Employment Rights Act 2025 – what it means for FM

THE CLEANING SECTOR’S VIEW
DOMINIC PONNIAH,
CHAIRMAN & CO-FOUNDER, CLEANOLOGY

The UK’s facilities management FM industry is sleepwalking towards the biggest regulatory change in decades. While framed by the Labour government as an ‘upgrade’ in worker protections, I have long warned that the legislation will fundamentally alter the operating model of a sector already under intense cost pressure.

FM is one of the most labour-intensive industries in the UK, employing hundreds of thousands of people, often across multiple sites and on tight margins. The new Bill introduces a series of reforms that, taken together, reduce workforce flexibility while increase legal, operational and financial risk for employers.

REDUCED OPPORTUNITY

As well as the introduction of enhanced sick pay and family-related leave from day one, probably the most consequential change is the move of unfair dismissal rights from two years to six months. Even during the six-month probation period, employers will need stronger documentation, better-trained supervisors and more formal processes from the very start of employment, increasing both the administrative burden and exposure to tribunal claims. For FM, which traditionally experiences high staff turnover in the early months of employment, the risk of employing people is going to massively increase. Other sectors such as hospitality and retail are also disproportionately affected by the new legislation.

We have already seen unemployment rise over the past year (exacerbated by the NI increase for employers) and all the expert predictions are for further significant job losses. Previously you may have been willing to take a chance on someone you were not sure about. Perhaps they are an ex-offender or long-term unemployed, but why would an employer now expose themselves to unnecessary risk? The very people who are most in need of opportunity will be the most affected by reducing their chances of gaining employment.

REDUCED FLEXIBILITY

The Bill also places new restrictions on zero-hours contracts, strengthening workers’ rights to predictable hours. This strikes at the heart of how many FM services are delivered. Demand often fluctuates with client occupancy, footfall or operational changes, and flexible staffing models have historically allowed contractors to respond quickly. Under the new regime, businesses may need to guarantee minimum hours even where client demand is uncertain, creating a risk of paying labour costs without corresponding revenue.

UNION POWER

Union access and collective rights are also strengthened under the proposed reforms. While unionisation is already present in parts of the sector, particularly in education, healthcare and local authority contracts, this raises the stakes around TUPE transfers and contract retenders. The unorthodox unions such as UVW and IWGB, who already often hold contractors and clients to ransom, will yield even more power.

RISING COSTS

The cumulative effect of these measures is a rising cost base in an industry where margins are often between two and five per cent. Increased sickness absence costs (which are estimated to at least double), higher HR and legal overheads, longer timeframes for managing underperformance and greater insurance exposure all threaten profitability.

Many operators argue these costs cannot simply be absorbed and will need to be reflected in contract pricing. Legacy contracts risk becoming loss-making, placing pressure on suppliers to renegotiate terms or walk away from unviable work.

INDUSTRY RESTRUCTURE

For the FM sector, the Bill is not merely an HR issue but a business model challenge. It will require re-engineering workforce structures and being more selective about the contracts pursued. The industry faces a period of adjustment that could reshape not only employment practices, but the economics of outsourced facilities services across the UK. 

THE HR DIRECTOR’S VIEW
LUCY HAYES,
HR DIRECTOR, Q3 SERVICES

This new Act is set to bring some of the most significant changes to UK employment law in a generation, and for FM, it represents a mix of welcome improvements and practical challenges. From a people perspective, many of the changes are long overdue. Giving employees day-one rights for sick pay and family leave, alongside earlier protection from unfair dismissal at six months, will provide much-needed security for a workforce that is largely operational and customer-facing.

For people in FM roles, these changes are a real step forward in giving employees the support and security they deserve. Day-one rights for sick pay and family leave, along with earlier protection from unfair dismissal, mean employees can focus on their wellbeing and their work with confidence. This isn’t just beneficial for individuals though; it strengthens teams and helps ensure smooth, reliable service. When employees feel secure and valued, everyone benefits.

The Act also reinforces the importance of fairness and trust in the workplace. Ending “fire and rehire” practices and putting clearer expectations around dismissal procedures encourages businesses to step up their people management. At Q3, fairness, transparency and respect have always been central to how we manage our teams, so we wholeheartedly support the intent of this legislation. Employees knowing their rights, and that they will be upheld, helps build a stronger, more loyal workforce.

It’s important to consider both sides of the coin, however. The ban on zero-hours contracts, for example, removes a level of flexibility that can work well for both employers and employees when used responsibly. In a sector where demand can fluctuate daily, that flexibility is often vital. Then there’s the cost side: sick pay, parental leave, and other entitlements come with real financial implications, particularly in an industry like FM. We could see recruitment becoming more cautious, especially for entry-level roles, which could slow workforce mobility and even affect operations.

There’s also a practical element. Every business will need to review contracts, policies and procedures to ensure compliance. For smaller providers, that can place a real strain on time and resources. The intention behind the Act is unquestionably positive, but the realities for FM businesses need careful consideration if these changes are going to work in practice.

Overall, the Act is a step in the right direction for employees, and we’re proud to already operate with fairness and transparency at the heart of what we do. At the same time, I hope policymakers continue to engage with our sector so that businesses can remain sustainable while delivering the protections and security employees rightly expect. The direction is right, but the sector’s unique challenges must not be overlooked.