Updated: 30 June 2025
How do changes in UK employment law affect Directors and Officers liability insurance?
Stelios Miltiadou, underwriting manager for financial lines in digital trading at Allianz UK, explores the implications of the Employment Rights Bill on Directors and Officers (D&O) insurance and the heightened exposures faced by smaller businesses.
The Employment Rights Bill is expected to bring one of the most significant changes in UK employment law in a generation.
Smaller businesses have already been facing increased exposures in the changing legal and regulatory environment compared to their larger peers as they don’t have in-house legal, compliance, HR or risk management departments. Failing to prepare for these new changes could lead to significant new exposures and challenges for businesses once the legislation takes effect.
Some of the Bill’s provisions relating to trade union reform may come into force towards the end of 2025, however the Government has confirmed that changes to unfair dismissal rights are expected no sooner than Autumn 2026.1
Unfair dismissal
Remove the two-year qualifying period of employment for the right to claim unfair dismissal, making it a day-one right, while simultaneously enabling employers to ensure the employee is a good fit for the job by establishing a new statutory probation period.
Collective redundancy
Strengthen collective redundancy rights by ensuring obligations to consult and notify apply when: (a) employers propose 20 or more redundancies at one establishment or (b) employers propose an amount of redundancies which meets a new threshold to be established in secondary legislation.
Fire and rehire
End ‘fire and rehire’ and ‘fire and replace’ practices by considering dismissals for failing to agree to a change in contract as automatically unfair, except where businesses genuinely have no alternative.
Statutory sick pay
Strengthen statutory sick pay by removing the Lower Earnings Limit and removing the waiting period.
Family friendly rights
Make existing entitlements to Paternity Leave and Unpaid Parental leave available from ‘Day 1’ of employment. Enable parents to take their paternity leave and pay after their shared parental leave and pay. Introduce new protections against dismissal for pregnant women, mothers on maternity leave, and mothers who return to work for a six-month period after they return to work. Introduce a new right to unpaid bereavement leave, allowing employees to take leave from work to grieve the loss of a loved one.
Flexible working
Strengthen the existing ‘day-one’ right to request flexible working, by requiring employers to explain the grounds on which they’ve denied a request and adding the requirement that a rejection of a request be reasonable.
Protection from harassment
Strengthen the duty on employers to take ‘reasonable steps’ to prevent sexual harassment of their employees by requiring them to take ‘all reasonable steps’. Introduce an obligation on employers to not permit harassment of their employees by third parties. Introduce a power to enable regulations to specify steps which are to be regarded as ‘reasonable’ for an employer to take in order to prevent sexual harassment. Strengthen protections for whistleblowers, by making it explicit that sexual harassment can be the basis for a protected disclosure.
Equality at work
Motivate employers to improve gender equality by requiring relevant employers to produce action plans, setting out how they are addressing the gender pay gap issues and supporting employees going through the menopause.
Employment Tribunals
Increase the time limit within which employees are able to make an Employment Tribunal claim from three months to six months.
Zero-hour workers
End zero hours contracts by introducing rights to guaranteed hours, reasonable notice of shifts, and payments for short-notice cancellation of shifts, with corresponding rights for agency workers.
How will this impact Directors and Officers liability insurance?
For smaller businesses it is common for insurers to offer a management liability package policy which includes optional sections to core D&O cover such as Employment Practice Liability and Commercial Crime.
Given the increased exposures that the significant changes will bring, there is an expectation that there will be an increase in demand for D&O liability insurance, especially take-up for the additional optional covers like Entity Employment Practice Liability.
In addition to insurance coverage, policies offer additional benefits which are important especially for smaller businesses.
Ensuring Protection
In today's rapidly evolving legal and regulatory landscape, Directors and Officers (D&O) insurance is becoming increasingly important. As the Employment Rights Bill introduces the biggest change in employment rights in a generation, directors and officers face increased personal liability and potential legal challenges.
A comprehensive management liability policy not only protects their personal assets but also provides peace of mind, allowing them to focus on steering their businesses through these transformative times. With the added complexities of employment law reforms, having robust management liability coverage ensures that directors and officers can confidently navigate new risks and lead their organisations forward.
A comprehensive management liability policy not only protects their personal assets but also provides peace of mind, allowing them to focus on steering their businesses through these transformative times. With the added complexities of employment law reforms, having robust management liability coverage ensures that directors and officers can confidently navigate new risks and lead their organisations forward.
Further information on our products
Complete Directors and Officers Liability offers personal liability cover for company directors, officers and managers, protecting them against claims that may occur from their decisions and actions taken within the scope of their regular duties. Cover includes the reimbursement of the insured company, in case it has to pay the claims of a third party.
Complete Directors and Officers Liability can be purchased as a standalone policy, or purchased alongside our other Complete products.
It's for businesses with a turnover up to £100 million and is digitally traded.
Complete Directors and Officers Liability can be purchased as a standalone policy, or purchased alongside our other Complete products.
It's for businesses with a turnover up to £100 million and is digitally traded.
Directors and Officers Liability Select offers personal liability cover for company directors, officers and managers, protecting them against claims that may occur from their decisions and actions taken within the scope of their regular duties. Cover includes the reimbursement of the insured company, in case it has to pay the claims of a third party.
Available as a standalone policy or as an optional section under the following products: Commercial Select, Property Owners Select, Real Estate Select, Motor Trade Select and Construction Select.
Available as a standalone policy or as an optional section under the following products: Commercial Select, Property Owners Select, Real Estate Select, Motor Trade Select and Construction Select.
It's for businesses with a turnover up to £400 million and is traded via our branch network.
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[1] Gov UK Factsheet: Employment Rights Bill - Overview. Available at https://assets.publishing.service.gov.uk/media/67f6711f555773bbf109e21a/employment-rights-bill-overview.pdf