Employment Rights Bill sets out major change for UK staffing companies and platforms and contingent workforces

The UK Employment Rights Bill has been published with the detail of the 158-page bill covering a broad range of general changes in employment law, as well as fire and rehire, flexible working, union law, sick pay and other benefits.

The proposals that relate to day-one rights, zero-hours workers and a new enforcement agency could have a huge impact on many current non-standard workforce arrangements and contingent working generally.

Significant challenges

"Day one" unfair dismissal rights will not apply to traditional agency workers engaged under contracts for services.

Platforms, staffing companies and other users of zero-hours arrangements face a significant challenge in terms of having to offer regular workers guaranteed hours.

There will be a year or two of consultation before many of the measures become law. The government says: "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."

There is still no "solution" to the eternal challenge of how to define self-employment. As widely predicted that issue has been kicked down the road for now.

Overall, the enhanced rights provided for by the bill are most likely to be felt most by employers in sectors with larger numbers of low-paid workers – for example, retail, construction, healthcare, logistics, manufacturing, etc. – where rights to predictable hours, the removal of age-related National Minimum Wage (NMW) rates and changes such as "day one" rights, will provide a benefit that is not currently costed and provided for by the employer.

In the short term, these changes will result in workforce reorganisations as employers attempt to control these anticipated employment costs and reconcile the wage bill for their businesses before these measures come into force. 

More cautious recruitment practices?

"Day one" dismissal rights will have a significant impact on staffing companies. The introduction of "day one" unfair dismissal rights, subject to a limited probationary period, will inevitably drive more cautious recruitment practices.

The "day one" unfair dismissal right appear only to apply to "employees", which suggests that workers (for example, agency workers supplied via intermediaries) may not have these rights. That outcome is perhaps a factor of the government's decision not to address – a and abolish? – until a much later date the separate status of workers within UK employment law. That will be a relief to suppliers and users of that sort of contingent-workforce arrangement.

Affected organisations will need to watch carefully any proposals to prevent employers from changing hiring practices such that new hires are, as predicted last month in the Financial Times, engaged on a '"try then buy" agency worker basis via staffing companies and similar intermediaries to avoid problems with "day one" unfair dismissal rights.

Anti-avoidance legislation may be introduced to stifle this approach, although some will argue that the Agency Workers Regulations and Conduct or Employment Agencies and Employment Business Regulations already provide enough protection to agency workers against unfair treatment. Claimant law firms could also start to challenge arrangements where people are engaged, on any volume basis, as agency workers where they are "really'" employees of the end client.

Predictable hours ahead?

Zero-hours workers, along with those on low hours contracts, will have the right to a guaranteed hours contract if they work regular hours over a defined period, giving them security of earnings – while allowing people to remain on zero-hours contracts if they prefer. Discussion as to what this defined period should be will continue, with original proposals suggesting 12 weeks.

In many sectors where zero-hours arrangements are a current norm, much work will need to be done on working out more systematic scheduling of work. Providers of rota software systems to have a busy time. This may be a particular challenge in relation to agency workers (traditionally engaged on a "turn on, turn off" basis) – it appears that these "guaranteed hours" rights will apply to agency workers.

Osborne Clarke comment

Many organisations, including the Recruitment and Employment Confederation, have told the government that new rights are not much use if they are not enforced or easily enforceable.

Without this ease of enforcement, all that happens is that responsible employers and responsible providers of staff will do their best to comply, while leaving less responsible players to ignore them so that they can enjoy lower business costs and win higher market share with lower prices for their services and products.

Many will welcome the creation of a long-touted new enforcement body, the Fair Work Agency. This will combine the functions of the Gangmasters and Labour Abuse Authority, Employment Agencies Standards Inspectorate and NMW enforcement team within HMRC. This body seems likely to ensure holiday pay, NMW and modern slavery rules are complied with, with holiday pay enforcement being a new area of regulation with new criminal and other sanctions for non-compliance.

This may have a big impact in some sectors – the current position is that no public body ensures compliance with holiday pay, leaving many workers in those sectors (typically short-term lower-paid workers) unaware of their rights and often not receiving full holiday pay. Increased NMW and holiday pay compliance may therefore lead to higher supply chain costs in some sectors.