The UK Government released the long-awaited Employment Rights Bill on 10 October. It describes it as “the biggest upgrade in rights at work since a generation”.
The Bill is a major reform of employment law. However, it will take many years before these changes are implemented.
The Employment Rights Bill introduces a total of 28 reforms. Many of these address issues such as dismissal rights and maternity leave. Others deal with flexible working hours, zero-hour contracts, and flexible working. While full implementation may be a few more years off, it is important that HR professionals and business prepare themselves for the potential impacts of these proposed changes.
Day One Rights and Unfair Dismissal
The Bill proposes a number of important reforms, including the extension of certain employment benefits to all employees starting on their first day at work. The Bill also includes the right to parental leave, bereavement, paternity, and paternity leave. It also introduces protection against unfair dismissal from day one. Employees must currently have at least two years’ service before they can bring a claim for unfair dismissal. This qualifying period will be removed by the new rules, which could lead to an increase of employment tribunal claims.
This change has raised concerns about how it will impact probation periods. There will be a statutory probationary period, which allows for some flexibility in unfair dismissal laws during this time. The Government has proposed that a probation period of nine months be introduced. However, the final details are to be confirmed following consultations, which will begin in 2025.
Maternity protection, flexible working, and zero-hour contracts
The Bill expands protections already in place for employees on maternity leaves. Women on maternity leaves are only partially protected from redundancy under current legislation. New rules prohibit dismissals of women on maternity leaves, pregnant or not, as well as for the first six months following their return to work. The enhanced protections apply to all statutory family leave, including paternity or adoption leave.
The Employment Rights Bill reinforces the right to ask for flexible working. Employers will have to give a written explanation if they refuse a request for flexible work arrangements. After a short consultation period, this change will be implemented soon. Businesses will have to adjust their policies in order to comply with the new requirements.
The Bill also aims to combat zero-hour contracts that are often criticized as “exploitative” by introducing a right to reasonable notification of the work schedule and guaranteed hours under certain circumstances. Workers will have a right to compensation in the event of a sudden cancellation. The protections could be extended to agency employees, but details have yet to be finalised.
Harassment and Fire and Rehire
The Bill strengthens the existing rules on workplace harassment by requiring employers to take “all reasonably possible steps” to avoid harassment based on protected characteristics – and not just sexual harassment. To reduce the risk of claims, employers will have to make sure their policies and programs are current.
A second reform is the controversial “fire-and-rehire” practice, whereby employers fire and then re-hire employees to change their conditions and pay – usually for lower wages and less protection. This practice will be limited under the new law. Dismissals for this reason are automatically unfair, except in severe financial hardship cases.
Collective Redundancy and Statutory sick pay
The Bill makes changes to the law on collective redundancy, eliminating the requirement that redundancies must occur in one location to trigger consultation. This could mean that large employers with multiple locations would be required to consult together if they were making redundancies at several sites within a 90 day period. A failure to consult properly could result in costly awards to affected employees.
The Bill also proposes reforms of statutory sick pay. It removes the three-day wait period and lower earnings limits. This will give employees greater financial security if they fall sick, but it will also increase the costs of businesses with many low-paid workers.
Impact on Workers
A impact analysis by the Department for Business and Trade indicates that the Employment Rights Bill is likely to provide significant benefits for workers, especially those who are in low-paid and insecure jobs. The analysis suggests that tens of millions of workers could benefit from improved job security and working conditions. Women, young workers, minorities and disabled workers are likely to be the most affected. The Bill will also have a positive effect on the health and well-being of workers, which can lead to increased productivity and economic outcomes.
TUC Paul Nowak, General Secretary of the TUC , commented: “This impact analysis confirms that Employment Rights Bill is good both for workers and for businesses. It’s also good for the economy as a whole.” Driving up employment standards can boost productivity and growth, as well as living standards. This is why the majority of managers are in favor of these plans.”
Impact on Businesses
According to government analysis, this bill will cost companies less than PS5bn annually.
The report states that “to contextualise this impact’s size, the total wage costs for the UK in 2023 were PS1.3 trillion nominally, which is equivalent to a rise of the UK total pay bill by up to 0.4%.” This cost would primarily be borne by employers in the lower-paid sector, rather than being spread across the entire economy. Even if all this cost fell on these sectors, the equivalent increase in wage bills for that part would only be 1.5%.
This assessment of the law suggests that employers who rely heavily upon low-paid workers or flexible contracts may find these changes disruptive. Some predict that the reforms on day-one rights, zero-hour contracts, and other aspects could discourage employers from hiring employees. Nowak says that this will “stop decent firms being undercutted by the bad”.
Most employers in the United States treat their employees well, and don’t use exploitative practices such as zero-hour contracts or firing and rehiring. This bill, by leveling the playing field for workers’ rights and protecting them, will allow people to have more control and predictability over their lives.
The report admits that new measures will have an impact that is proportionately greater on SMBs because “there are fixed compliance costs which do not depend on the revenue of a business”.
The report states that “the Government will consult with stakeholder prior to secondary legislation in order to understand the impact on SMBs and to develop appropriate mitigations such as information and accessing advisory services to help support compliance with the new regulations.”
Prepare for Change
Businesses that align their HR strategies to the evolving legal framework will be able to retain and attract top talent, while remaining compliant with the new laws.
The new Bill and its implications for businesses will be the main topic of discussion during the Annual Conference and Exhibition which will take place in Manchester on 6 and 7. November. This year’s theme is “Making Work”, with four key streams that cover “productivity, skills, AI, workplace conflict, leading responsible, and boosting employee experiences”.
