Employment Rights Act 1996: HR Guide

The Employment Rights Act 1996 (ERA) sets out and governs the majority of statutory employment rights in the UK.

In this guide for employers, we outline the key provisions of the Act and the obligations it places on employers, or risk legal action.

What is the Employment Rights Act 1996?

The Employment Rights Act 1996 was introduced to consolidate multiple pieces of employment legislation, such as the Contracts of Employment Act 1963, the Redundancy Payments Act 1965, the Employment Protection Act 1975 and the Wages Act of 1985.

The Employment Rights Act ERA 1996 now acts as the primary source of law governing the employer-employee relationship within the UK. Other key current employment legislation includes the Equality Act 2010, the Employment Relations Act 1999 and the Trade Union and Labour Relations (Consolidation) Act 1992.

The ERA covers everything from protections against unfair dismissal to maternity or paternity rights—as well as periods of holiday entitlement and what happens when an employee’s contract comes to an end. For this reason, it’s crucial for employers to understand how the ERA 1996 protects employees’ entitlements in order to avoid workplace disputes and tribunal claims.

Some of the rights are available only to “employees”, and some to “workers”. The difference between these two categories of individual is complex and fact-specific.

Some rights also have qualifying periods. For example, the right not to be unfairly dismissed is available only to employees who have at least two years qualifying service, with some exceptions for cases of automatically unfair reasons for dismissal.

In most cases, the primary means of enforcing an employment right is by workers bringing a claim before an employment tribunal. There is a strict three-month time limit for doing this which is waived only in exceptional circumstances.

Amendments to the Act

Since being passed into law, the ERA has been subject to amendments and updates.

The Public Interest Disclosure Act 1998 (PIDA) amended the 1996 Employment Rights Act to protect whistleblowers by allowing them to claim unfair dismissal if they lose their job. Protected disclosure now protects whistleblowers from suffering other disadvantages in the workplace. This only applies to people who make a certain type of disclosure, which must involve either a criminal offence, a breach of legal obligation, an injustice, danger to health and safety, or damage to the environment.

In 2019 an amendment to the original legislation came in, which required itemised payslips for all workers. This requires that employers specify the hours worked and the pay rate for these hours.

The Employment Rights (Amendment) Regulations 2018, which came into force in April 2020, also since changed holiday pay calculations for workers who are paid different wages at different times of the year, and lengthened the holiday pay reference period from 12 to 52 weeks. This ensures that holiday pay is not lower for employees who take time off in less busy periods.

The 2018 changes to the Act also made a contract, or written statement, necessary from the first day of employment instead of within two months, for all workers. Within it, additional information relating to working days and times, a probation period, training, paid leave, and other benefits must now be included.

The Employment Rights (Miscellaneous Amendments) Regulations 2019, part of which came into force in 2019 and part in 2020, have quadrupled the maximum fine for a serious breach of worker’s rights.

Recent changes also introduced parental bereavement leave for parents who suffer stillbirths or the death of an infant. Minimum wage, statutory sick pay and parental pay all typically increase each year in April, along with the cap on compensatory awards for unfair dismissal claims.

What does the Employment Rights Act 1996 cover?

The ERA 1996 provides the following statutory rights:

• The right of an employee not to be unfairly dismissed
• Protection of wages
• The right to redundancy pay
• Holiday reference periods to calculate holiday pay
• Parental bereavement leave
• Maternity, paternity, and adoption leave
• The duty of both parties is to provide reasonable notice if they plan to terminate the employment contract
• The right to request flexible working
• The right to request study or training
• The right to take time off to care for dependents, attend ante-natal or adoption appointments
• The right to take time off to perform employee representative duties
• The right to receive a Statement of Particular Employment Terms before or on the first day of employment
• The right to paid leave for jury service
• An employee must not disclose private or confidential information to a third party
• The right of employees to be paid wages/salary from the National Insurance Fund if the employer becomes insolvent
• Protection for whistleblowers
• Sunday working hours for shop and betting workers

Important rights given to employees or strengthened by the Employment Rights Act 1996 include:

The right to be told key employment terms

Section 1 (2) of the ERA 1996 as amended by the Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 states that the main terms between the employee and employer must be recorded in writing and given to the employee before the employment begins.
The document might be an employment contract, or a shorter ‘written statement of particulars’. Signing creates an enforceable contract with the employer. A statement may also describe statutory employment rights.

Disclosures and detriment

Under the Employment Rights Act 1996, workers may not disclose any company’s confidential or private information to a third party.

Sundays, time off and suspension

An employee has a right to receive paid leave for public duties and responsibilities such as jury service.

Dismissal: notice and reason

Under Section 86 of the Act, ‘reasonable notice’ has to be given before the termination of the contract. That applies to both the employee and the employer.

The duration of a reasonable notice period depends on the employment duration. If the employee has worked for more than one month then a minimum notice period of one week should be issued in case of dismissal. After 2 years of service, the duration of a reasonable notice period increases to two weeks.

After 3 years, the duration increases by another week to 3 and so on to a maximum of twelve week’s notice. However, the employer can also issue pay in lieu of notice, if this is mentioned in the employee’s contract of employment.

Unfair dismissal

Section 94 of the Employment Rights Act prevents the employer from unfairly dismissing the employee. An employer must specify the reason that resulted in the employee’s dismissal.

Dismissals related to the following are considered automatically unfair:

• health and safety concerns
• assertion of statutory rights
• request for flexible working

Valid (fair) reasons mentioned in s. 98(2) to dismiss workers are as follows:

• relates to the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do
• relates to the conduct of the employee
• is retirement of the employee
• is that the employee was redundant, or
• is that the employee could not continue to work in the position which he held without contravention (either on his part or on that of his employer) of a duty or restriction imposed by or under an enactment.

Additionally, the employer has the right to dismiss the employee under s98 (1) for some other substantial reason.

Claims for unfair dismissal must be made to an employment tribunal within 3 months of dismissal unless circumstances come to light to support a claim much later.

Redundancy payments

Section 135 of the Act gives workers a right to compensation if his or her job becomes obsolete (redundant) – provided he or she has worked under the employer for a specified duration to become an established employee.

To qualify for the redundancy payment, the employee must have had a working relationship with the same employer for two years (s 155). Employees who have reached retirement age are not entitled to redundancy payments (s 156).

The employer can avoid compensatory payments by dismissing him or her for a different reason, such as misconduct or capability, as mentioned above.

Redundancy payments are calculated using the length of the service and the age of the employee. If the employee is under 21 years old, half a week’s pay will be given for each year. If they are between the ages of 21 and 40, one week’s pay will be given for each year. If they are over 40, one and a half week’s pay will be given for each year. The upper limit of the payment is set almost equally to the National Minimum Wage.

Employer insolvency

Section 182 gives protection to the employee in the case that the employer has become bankrupt and there is no money remaining to pay him or her. If it is established that the employer has become insolvent, the Secretary of State will compensate workers from a National Insurance Fund.

Request for flexible hours

In 1997, the Labour government proposed an amendment to the Act – strengthening the right of workers to request flexible working time – which was subsequently passed by Parliament.

Protection for whistleblowers

The Public Interest Disclosure Act 1998 (PIDA) gave whistleblowers additional protection by allowing them to claim unfair dismissal if they lost their job as a result of the disclosure. It has since been amended again so that being disadvantaged in the workplace as a result of disclosure is also a breach.
In order to be protected, the subject of the disclosure must be in the public interest being: a criminal offence, a breach of a legal obligation, an injustice, a danger to health and safety (to anyone) or damage to the environment.

Holiday pay reference periods

Some people are paid different wage rates according to the time of the year. For example, they might work fewer hours at certain times of the year depending on customer demand.

Previously, the holiday pay reference period was 12 weeks. In other words, holiday pay would be calculated based on pay for the prior twelve weeks.

This was changed in April 2020 under the Employment Rights (Amendment) Regulations 2018 to 52 weeks so as to ensure that the calculation does not take seasonality into account.

Itemised payslips

In 2019 an amendment required itemised payslips to be provided for all workers. These must show the hours worked and the pay rate for these hours.