Leaving almost no employment law stone unturned, the Labour Government announced sweeping changes on 10 October 2024 via its new Employment Rights Bill. This legislation will create impactful employment rights for staff, including day one rights for unfair dismissal and family leave. Along with reducing the scope for zero hours contracts and expanding trade union rights in the workplace amongst other changes. We look at what this means for employers.
What’s in Labour’s Employment Rights Bill?
The Employment Rights Bill is draft legislation introduced in Parliament by the new Labour Government with the stated intention in its press release to upgrade workers’ rights across the UK, tackle poor working conditions and benefit businesses and workers alike. The Government has told us that, at the heart of the reforms aimed at driving growth in the economy and supporting more people into secure work, is a new balance for workers in the early months of a job. The impetus behind one of the biggest shake-ups to Employment Law in decades is a belief that more secure, flexible and better paid work means healthier people, more settled families, better communities, and thriving businesses. The question is will this actually be achieved and when will the changes to employment law take effect?
The Bill will bring forward 28 individual employment reforms, from ending ‘exploitative’ zero hours contracts and ‘fire and rehire’ practices to establishing day one rights for unfair dismissal, and paternity, parental and bereavement leave for millions of workers. Statutory sick pay will also be strengthened, removing the lower earnings limit for all workers and cutting out the waiting period before sick pay kicks in.
The Government has also published a paper, titled ‘Next Steps to Make Work Pay’, which sets out the next steps in its workplace reforms. It makes clear that major employment law changes in the Bill will not take effect until at least two years’ time. With the Government stating, “We expect to begin consulting on these reforms in 2025, seeking significant input from all stakeholders, and anticipate this meaning that the majority of reforms will take effect no earlier than 2026. Reforms of unfair dismissal will take effect no sooner than autumn 2026.” (See below for a few changes that may take effect earlier.)
So, what are the top headlines from the Employment Rights Bill?
1. Unfair dismissal rights from first day of employment
The Employment Rights Bill is going to remove the qualifying period for unfair dismissal, so that these claims can be made from day one of employment. This will be a huge change for employers and is likely to increase the volume of employment tribunal claims.
A consultation is going to take place on a new statutory probationary period. The Government’s preference is for a nine month probationary period. During this time an employer may be able to fairly dismiss an employee, but there will be certain conditions attached to this, i.e. following a fair and transparent process.
Currently most claims of unfair dismissal currently require a qualifying period of two years. There are a few exceptions to this, for example, where there is a whistle-blowing dismissal or dismissal based on discriminatory reasons such as childbirth or maternity. The qualifying period for unfair dismissal has varied under different governments, but to date the shortest period was six months in 1971.
When the new changes are introduced employers will need to take care to monitor staff during probationary periods and not put off dealing with unsatisfactory hires until a later date.
2. End to ‘exploitative’ zero-hour contracts and right to average hours contracts
The Bill aims to end what the Labour Government describes as ‘exploitative’ zero-hour contracts, following research that 84% of zero hours workers would rather have guaranteed hours. Employers will be required to offer a guaranteed hours contract to zero-hours workers after the end of every reference period, which would reflect the hours worked during the previous reference period. This requirement will also extend to workers who are employed on guaranteed minimum hours contracts. This extension is designed to avoid employers seeking to circumvent the new rules by moving their zero-hours workers on to guaranteed hours contracts with very low guaranteed hours.
Attempting to give workers greater ability to plan their lives, the Government intends to ensure workers employed on a zero-hours or minimum hours contract (as well as workers who do not have a set working pattern) are given reasonable notice of a shift they are required to work. This will include the time and day of the shift and how many hours will need to be worked. Coupled with this right, those same workers will need to be given reasonable notice of any change to, or cancellation of, a shift. Any worker denied reasonable notice will be entitled to a proportionate level of compensation.
The reality is that zero-hours contracts can be beneficial to both parties, appears to be recognised by the fact that a worker will be able to decline an offer of guaranteed hours. It appears however that the offer must still be made, including (presumably) future offers. This seems an unnecessary administrative burden on many employers.
3. Strengthening statutory sick pay
The Employment Rights Bill also proposes to make statutory sick pay (SSP) a day one right – you currently have three waiting days that are unpaid before statutory sick pay kicks in. They’re also proposing to remove the requirement to meet the lower earnings limit, which is currently set at £123 pounds a week. This will mean that upwards of an extra million people will now be eligible for SSP. It is possible these changes could be made in April 2025 on the basis they don’t require substantial regulations to introduce them.
4. Protection against sexual harassment including third parties
There’s a new anti-sexual harassment regime that’s just around the corner. The previous Conservative Government already instigated stricter protections against sexual harassment that take effect from 26th October 2024. There will be a new proactive duty to take ‘reasonable steps’ to protect staff against sexual harassment.
The Labour Government is raising the bar on this so that employers won’t just have to take reasonable steps, they will have to take ‘all reasonable steps’ to prevent sexual harassment. In addition, this obligation will be extended to apply to customers and third parties.
Pragmatic steps that employers can take now include reviewing and implementing technical guidance from the Equality and Human Rights Commission that was updated on 26 September 2024 to support the changes taking effect in October 2024. See here for the guidance that will be taken into account by employment tribunals. If an employer has not taken ‘reasonable steps’ then this failure can be added to a claim of sexual harassment and compensation awarded increased by up to 25%.
Other important steps for employers to take include having a robust and well-drafted anti-sexual harassment policy, which confirms such treatment is not tolerated in the workplace, make sure staff have regular training to have it recognised and prevented and ensure you have a ‘speak up culture’ against sexual harassment.
5. Rights to paternity, parental and bereavement leave from day one
The Employment Rights Bill also provides a day one right to parental and paternity leave, and a new right to bereavement leave.
Currently, ordinary parental leave is an unpaid right which applies if you have qualified by attaining one year of employment. It means that you can take up to 18 weeks’ leave while your child is under the age of 18 years. With paternity leave there is a current requirement to have six months of employment to qualify for it.
There’s going to be some new rights to bereavement leave from day one of employment. At the moment bereavement leave is limited to parental bereavement leave of a child. The right to parental bereavement leave applies from the first day of employment, but currently the right to have it paid only applies after employment for six months. Bereavement leave appears to be extended in the Employment Rights Bill to anyone who is bereaved, although it is not yet clear if you need to be related in some way to take it. Bereavement leave for a child will remain at two weeks and will otherwise be for one week.
6. Flexible working made the default where practicable
At the moment employees can make a request to work flexibly up to two times a year and there is a statutory process to be followed to do so. See our article for details of the current legal right which was broadened to apply from day one of employment with effect from 6 April 2024. The Government has said that it will change the law to make flexible working the default for all, unless the employer can prove it’s unreasonable. The new proposed legislation provides that the employer only needs to state the grounds of refusing the application and explain why they consider it reasonable to refuse the application on one or more of the eight statutory grounds for refusal that already exist (such as the burden of additional costs or the inability to recruit additional staff).
So it’s not a huge change for employers. There is no difference to the penalty for breach, which will remain at 8 weeks’ pay (alongside potential sex discrimination claims), so arguably this reform is a bit of a non-event. It’s worth noting there is no ‘right to demand a four-day week’ as some newspapers were reporting.
7. Strengthening protections for pregnant women and new mothers returning to work
At the moment there are legal protections for employees dismissed on maternity leave or for reasons relating to pregnancy, but there is minimal specific protection for new mothers in the workplace. The Bill includes proposals to strengthen protections for pregnant employees and returning mothers. The expectation is that their dismissal will be banned for six months on return to work and during pregnancy except in ‘specific circumstances’ (yet to be defined). The detail of the Bill is vague here and we are waiting for consultation on this for more detail.
8. Collective redundancy consultation
There is a strengthening of protection for employees in a collective redundancy consultation. There is a well-known case involving Woolworths which was referred to the European Court of Justice (ECJ) on the point of if the obligation to collectively consult in a redundancy situation is triggered by the threshold number of employees at one individual establishment or across the entire organisation. The ECJ ruled that the obligation to collectively consult is applicable when an employer proposes to dismiss 20 or more employees by reason of redundancy at an individual establishment within 90 days, rather than counting up the number of employees across the whole of the business. The upshot of this case was that Woolworths did not have to collectively consult for the purpose of redundancy dismissals at its stores that had less than 20 employees.
The Employment Rights Bill is going to change this decision, so that when considering if there are 20 or more employees, the number of employees across the whole of the organisation will need to be taken into account. This is effectively a reversal of the Woolworths decision and will increase redundancy protection for employees.
9. Restricting ‘fire and rehire’
The Government has confirmed it wants to clamp down on this practice, which includes giving notice and rehiring staff on new contracts of employment with less favourable terms or dismissing existing workers and hiring a different workforce on new terms.
There is an existing Code of Practice on ‘fire and re-hire’, which was introduced under the Conservative Government on 18 July 2024 that Labour has described as ‘inadequate’ and has said it will be replaced by a stronger version.
Under the new Employment Bill it will become automatically unfair to dismiss an employee for not accepting a contract variation or to enable the employer to recruit another person (or the employee) under new terms of employment, but with substantially the same duties. The limited exception to this will be where there is evidence of financial difficulties and the employer can demonstrate that the need to make the change in contractual terms was not reasonably avoidable.
The detail of this reform is yet unknown, but in the future employers would need to have more than a ‘substantial reason’ for changing terms and conditions of employment, which is what is required currently.
10. Protection for trade unions
The Labour Government is introducing a list of changes that protect and promote trade unions. This includes allowing unions ‘access to the workplace’ for activities such as meeting members, recruiting new members, and to support a member with an employment related matter. Also, simplifying the process of statutory trade union recognition and lowering the threshold for a union to achieve this. There will be a repeal of current legislation, which would lessen restrictions on strikes and make ballot mandates easier to secure. There will be a new obligation on employers to notify workers of their right to join a trade union. The written statement of employment particulars that must be given to all workers when they start a new job (often incorporated into a contract of employment) will need to confirm that all workers have the right to join a trade union.
It is possible that union membership may increase and through simplified recognition procedures employers might be required to increasingly negotiate with them as workers’ representatives. Some employers may wish to avoid this and could take pre-emptory steps to establish a works council or staff representative body to ensure workers have pre-existing representation rights in the workplace before the new legislation comes into effect.
What hasn’t been included in the new Employment Rights Bill?
As stated above, the Government published a paper on 10 October 2024, titled ‘Next Steps to Make Work Pay’, which sets out the next steps in its workplace reforms. The paper includes details of reforms that the Government aspires to make, but are not within in the Employment Rights Bill, including:
The right to switch off
We have been informed that some of these changes do not need legislation and can be achieved through other means. This includes taking forwards the Right to Switch Off through a statutory Code of Practice. See our article on this proposed right for steps employers could consider in advance.
Removing age bands from minimum wage and taking cost of living into account
Additional non-legislative changes include removing age bands from the National Minimum Wage to, ‘ensure every adult worker benefits from a genuine living wage’. See our article for details of this change, including the Government’s intention to have a minimum wage which takes into account the cost of living. The national minimum wage increases annually and these reforms could take effect as early as April 2025.
Introducing a single status of ‘worker’ and introducing a simplified two-tier system for employment status
The Government has stated an intention to simplify the current three-tier framework of ‘employee’, ‘worker’ and ‘self-employed’. This is likely to be pushed back into the next parliamentary period, i.e. in five years’ time.
Review into parental leave and carers leave systems to ensure they are working
Reviews have been proposed to ensure these types of leave are working for employers, employees and the loved ones that staff are looking after in exercising these rights. Again, this initiative seems likely in the next Parliament.
Equality (Race and Disability) Bill
The government has also committed to start consulting on the Equality (Race and Disability) Bill “in due course”, with a draft Bill to be published during the current parliamentary session for pre-legislative scrutiny. The Bill will include extending pay gap reporting to ethnicity and disability for employers with more than 250 staff and measures on equal pay. Also, extending equal pay rights to protect workers suffering discrimination on the basis of race or disability.
With Stephens Scown, our experienced and proactive team of employment law specialists works alongside you, guiding, advising and helping you find the right solution for your circumstances. If you would welcome a chat about how Stephens Scown can support you with the incoming changes in legislation, please feel free to reach out by phone: 0345 450 5558 or by email: enquiries@stephens-scown.co.uk