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So, what does the Employment Rights Bill mean for Employers & HRs? In the first King’s speech of the new Government, Labour announced its Employment Rights Bill, which will significantly enhance workers’ rights and bring substantial changes for employers. 

Labour has pledged to introduce the Employment Rights Bill within the first 100 days of entering Government. This means that the Bill should be laid before Parliament by 12th October 2024.

However the Government has also committed to consult fully with businesses, workers and ‘civil society’ (Unions, NGOs, think tanks, voluntary & community organisations) on how plans are to be put into practice, before the Bill is presented to parliament. 

For this reason, coupled with the usual parliamentary process and the need for ACAS to produce and consult on new Codes of Practice, it’s our view that significant change is not going to happen this year. Is is likely the new laws will be phased in at the usual April 2025 and October 2025 and future years, when employment law changes are traditionally made.

The King’s speech confirmed that the Employment Rights Bill will deliver on proposals set out in Labour’s plan to  “Make Work Pay” (MWP) which Labour published at the start of the general election campaign, and which it committed to implementing ‘in full‘ in its election manifesto. 

But it was not clear from the King’s speech precisely which policies will be included in the Employment Rights Bill and which will come in more slowly.

From their mention in the briefing notes which accompanied the King’s speech (on page 20) we can expect that banning ‘exploitative’ zero hours contracts and making unfair dismissal a day 1 right, are priorities for the Government and will be included in the Bill. All the new laws listed below were mentioned in the briefing notes to the King’s speech, and can be found on the link above, at page 20 and 21.

In short, the Bill imposes considerable new responsibilities on all employers, with small and medium-sized enterprises (SMEs) and seasonal, retail and hospitality sectors likely to be the most affected. 

So what does the Employment Rights Bill mean for employers and HRs? This article outlines what we know so far about the changes, and the potential impact on UK businesses.

Key features of the Employment Rights Bill

The Employment Rights Bill includes the following new laws:

Day 1 protection from unfair dismissal, enhanced parental leave and sick pay rights

This proposal has the potential to cause the biggest impact on employers and on day-to-day HR practice.
It includes providing ‘basic individual rights’ from day 1 for all workers.

As its drafted in the MWP, the proposal to award day 1 one rights would not only remove the qualifying periods for employees but would also extend these basic employment rights to a broader category of workers, which would be a monumental change.

Even if the removal of qualifying periods is, for now, limited to rights for employees, it is still a big shift.  Employers will not be able to dismiss their employees with under 2 year’s service without following a full and fair procedure (the same procedure employers follow with employees of over 2 years service? We don’t know yet). 

Employers will ‘still be able to use probationary periods to assess new hires’. Quite what this means in practice not yet clear, but it will lead to employers extending the use of probationary periods, more vigorously evaluating new hires during those periods, stricter monitoring of hiring practices, and using more temporary fixed term contracts to ‘test out’ the employee prior to offering a permanent contract, which is common practice in Europe. Does this make work more stable and secure as the MWP promises?

The Bill will also remove the need to wait until day 4 to receive Statutory Sick Pay, and will remove the requirement to earn above the lower earnings limit to qualify for it, making it available to all workers, regardless of how much they earn.  

As the proposal is drafted in the MWP, employees and workers also will also have the right to parental leave from day one.

Ban on ‘exploitative’ zero hours contracts

The Bill will ban what the Government terms ‘exploitative’ zero hours contracts’, which Unions have long opposed, (rather than an outright ban on all such contracts which Labour originally proposed, then watered down, in a U turn which infuriated the Unions).

A ban on ‘exploitative’ zero hours contracts will be achieved by ensuring workers have rights to a contract which reflects the average hours worked based on a 12 week reference period. Although it is unclear how this reference period will work in sectors where there are seasonal peaks in number of hours worked, such as pre-christmas retail periods, large one off events, and agriculture.

Employers may remember that the previous Government had announced plans to introduce similar with a ‘right to request a more stable contract’.

Workers will have the right to reasonable notice of shift changes, and will receive compensation ‘proportionate to the notice given’ for shifts which are cancelled or curtailed. This does ensure more predictability and security for workers, and at the same time less workforce flexibility and potentially more employment costs for those businesses using freelancers, bank, seasonal or gig economy workers, especially those in the residential care and hospitality sectors.

Line Managers will need to be ‘on top of’ the shifts of zero hours teams, to ensure they give adequate notice of changes, to avoid costly compensation pay-outs.

To offer some reassurance to employers, there is a specific reference in the MWP that ’employers will not be prevented from offering fixed-term contracts including seasonal work.’

A genuine Living Wage

The Bill introduces a genuine living wage, a new remit for the Low Pay Commission to reflect the ‘cost of living’ as well as median wages and economic conditions when setting minimum wage rages. It will remove the lower age bands, which Government’s sees as ‘age based wage-discrimination’ and extend the living wage rate to 18-20 year olds.

It remains to be seen if recruiters faced with paying fresh-out-of-school 18 year olds the same living wage as more experienced 25 year olds, are willing to allow the 18 yr olds to make the shortlist.
Employers will certainly see increases in their wage bills. It will be essential to budget for these changes and to ensure they are able to meet the new wage standards. This inevitably means price hikes, and yes, inflation.

Ending ‘Fire and Rehire’ Practices

Think P&O ferries. This is a practice where a business in trouble and unable to agree changes to terms and conditions of employment with its workforce, dismisses its workers and re-engages them on new, less favourable terms.

The Government wants to outlaw the practice which it terms in the MWP the ‘scourges of ‘Fire and Rehire’, and ‘Fire and Replace’, a similar practice which sees workers dismissed and replaced by a workforce willing to work for less favourable pay, terms, and conditions.

The Bill will end both practices, but not entirely. The MWP seems to say it will permit its use in limited circumstances and the SOS for Business and Trade, Jonathan Reynolds, has since confirmed that whilst the current Code of practice, which came into effect on 18 July, will remain in place for now, the Bill will bring in a new strengthened code of practice.

Hire and Fire practices make headlines but are relatively rare, as they are invariably devastating to a corporate brand and to employee relations. Of course, if an employer in trouble is denied the option to dismiss and re-engage, the danger is they are left with only one option – dismissal. That’s a zero sum game.

Flexible working from Day one

Flexible working will become the default option from day one of employment, with employers required to accommodate except where its not reasonably feasible. This of course isn’t new. Since April 2024, employees have had the right to request flexible working from day 1. However making it the default option is changing the balance of power considerably in favour of the employee.

The MWP refers to ensuring workers can benefit from flexible working including opportunities for contracts and hours that better accommodate school terms. Term time working has long been the unreported holy grail for mothers who work, and its to the Government’s credit that, however easily accommodated or not, it is putting this on the agenda.

Strengthening protections for new mothers

The Bill will make it unlawful to dismiss a woman who is pregnant or who has had a baby for six months after her return, except in specific circumstances. The MWP proposals say this will give ‘new mothers certainty that the law is on their side’.

But again, this isn’t a new initiative. Since April 2024 we have had enhanced protections from redundancy for pregnant women and those on/returning from maternity leave, for 6 months after maternity leave ends. Its only those as yet un-specified ‘specific circumstances’ that will or may make the difference.

A New Single Enforcement Body

The Bill will establish a Single Enforcement Body, also known as a Fair Work Agency, to protect the most vulnerable workers and strengthen enforcement of workplace rights and the minimum wage.

A well-resourced dedicated enforcement body will mean stricter enforcement of workplace rights. This may well lead to more litigation and regulation. This will require businesses to make more efforts than ever to ensure they are fully compliant with all aspects of the new legislation, to avoid penalties, naming and shaming and legal issues. Again, this isn’t a new initiative. Following the Taylor Review, the previous Government consulted at length on the creation of a single enforcement agency in July 2019.

Establishing a Fair Pay Agreement in the adult social care sector and other industries

The Bill will establish ‘Fair Pay Agreements’ in the adult social care sector, in order to, as the MWP states, resolve the recruitment and retention crisis in this sector that has long been having such detrimental knock on effects on the NHS. The aim is to ensure fair pay and conditions in social care and to assess the same to be rolled this out to other, but not all sectors.

In plain english, this means the introduction of collective bargaining, empowering unions and the workers whom they represent, to collectively negotiate increased pay and conditions.

This may ease recruitment and retention issues and meet demand in the social care. All well and good. Businesses in this sector, and others sectors in future, will need to adhere to new pay and conditions standards which will involve adjustments to current pay structures. The flip side is that the the cost of care is going to increase seismically. An eye watering concept with private care home fees already between £5600-£8000 per month.

Trade Union Legislation Updates

Labour now in Government is seeking an enhanced role for trade unions. The King’s speech briefing notes specifically mention that the Bill will strengthen the unions, update trade union legislation, introduce new rights, reverse the restrictions on trade union activity – including the previous Government’s approach to minimum service levels – and promote what it calls ‘good faith negotiation and bargaining in industrial relations’. It will be interesting to see how this plays out. We haven’t seen very much in the way of ‘good faith negotiations’ in recent years.

Nevertheless, there will need to be a more collaborative approach to industrial relations. Employers and Unions will both have to move significantly towards each other. Businesses will need to engage in good faith negotiations and be ready for increased union activity.

Simplifying Statutory Recognition

The process for statutory recognition of trade unions will be simplified, ensuring workers have a reasonable right to access a union within the workplace. There will be rights for unions to access the workplace for recruitment and organisation purposes. A new duty on employers to inform all new employees of their right to join a union (to be included in the S1 statement of terms). Some employers may well wince.

School Support Staff Negotiating Body

The Bill will reinstate School Support Staff Negotiating Body to establish national terms and conditions, career progression routes and fair pay rates for teachers.

How will the Employment Rights Bill affect your business?

Increased compliance and disciplined assessment of Employees and Employee Relations

As the details of the Employment Rights Bill are finalised and ACAS consultations proceed, the detail and time lines for these changes will be become clear.

Employers and HRs will need to be ready to:

• Update your employee contracts for the enhanced leave rights and sick pay.
• Ensure all contracts have probationary periods.
• Be very disciplined in the assessment of employees during their probationary periods and ensure line managers know how to monitor and assess new hires within that period.
• Update and stick to your disciplinary and poor performance procedures as all employees will have unfair dismissal protection from day 1.
  The perception that dismissing staff within their first 2 years of service is easier will no longer exist.
• Update the current zero hours worker contracts to become a specific Employment Contract  with stated regular working hours, reasonable notice of shift changes, and compensation for cancelled shifts.
  

More regulation, more litigation & ET Claims

The Employment Tribunal case management system is being digitised onto a cloud platform with the roll-out taking place over the Summer 2024. This will make it easier for employees to file claims.

These new employee rights, the new Fair Work Agency and a streamlined digital system for filing claims will make it easier for employees to enforce a raft of boosted employment rights.

Other actions to take now

Audit your staff! In terms of:

• Employment status,
• Outsourced workers, zero hours contractors, and
• Pay (particularly around National Minimum Wage, National Living Wage).

The King’s Speech briefing notes also include reference to action plans on the gender pay gap, menopause and Sexual harassment at work, but without saying if these areas will be included in the Employment Rights Bill.

Please remember the new duty for employers to prevent sexual harassment at work still comes into for in October 2024, and that the day 1 right to request flexible working remains in place.

Draft Equality (Race and Disability) Bill

Alongside the Employment Rights Bill, the Government also plans a draft bill to:

• extend the equal pay regime to cover race and disability as well as sex, and
• introduce mandatory ethnicity and disability pay reporting for employers with at least 250 or more staff.

Commentators think these plans to change discrimination law to extend the complex equal pay regime to race and disability are flawed. And that its possible that this plan will be dropped before the Bill is finalised.

Next steps

Labour claims in its MEP to be ‘pro worker and pro business’. In reality there is very little benefit to business in the proposals, perhaps some slowing down of speed of change in some areas, rowing back on the outright ban on zero hours contracts for example, and the commitment to consult ‘fully’ with business, workers etc.

However, the removal of qualifying requirements, the emphasis on trade union and worker voice, and the sheer volume of additional change will mean employers and HRs have a huge amount to contend with.

There was little from the Government in the King’s speech in the way of new initiatives or concrete plans for increasing productivity, nor of easing the tax burden on SMEs, the engine of the economy, in order to stimulate the economic growth the Government is so volubly chasing.

Adapting to these regulations will be challenging. But they won’t all happen at once, and the changes may not be as significant as they appear. We will have to wait and see. We will know a lot more when we see the Employment Rights Bill.

Our team of employment law experts has been around a long time, seen numerous Governments come and go, and is here to support you through the transition.

We will provide as usual clear, comprehensive guidance and tailored resolutions to ensure your business remains de-risked, compliant, can deal with more employee disputes and thrives under the new legal framework.

If you would like to discuss how these changes will impact your business, or advice on preparing for and implementing the changes effectively, please contact Philippa Mullett or your usual employment team contact.