The UK’s Employment Rights Bill 2025 (ERB) is currently being debated in the House of Commons and is clearly politically sensitive. However, the legislation represents a fundamental component of this Government’s policy agenda. If the ERB receives Royal Assent in its current form, it is set to redefine the employment landscape across multiple sectors - but few will feel its impact as acutely as healthcare and social care providers. The Bill is a flagship component of Labour’s New Deal for Working People. It aims to improve pay, job security, and workplace fairness.
However, while the social care workforce stands to benefit, the reforms also bring new cost, compliance, and liability risks for employers - risks that insurance brokers and risk advisers must help clients prepare for.
The current intended scope of the ERB is very broad and it is beyond the scope of this article to analyse every facet of it in detail. Instead, we focus on some of the key provisions of the Bill that are most likely to affect the healthcare and care sectors, and consider what both providers and their insurance partners should be doing now to manage the changes ahead.
A Major Reform in Employment Law
The ERB represents the most far-reaching overhaul of UK employment rights in a generation. Some of the core proposals that are most likely to impact on the healthcare and care sectors include:
- Day-one rights for unfair dismissal and flexible working.
- Fair Pay Agreements (FPAs) to set sector-wide pay and conditions - including a dedicated framework for adult social care.
- Restrictions on zero-hours contracts and a right to predictable working patterns.
- Significant restrictions on the practice of “fire and rehire” - whereby employers dismiss staff and then re-engage them on less favourable terms.
- Stronger protections against workplace harassment and improved enforcement mechanisms.
- Reforms to statutory sick pay (SSP) and family leave, with more inclusive, day-one entitlements.
These reforms will take time to come into force, with the Government to take a phased approach to implementation. The majority of changes are planned in April and October 2026, and the remainder expected in 2027. This is later than original indications, to give businesses time to prepare.
Why This Matters for Healthcare and Care Providers
1. Employment cost and funding pressure
It’s anticipated that the creation of FPAs in adult social care - giving the Secretary of State for Health and Social Care power to establish a national negotiating body - will substantially raise pay and conditions across the sector (UK Government consultation, 2025). The establishment of a FPA process is one of the key planks of the Government’s reforms of the adult social care sector, that will run in parallel with the Casey commission into social care, laying the foundations for a national care service.
However, while this development may help improve care providers’ staff recruitment and retention, it could also increase operating costs significantly, particularly for providers reliant on fixed local authority or NHS funding. As Care England warns, without a funding uplift to match new statutory pay rates, some providers may struggle to remain viable.
Insurance brokers should therefore expect heightened concerns from clients around business interruption, financial resilience, and directors’ and officers’ (D&O) liability, especially where financial distress could lead to restructuring or closure.
2. Unfair dismissal - Expected 2027
With unfair dismissal rights set to become a day-one entitlement (subject to important caveats), healthcare and care providers will face greater risk of employment tribunal claims - even during probation periods. From a risk management and insurance standpoint, this change increases exposure to Employment Practices Liability (EPL) claims, which cover allegations about the employer’s conduct, policies, or decisions - including claims of unfair dismissal, discrimination, and harassment.
Providers with high staff turnover or complex workforce models (such as some care homes, domiciliary care services, and independent hospitals) may see an increase in claim frequency. Insurers will likely respond by reassessing EPL premiums, coverage terms, and deductibles - making robust HR policies and training even more important in terms of ‘soft risk control.’
3. Zero-hours and workforce flexibility – Expected 2027
The ERB aims to curb excessive reliance on zero-hours contracts, introducing a right for workers to request predictable hours and a right to reasonable notice if they are required to work a shift, or if the shift is changed or cancelled. This change has significant operational implications. Healthcare and care providers often depend on flexible staffing - agency nurses, bank care workers, and variable shift rotas - to meet fluctuating demand.
Moving toward guaranteed minimum hours or predictable scheduling could reduce staffing flexibility, increase payroll obligations, and heighten exposure to claims of breach of contract or wage underpayment if terms are mishandled.
From an insurance perspective, this may elevate the risk of employment disputes, overtime errors, and HR compliance investigations. Providers should audit existing contracts and work closely with brokers to ensure adequate EPL and legal expenses cover. It could also have implications on vicarious liability exposures for providers and their insurers, as a more formalised working relationship could more readily be interpreted as a ‘relationship akin to employment’.
4. Restrictions to ‘Fire and Rehire’ – Expected October 2026
Under the ERB, dismissals whose primary reason is to impose changes to pay, pensions, hours, shifts or time off will automatically be unfair unless truly justified by severe financial distress.
For healthcare and social care providers - and the insurers who support them - the proposed curbs on ‘fire and rehire’ mark a pivotal shift in employment relations. These sectors operate in a climate of rising demand, workforce shortages and constrained budgets, often requiring agile staffing models to maintain safe and continuous care. The new restrictions mean that attempts to impose less favourable terms through dismissal and re-engagement could now trigger unfair dismissal claims, regulatory scrutiny and reputational damage. In this context, providers will need to adopt more collaborative approaches to workforce change - grounded in consultation, transparency and trust - to manage risk while sustaining morale and service quality.
5. Workplace conduct and harassment – October 2026
The Bill strengthens employers’ duties to prevent workplace harassment, echoing the recently revived Worker Protection (Amendment of Equality Act) Act. This legislation came into effect in October 2024 and imposed a new duty on employers to take ‘reasonable steps’ to prevent sexual harassment of employees in the course of their employment. This new preventative and proactive duty on employers represented a shift from employers reacting to complaints, to taking steps to prevent harassment from occurring in the first place.
The ERB now looks to strengthen this duty further by looking to enforce ‘all reasonable steps’ by employers in the prevention of sexual harassment. Additionally, the ERB will re-introduce an obligation on employers not to permit harassment of its employees of any kind (i.e. not limited to sexual harassment only) by ‘third parties’ – which could include clients, patients and members of the public, as well as other employees.
It remains speculative as to what these changes will mean in practice. However, some observers are concerned that they will be so onerous as to essentially impose de facto strict liability on employers. At the very least, employers will need to demonstrate proactive measures - policies, training, and investigation protocols - to protect themselves against claims. Given the sensitive nature of healthcare and care work, often involving lone working, intimate care, and exposure to distressed patients, this duty is particularly relevant.
These aspects of the ERB raise the prospect of increased potential and reputational risk exposures for healthcare clients.
6. Sick pay, leave and absence management – April 2026
The ERB proposes a modernised system of Statutory Sick Pay (SSP), with no lower earnings threshold (currently at least £123 per week) and entitlement from day one (currently day four). It will remove the qualifying service requirement for paternity leave (currently 26 weeks) and unpaid parental leave (currently one year). Both are set to become day one rights from April 2026.
For care providers already facing staff shortages, this could mean higher short-term absence rates and greater reliance on agency staff. Insurers may see increased claims frequency in areas such as agency liability, temporary staffing, and occupational health support costs.
Implications for Insurance Brokers
The ERB represents one of the most significant shifts in UK employment regulation in over a decade. For insurance brokers, the reforms will reshape how employment-related and management liability risks are assessed, priced, and mitigated, particularly within the health and social care sectors. Expanded grounds for unfair dismissal, enhanced protections against workplace harassment, and strengthened employee rights from day one all broaden the potential scope of claims. As a result, brokers should revisit Employment Practices Liability (EPL), Directors’ and Officers’ (D&O), and Legal Expenses Insurance (LEI) policy wordings to ensure alignment with new statutory exposures. Effective risk profiling will be essential, especially for smaller providers operating with tight margins, while claims defensibility will increasingly depend on clients’ ability to evidence robust governance, documentation, and staff training.
Preparing for Change - practical priorities for providers and brokers
Healthcare and care providers should use the transition period to prepare for compliance and financial resilience. Workforce audits can help identify vulnerable contractual arrangements -such as zero-hours or agency staff – likely to be most affected by predictable-hours and dismissal reforms. Updating contracts, policies, and management training will be critical to ensure fairness and legal defensibility. Providers should also budget for potential wage uplifts linked to future FPAs and statutory sick pay changes, engaging early with commissioners to align funding models. For brokers and advisers, the priority is to embed HR due diligence into renewal cycles, encourage proactive claims management, and monitor regulatory implementation timelines through 2026–27.
As with all cases of significant new regulation, it will be those who take a coordinated, anticipatory approach - integrating HR, legal, and insurance perspectives - will be best placed to support clients through this evolving landscape of workforce risk.
Conclusion
It remains to be seen whether and, if so, to what extent, the Employment Rights Bill 2025 will be watered down as it wends it way through the House of Commons. However, there is no doubt that, in its current form, it has the potential to improve fairness and professional standards across healthcare and social care, but it also introduces substantial operational and liability risks.
Handled well, the reforms could support a more stable and professional workforce. Handled poorly, they could increase costs, claims, and reputational risks across the sector. The difference will lie in preparation and in the quality of advice providers receive from their professional partners.
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“The information contained in this article does not represent a complete analysis of the topics presented and is provided for information purposes only. It is not intended as legal advice and no responsibility can be accepted by Altea for any reliance placed upon it. Legal advice should always be obtained before applying any information to particular circumstances.”
