UK government announces new Employment Rights Bill: what does this mean for employers?

The government has today "unveiled" its Employment Rights Bill, as it looks to deliver "economic security and growth to businesses, workers and communities across the UK".

Many of the proposed reforms have been heavily trailed in Labour's Make Work Pay plan and in the media after the government's election, but there has been increasing speculation as to what may or may not be included in this bill, the form the proposals will take and what measures will be immediate or subject to consultation and secondary regulations.

Indications are that some reforms are unlikely to have an impact in practice for some time, with the government expressly stating that the proposals around unfair dismissal and probationary periods will not come into force until autumn 2026.

The bill was presented before Parliament on 10 October and is stated to bring forward 28 individual employment reforms which cover a broad range of employment reforms.   

Family-friendly rights

The bill makes a number of changes to support working families with caring responsibilities; while these are descried as "immediate" changes, this is qualified by the statement that the government feels "it is important to take account of a range of views, and… will develop the detail of the approach in consultation and partnership with business, trade union and third sector bodies".

Flexible working

As expected, amendments are proposed to the existing statutory right to request flexible working. Despite it being stated that flexible working will become "the default for all", there does not appear to be a substantial shift from the current statutory right: an employer remains able to refuse a request on commensurate statutory grounds but these are now subject to a statutory reasonableness requirement and an employer must explain to an employee in writing why any request is refused and why the refusal is reasonable.

Bereavement leave

The bill amends existing statutory provisions to provide that employees will be entitled to "protected time off work" of one week on a bereavement. Entitlement will be by reference to the employee's relationship with the person who has died. Detail will be provided for in regulations. This sits alongside the existing right to statutory parental bereavement leave.

Paternity and parental leave

Paternity and parental leave to become day one rights.

Protections for those who are pregnant and new mothers

The government is proposing to provide stronger protections against dismissing those who are pregnant, on maternity leave and within six months of returning to work.

Fair pay

National minimum wage

The government is progressing plans for all adults to be entitled to the same minimum wage by removing discriminatory age bands. The national minimum wage is set to increase to take account of the cost of living.

Statutory sick pay

The bill also removes the lower earnings limit for statutory sick pay and cuts out the waiting period before statutory sick pay kicks in.

Ending 'one-sided flexibility'

Zero-hours and low hours contracts

The bill seeks to address "exploitative" zero-hours contracts, while recognising that some individuals will wish to retain the right to remain on these arrangements where that is their preference.

It sets out detail on these proposals, including that workers on zero-hours contracts and workers with a "low" number of guaranteed hours, who regularly work more than these hours, will have the ability to move to guaranteed hours contracts which reflect the hours they regularly work over a 12-week reference period and ensure that workers get reasonable notice of any change in shifts or working time, with proportionate compensation for any shifts cancelled or curtailed at short notice. It is stated that these measures will also be adapted and applied to agency workers.

The government has stated that it will consult on these measures, including how review periods should work, what constitutes "low hours" and how they will apply to agency workers. Its intention is that workers on full-time contracts who occasionally pick up overtime hours are not affected and that where work is genuinely temporary, there will be no expectation on employers to offer permanent contracts. Those who are offered guaranteed hours will also be able to remain on zero-hours contracts if they wish.

Fire and rehire

The bill includes new statutory obligations around the use of "fire and rehire" to introduce a contractual variation.

A dismissal will be automatically unfair unless it falls within a very limited exception permitting this practice where the reason for the variation is to "eliminate, prevent or significantly reduce or significantly mitigate the effect of, any financial difficulties" which threaten the employer's ability "to carry on the business as a going concern or otherwise to carry on the activities constituting the business" and it was reasonable in the circumstances. The employer must also adhere to a prescribed consultation process.

Unfair dismissal

The bill will remove the two year qualifying period for protection from unfair dismissal so that all workers have a right to this protection "from day one on the job".

Probationary periods

The bill will allow employers to operate probationary periods by providing an initial period during which there will be "a lighter-touch and less onerous approach for employers to follow to dismiss an employee who is not right for the job".

The government will consult on the length of that initial statutory probation period; its preference is nine months: "We will also engage further during the passage of the Bill on how we can ensure the probation period has meaningful safeguards to provide stability and security for business and workers".

As a starting point, the government is inclined to suggest it should consist of holding a meeting with the employee to explain the concerns about their performance (at which the employee could choose to be accompanied by a trade union representative or a colleague). The government will consult extensively, including on how it interacts with Acas’ Code of Practice on Disciplinary and Grievance procedures. It also intends to consult on what a compensation regime for successful claims during the probation period will be, with consideration given to tribunals not being able to award the full compensatory damages currently available.

Existing day one rights that provide protection for employees from unfair dismissal will not be affected by the statutory probation period.

The government has committed to a full consultation on the detail of the proposals. Before the measures come into force there will be a substantial period – once the detailed rules in secondary regulations are confirmed – to allow employers to prepare and adapt: "To provide sufficient time for this, we are making clear now that the reforms to unfair dismissal will not come into effect any sooner than Autumn 2026, and until then the current qualifying period will continue to apply".

The government hopes that this will give "more people confidence to re-enter the job market or change careers" and which in turn should improve their living standards. While detail is not included in the government's press release, it has been reported that the proposed probationary period will be nine months following pressure from businesses to lengthen the six months sought by trade unions.

Collective redundancy consultation

As foreshadowed in Make Work Pay, the bill removes the "one establishment" requirement from collective redundancy consultation obligations meaning that 20 or more proposed redundancies within 90 days across a whole business will trigger the collective consultation requirements.  

Equality at work

Harassment

While reforms around harassment law were not set out in the government's press release, the bill does seek to take forward, reforms around protection from harassment in Make Work Pay.

It provides that the new duty on employers to take reasonable steps to prevent sexual harassment will be amended to provide for an employer to have to take "all" reasonable steps.

It also introduces liability for third party harassment extending to all the protected characteristics currently covered by harassment (age, disability, gender reassignment, race, religion or belief, sex, and sexual orientation) in the course of employment, unless an employer has taken all reasonable steps to prevent the third party from harassing them.

Regulations may also be introduced specifying what may be "reasonable steps" for these purposes including, among others, carrying out assessments of a specified description; publishing plans or policies of a specified description; steps relating to the reporting of sexual harassment; steps relating to the handling of complaints.

The bill also amends the existing statutory provisions on whistleblowing to explicitly include sexual harassment as a relevant failure in relation to disclosures qualifying for protection.

Equality action plans

The bill provides for regulations to introduce a requirement for large employers to produce equality action plans on how to address their gender pay gap and supporting employees through the menopause.

Enforcing rights at work

The government will establish the Fair Work Agency which will bring together existing enforcement functions, including minimum wage and statutory sick pay enforcement; the employment tribunal penalty scheme; labour exploitation and modern slavery; as well as introducing the enforcement of holiday pay policy.

Voice at work

The bill reflects a number of the proposals on trade union rights and industrial action set out in Make Work Pay and a number of which will be subject to consultation. The government is looking to simplify the union recognition process, bringing in a new right of access – with a transparent framework and clear rules designed in consultation with unions and business – for union officials to meet, represent, recruit and organise members. Proposals also include a requirement for section 1 statements to include a statement regarding union rights.  

The government has already committed to repealing ineffective anti-union legislation, including the Strikes (Minimum Service Levels) Act

The above highlights some of the main provisions; the bill also contains a number of other specific measures, including measures around public-sector outsourcing and addressing sector-wide collective bargaining relating to school and adult social care workers.

The government's 'Next Steps' document

Alongside the bill, the government has published a Next Steps document outlining reforms "it will look to implement in the future". Subject to consultation, the specific proposals referred to include:

• a Right to Switch Off, preventing employees from being contacted out of hours, except in exceptional circumstances.
• ending pay discrimination by expanding the Equality (Race and Disparity) Bill to make it mandatory for large employers to report their ethnicity and disability pay gap. 
• a move towards a single status of worker and transition towards a simpler two-part framework for employment status. 
• reviews into the parental leave and carers leave systems "to ensure they are delivering for employers, workers and their loved ones".

What does this mean for employers?

While the headline announcements in today's press release do not contain any real surprises for businesses, the bill itself is detailed and encompasses many of the proposals set out by Labour in Make Work Pay.

Notably, the government has indicated that it will be consulting on a large number of the proposals with trade unions, employers and other interested parties and many of the proposed reforms will ultimately be implemented through secondary regulations. While there is no firm time-frame, we can expect the government to push forward with consultations on a number of proposals. It has also stated that it expects to begin consulting on these reforms in 2025 and anticipates therefore that "the majority of reforms will take effect no earlier than 2026" with reforms of unfair dismissal taking effect "no sooner than Autumn 2026". There are also indications that a number of the proposals will be supported by codes of practice and government guidance. 

The government's intention is that the bill will "help drive growth in the economy and support more people into secure work" providing "flexibility for workers and businesses alike". While the extension of workers' rights in relation to family leave, pay, working conditions and protection from dismissal is likely to result in a shift in employment practices from employers; it remains to be seen whether in practice the government will achieve these aims.

The additional day one rights provided for by the bill will be additional costs for employers which could be substantial, particularly for those employers engaging lower paid workers. As employers seek to manage these changes, they will need to reassess staffing levels to reconcile the wage costsfor their businesses and adapt their existing policies and procedures to reflect these new rights – for example, the removal of the statutory sick pay waiting period may require careful management of short-term sickness absence through policies, line-management and return to work interviews to address any issues. In the short-term these changes may result in hiring freezes and workforce reorganisations before the measures come into force.

We may also see more cautious recruitment practices in light of the introduction of day one unfair dismissal rights (subject to a statutory probationary period); there is a risk that this could inadvertently drive practices of those who are not an obvious fit for their organisation which could work to the detriment of inclusivity, affecting those with protected characteristics.

Employers will also need to consider the potential repercussions where there is increased movement between competing employers within the same sectors, including how sensitive business information will protected. To address the risk of additional day one rights increasing job mobility, employers will need to consider what loyalty incentives can be provided to control attrition, for example, through share incentive arrangements or retention bonuses.

Much focus has been placed on the proposed changes to flexible working giving employees greater determination over their working arrangements, yet what is proposed appears to be existing rights in a different wrapper. For example, employees currently have a day one right to request a flexible working arrangement which can only be refused on specific statutory grounds and are already able within this right to request working arrangements such as compressed hours, part-time working, term-time working. The government's emphasis appears to be premised on a flexible working arrangement being accepted unless it is not reasonably feasible – practically speaking this reflects the same grounds on which an employer is able to refuse a flexible working request under the current regime. While the announcement may raise awareness of the right to request flexible working, we do not anticipate this change making any substantial difference, subject to further detail being provided.

We are also expecting the Autumn Statement on 30 October 2024 to contain announcements of relevance to employers; for example, it has been reported that the prime minister may look to increase employer national insurance contributions, alongside other employment-related measures.