Government is also seeking to understand the impact of these changes on individuals, including whether or not they have considered making a flexible working request, the reasons for choosing not to do so, the outcomes where requests were made, and the effect that decisions to make, or not make, a request has had on employees’ working and personal lives.
• Part two of the consultation sets out proposed changes under the Employment Rights Act 2025. These proposals include introducing greater consistency in decision-making on flexible working requests, as well as providing guidance for employers on holding constructive discussions with employees about requests and exploring alternative options.

The consultation is due to close at the end of April 2026, with any resulting changes to employment law relating to flexible working requests expected to be implemented in January 2027.

Fire and Rehire

Employer:

The Government has published a consultation on the proposed dismissal and re-engagement (otherwise known as “fire and rehire”) provisions. The consultation seeks views on contractual changes relating to employment expenses, benefits, and payments in kind. It also considers shift patterns for the purpose of determining when an employee should not be regarded as automatically unfairly dismissed for refusing to agree to restricted variations to their contract of employment.

Section 28 of the Employment Rights Act 2025 will insert a new section 104I into the Employment Rights Act 1996. This provision will render a dismissal automatically unfair where the reason, or principal reason, for the dismissal is that the employer sought to vary the employee’s contract of employment and the employee did not agree to such variation.

The Government aims to strike a careful balance between protecting employees from the imposition of detrimental contractual changes and recognising legitimate needs for businesses to adapt to changing circumstances. The effect of the proposed amendment is to prevent employers from unilaterally changing contractual terms and conditions that are integral to the employment relationship. Only in exceptional circumstances, where an employer is facing significant financial difficulties, will such an approach be considered justifiable.

It emphasises that any expenses, benefits, or payments in kind falling within the scope of a restricted variation must be clearly and precisely defined, to allow employers to make other permissible contractual changes.

What is the Government proposing on Fire and Rehire?

The Government has proposed two options for consultation but has indicated that it is open to alternative approaches by responders. These are:

• All expenses and benefits or payments in kind are excluded from the restricted variation of sums payable to an employee in connection with the employment (though all general fairness principles will still apply); and/or
• All expenses and benefits are excluded except for certain share schemes, travel, and accommodation expenses. Dismissals to reduce or remove these could be automatically unfair unless exempted for financial difficulty.

The consultation paper also notes that the variety of possible shift patterns, and the ways in which these are set out in employment contracts, makes it challenging to create common rules for all arrangements.

The government has proposed the following two options but remain open to alternative views:

• Shift changes from day to night working (or vice versa), and weekday to weekend working (or vice versa), will be restricted variations; and/or
• No types of shift pattern changes are in scope of the restricted variation.

Under this option, no dismissal related to changes to the timing or duration of a shift would give rise to an automatically unfair dismissal claim under section 104I of the ERA 1996, unless it also included a change constituting another type of restricted variation.

Conclusion

The Government’s programme of consultations marks a significant step in the ongoing reform of UK employment law under the Employment Rights Act 2025. Across the consultations, a common theme emerges; enhanced worker protections underpinned by a stronger emphasis on consultation, transparency, and reasoned decision-making.

For employers, these proposals serve as an early warning to review existing practices and prepare for more rigorous procedural requirements. Policies relating to tips, flexible working requests, and contractual variations will need to be clearly documented, consistently applied, and supported by meaningful engagement with employees or their representatives. Failure to do so may increase the risk of employment tribunal claims and compliance challenges once the reforms come into force.

Employees are being afforded greater scope to influence workplace practices and safeguard their rights through both consultation responses and future enforcement mechanisms.

As the consultations progress and further guidance is published, we will continue to monitor developments and provide updates on the practical implications for employers. In the meantime, organisations may wish to seek advice on how best to prepare for these anticipated changes and mitigate potential risk ahead of implementation.

For further information, please contact:

Kerseys Solicitors in Ipswich at [email protected] or telephone 01473 213311 or
Kerseys Solicitors in Felixstowe at [email protected] on 01394 834557 or
Kerseys Solicitors in Woodbridge at [email protected] on 01394 813732 or
Kerseys Solicitors in Colchester at [email protected] on 01206 584584 or
Kerseys Solicitors in Stowmarket at [email protected] on 01449 613631 or

visit our website and click “Call Me Back” where a member of our employment law team will be happy to contact you at a time that is convenient to you.