On 10 October 2024, the Labour government published the Employment Rights Bill. While the content was not surprising, given much was detailed heavily in their Plan to Make Work Pay campaign document, what is a surprise is how much of the specifics of the strengthened rights are subject to consultation. In the Next Steps to Make Work Pay policy paper published by the Department of Business and Trade, we have been advised that the government “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.”
Notwithstanding the long runway the Employment Rights Bill has to implementation, it would be prudent for employers to get to grips with the pending legislative changes in order to ensure a safe landing as the bill becomes law.
Dismissal Regulations
Unfair Dismissal
Labour’s new right not to be unfairly dismissed from Day One has made it into the final bill, albeit significantly watered down, yet still marking a major shift in employment law. The qualifying period for claiming unfair dismissal will be eliminated, except during the “initial period of employment,” which will be defined by future regulations following consultation. The Next Steps to Make Work Pay document suggests that this initial period of employment shall be nine months (this would seem to align with current probation periods of six months with a three-month extension if needed) but further consultation is necessary. Employers will still have the opportunity to dismiss employees fairly, but process should be followed. What this process is has not been defined and is likely subject to further consultation. The document also suggests that consultation will be seen in a lower compensation scheme for unfair dismissals during this initial period.
Fire and Rehire Practices
Dismissing an employee for refusing to agree to changes in their contract will be considered automatic unfair dismissal unless the employer can demonstrate that the variation was necessary to address significant current or immediate future financial difficulties and that reasonable steps were taken to avoid the need for changes. What will be deemed as financial distress is still to be consulted on and further guidance will be much anticipated given that, as currently drafted, the Employment Rights Bill will make lawful fire and rehire almost impossible. Factors such as consultation efforts and whether compensation was offered to the employee will be considered in determining the fairness of the dismissal. Employers must exercise caution when modifying employment contracts and engage in thorough consultations to mitigate risks.
Collective Consultation in Redundancies
The requirement for a collective consultation in redundancies will no longer be limited to cases “at one establishment”, but will now instead cover redundancies across all sites/workplaces. This will mean that more redundancies will fall within the requirement to engage in collective consultation when proposing redundancies for 20 or more employees. While not expressly stated in the bill, the Next Steps to Make Work Pay does suggest that there may be protective awards for failing to collectively consult, although this has not been expanded on in much detail (and is likely subject to further consultation).
Protection from Harassment
Just as employers get to grips with taking “reasonable steps” to prevent workplace sexual harassment, that duty will be strengthened to take “all reasonable steps” to prevent sexual harassment in the workplace. This includes conducting specified assessments, publishing plans or policies addressing harassment, and implementing procedures for reporting and handling complaints. What specifically counts as “all” reasonable steps will be defined in further regulations, following, as you might guess, further consultation.
Additionally, employers will be required to protect workers from any form of harassment by third parties, such as customers or clients. Failure to take all reasonable steps to prevent any form of harassment by third parties during the course of their employment may result in liability. This is a significant shift in legal liability, and we encourage all employers to take risk mitigation with third parties very seriously.
Workers who disclose information about sexual harassment will be granted special protection, ensuring they are not penalized for reporting incidents, including situations where harassment is likely to occur. This emphasis on proactive measures and whistleblower protections underscores the importance of creating a safe and respectful work environment.
Zero-Hour Workers
Employers are now mandated to offer guaranteed hours to workers on zero-hours contracts or similar arrangements. This requirement is based on the hours worked during a predefined “reference period,” reflecting a consistent pattern of work, which, as has become a running theme of the Employment Rights Bill, is undefined and will be subject to consultation. Employers must either adjust the existing terms and conditions of the worker or issue a new contract (which must not be limited-term unless reasonable to make as such). Workers who believe this duty has not been fulfilled have the right to file a complaint with an employment tribunal within three months, potentially receiving compensation for any financial losses incurred.
Zero-hours and shift workers will also be entitled to reasonable notice of their work schedules. If shifts are cancelled, moved or shortened without sufficient notice, employers will be required to provide compensation. Employers should ensure that they have clear policies for shift scheduling and cancellation notices, as workers can seek remedies through an employment tribunal if these rights are not respected.
Finally, employers will no longer be able to include terms in zero-hours contracts that prevent workers from seeking employment elsewhere. This change is intended to promote flexibility and autonomy for workers in managing their employment relationships.
Right to Request Flexible Working
All workers currently have the right to make two requests for flexible working arrangements per year from the first day of their employment. The Employment Rights Bill proposes to make flexible working a default for all, unless the employer can prove it is unreasonable. This includes adjustments such as altered working hours, remote work options or other flexible arrangements tailored to individual needs. Employers will be obligated to consider these requests reasonably and promptly. Refusals will still be permissible on the current specified, justified grounds, such as the burden of additional costs or a detrimental impact on performance. However, there will be an obligation on employers to ensure that any refusal is provided in writing, clearly stating the reasons and explaining why the refusal is considered reasonable.
Statutory Sick Pay (SSP)
Significant changes will be made to SSP entitlements. The current three-day waiting period will be removed, meaning workers will be entitled to SSP from the first day of illness. Additionally, the earnings threshold required to qualify for SSP will be adjusted to the lower of £116.75 or a prescribed percentage of the employee’s normal weekly earnings. Employers should update their payroll systems and policies accordingly to ensure compliance and accurate compensation for employees during periods of sickness.
Tips and Gratuities
Employers will be mandated to develop and maintain a written policy on the allocation of tips, gratuities and service charges. This policy must be created in consultation with workers or their representatives and reviewed every three years, incorporating feedback to ensure fairness and transparency. A summary of the views expressed during consultations should be shared with all workers. This change aims to foster trust and equitable treatment in the distribution of additional earnings derived from customer generosity.
Entitlement to Leave
The qualifying period for taking parental and paternity leave will be removed, allowing employees to access these entitlements from the first day of employment. Furthermore, workers who have taken shared parental leave will also be eligible for paternity leave. This expansion of rights enhances support for employees balancing work and family responsibilities.
Bereavement leave will be broadened beyond parental bereavement to include the loss of any close relation, and employees will be permitted leave for each loss in cases of multiple bereavements. This change acknowledges the profound impact of loss and provides employees with the necessary time to grieve.
Duties Relating to Equality
Employers with 250 or more workers, including public authorities, will be required to develop and implement equality action plans to address workplace discrimination and promote diversity, specifically concerning gender equality. Focus areas will include addressing the gender pay gap and supporting employees experiencing menopause.
Additionally, employers will be required to report on the working conditions of outsourced workers, enhancing transparency and accountability. Developing comprehensive equality action plans and considering the working conditions of all employees, including those indirectly associated with the business, will be essential for compliance and fostering an inclusive work environment.
Conclusion
The Labour government have achieved their promise of proposing the Employment Rights Bill within the first 100 days of their leadership, but in the rush to publish the bill within the promised time frame they have watered down a number of their key proposals in doing so – and have advised that some key proposals such as the right to disconnect will be implemented at a future, unknown date. That said, it is clear that the proposals set out in the Employment Rights Bill aim to establish a more equitable balance between employer interests and employee rights.
The bill is now set to commence its legislative journey through Parliament, with all the revisions and consultations that come with it, not to mention secondary legislation that may be required. The government has also already expressed its intention to introduce additional amendments, and we can only wait and see whether they will water down the rights further or add additional processes into the proposals.
As the legislative process unfolds and consultation documents become available, the precise details will become clearer. In the meantime, both employers and employees can take a long two years to consider whether these amended rights appease both sides – or are simply not enough to make anyone happy.
So at this juncture, without the benefit of further consultations, there is a limited amount that employers can do to get ready for these anticipated changes. However, there is now time for some housekeeping of current policies and practices, and we would advise that employers can start addressing key principles in their workplaces: utilise strong recruitment practices; get the right people on the right contract terms from the get-go; monitor and be proactive in probationary periods; and think about the training you have in place to ensure HR and managers are confident in their current and incoming obligations.