On 10 October 2024, the UK’s Labour government introduced the Employment Rights Bill to Parliament. The changes set out in the Bill are, we are told, aimed at enhancing employees’ and workers’ rights as part of the government’s declared intention to “make work pay”. While the changes do, on the surface, provide greater protections for workers, they inevitably increase the burden on employers and add further risk to the decision to become or remain an employer. One would be hard-pressed not to spot the incongruous timing of this, coming only four days before the Prime Minister speaks of the need to “rip out bureaucracy” and cut regulation to attract investment to the UK.
In this blog post, we’ll break down the key aspects of the bill and what these changes might mean for your business.
Of course, none of this is yet law and much may change as the Bill makes its way through Parliament, but being an employer is certainly going to change and, despite what Kier Starmer might say, become more, not less, regulated.
1. Zero-Hours Contracts: Less Flexibility for Employers
The new bill introduces significant changes to zero-hours contracts, including a right for workers to be offered guaranteed hours after a certain period. This means that employers will need to assess their workforce needs more proactively and make offers of a guaranteed working hours contract to eligible workers. However, as the Bill stands, workers will have the option to opt out of guaranteed hours if they prefer the flexibility that zero-hours contracts provide, and we know many do indeed value these contracts.
The right to guaranteed hours appears to be limited to those situations where, after a certain period (expected to be 12 weeks) there is an identifiable pattern to the work. Those opposed to zero-hours contracts have suggested this makes it easy for employers to circumvent the intention of the Bill by ensuring no pattern emerges. However, I don’t think employers can rely on this, firstly, zero-hours contracts tend to be used where customer-driven demand sets the work pattern, not the whim of the employer, so the establishment, or otherwise, of patterns is outside their control. Secondly, and more significantly, I suspect the legislation in its final form will somehow remove what some have identified as a loophole – we know that many in the Labour Party want to abolish the concept of the zero-hours contract entirely. Ten pages of the Bill are given over to the right to Guaranteed Hours and it is abundantly clear the Government are not fans of the zero-hours contract.
The introduced requirement to give reasonable notice for shifts, and compensate workers for cancelled or changed shifts, reduces the flexibility that zero-hours contracts have traditionally provided. Employers may face increased costs and need to rethink their staffing strategies, particularly in industries that rely on an on-demand workforce. These changes mean that employers can no longer rely solely on the flexibility that zero-hours contracts once provided. They will need to establish clearer communication channels to provide adequate notice for shifts and be prepared for potential disputes regarding shift cancellations. The financial impact of compensating for cancelled shifts could be substantial, especially for businesses that experience frequent fluctuations in demand. One hopes “reasonable notice” will be reasonable, but we will have to see how that ends up written into legislation and then interpreted by the courts.
2. Flexible Working: Day-One Rights
One of the most notable changes is that all employees will have the right to request flexible working from day one of their employment. As now, employers will only be able to refuse requests on specific grounds, such as additional costs or impact on service delivery, but the employ will also have to set out why it is reasonable to decline the request on these grounds. This change means businesses must be prepared for an influx of flexible working requests and ensure they have processes in place to handle these requests fairly and efficiently. Balancing these requests with operational needs will require careful planning and might involve adjusting workforce management practices.
For employers, this change represents a cultural shift towards a more flexible work environment. It requires a proactive approach to managing employee expectations while ensuring business needs are met. Employers may need to invest in new technologies or systems to facilitate flexible working arrangements, such as remote work tools or scheduling software. Additionally, training managers to effectively handle and evaluate flexible working requests will be crucial to maintaining productivity and employee satisfaction. The emphasis on flexible working also means that businesses that are unable to accommodate such requests may find it harder to attract and retain talent in a competitive job market.
3. Statutory Sick Pay: Increased Obligations
The removal of the waiting period for statutory sick pay (SSP) means that employers must now pay SSP from the first day of sickness. Additionally, the qualifying lower earnings limit for SSP is to be removed, meaning sick-pay is now available to a broader range of employees, impacting financial planning for businesses even more broadly. These changes are intended to support workers more effectively during times of illness, but they also place an increased financial burden on employers. Businesses will need to prepare for higher short-term costs related to employee sickness, which could particularly impact small businesses with limited cash flow.
Employers should also consider the potential for increased absenteeism, as the removal of the waiting period may lead to more employees taking sick leave earlier. To mitigate the impact, employers could implement health and wellness programs aimed at reducing the incidence of sickness and supporting employees in maintaining their health. Effective absence management policies will be essential to ensure that the business can continue to operate smoothly, even when multiple employees are on sick leave. Employers may also need to revisit their financial planning to account for these additional costs, ensuring they have sufficient reserves to handle potential increases in SSP payouts.
As much as we would like to think we make smart recruitment decisions, not everybody in our workforce is highly conscientious. Having to pay sick pay from the first day of absence means, inevitably, there will be more absences related to claimed sickness. Some of this will be legitimate, where those who previously feared they could not afford to be absent when genuinely ill will no longer be so financially constrained, but some of it will not. More than ever, it is going to be essential for employers to carefully and robustly monitor sickness absence.
4. Parental and Paternity Leave: Immediate Eligibility
The qualifying period for parental and paternity leave (for both birth and adoption) has been removed, meaning employees are now eligible for these types of leave from the start of their employment. Employers will need to adapt quickly to accommodate these leave requests, even from new appointments. This change can complicate workforce planning, especially in roles that require specialised skills, as finding temporary replacements may prove challenging.
The removal of the qualifying period underscores the importance of having robust contingency plans in place. Employers should ensure they have a pool of trained temporary staff or a plan for redistributing work among existing employees during periods of leave. This may involve cross-training employees to cover multiple roles, which can provide greater flexibility when managing absences. Additionally, employers should consider how to maintain engagement and communication with employees on leave to ensure a smooth transition when they return to work. This change also highlights the need for clear, accessible policies on parental and paternity leave so that all employees understand their rights and responsibilities.
5. Protection from Harassment: Strengthening Employer Responsibilities
The bill places greater responsibility on employers to prevent sexual harassment, including incidents involving third parties, such as customers or suppliers. Employers are now required to take all reasonable steps to prevent harassment, which includes implementing policies, providing regular training, and fostering a safe workplace culture. Failure to do so could lead to increased liability and more tribunal claims. Employers should review their policies and procedures to ensure compliance and mitigate risks.
To meet these new responsibilities, employers will need to take a proactive approach to creating a safe and respectful work environment. This includes conducting regular risk assessments to identify potential areas where harassment might occur and taking steps to address these risks. Providing comprehensive training to all employees, including managers, on recognising, preventing, and addressing harassment is essential. Employers should also establish clear reporting mechanisms that allow employees to report incidents confidentially and without fear of retaliation. By fostering an open and supportive culture, employers can reduce the likelihood of harassment occurring and demonstrate their commitment to maintaining a positive workplace.
Hospitality, care and health sectors are likely to find this aspect of the Bill most challenging, given the inclusion of harassment by third parties as being something the employer must take reasonable steps to prevent. Expect to see some interesting tribunal cases once this becomes law.
6. Dismissal Protections: Broader Coverage
The bill removes the qualifying period for protection against unfair dismissal in certain situations, such as during pregnancy or after family leave. It is important to note that there is already protection against unfair dismissal from day one if the dismissal relates to a protected characteristic, such as age, disability, sex, or sexual orientation etc. Employers must exercise extra caution when making decisions related to dismissals or variations in contracts to avoid claims of unfair dismissal. Consulting with employees and documenting decisions will be crucial to minimize risks and ensure compliance.
Employers will need to review their disciplinary and dismissal procedures to ensure they are in line with the new protections once they become law. However, the implications of this change are broader than the revision of policy and will probably, and I would argue, should, make employers more risk-averse in recruitment. The employer who has some concerns about an otherwise promising candidate at interview will need to be more careful when considering giving somebody a chance – the risks of doing so are going to be more significant.
7. Redundancy Procedures: More Rigorous Requirements
The bill extends requirements for handling collective redundancies, including enhanced obligations in public-sector outsourcing situations. Employers must provide earlier notification and conduct thorough consultations before making redundancies. This change aims to provide workers with more security but may delay redundancy processes and increase administrative burdens. Employers will need to ensure they follow all procedural requirements to avoid potential penalties.
For employers, particularly those involved in public sector contracts, these changes mean that redundancy planning will need to start earlier and be more comprehensive. Employers must ensure they are fully compliant with consultation requirements, which may involve engaging with employee representatives or trade unions. The extended notification periods may also mean that employers need to retain redundant employees for longer, potentially increasing costs. To navigate these challenges, employers should develop a clear redundancy strategy that includes detailed timelines, consultation processes, and support for affected employees, such as outplacement services or retraining opportunities. By approaching redundancies with transparency and empathy, employers can mitigate the negative impact on both their workforce and their reputation.
8. Sector-Specific Regulations: Increased Oversight
The bill introduces sector-specific changes, such as the establishment of the Adult Social Care Negotiating Body and new pay regulations for school support staff. Employers in these sectors will have less flexibility in setting pay and working conditions, potentially leading to higher labour costs. Public sector contractors are also required to provide additional protections for workers during outsourcing, which could make bidding for such contracts less attractive due to the added complexity and costs.
Employers in the affected sectors will need to stay informed about the specific regulations that apply to them and ensure they are compliant. This may involve participating in negotiations with bodies like the Adult Social Care Negotiating Body or adapting to new pay structures mandated by the government. The increased oversight in these sectors means that employers must be prepared for more scrutiny from regulatory bodies and may need to allocate additional resources to compliance efforts. For public sector contractors, understanding the full scope of their obligations during outsourcing will be crucial to avoid unexpected liabilities. Employers should also consider how these changes might impact their competitiveness when bidding for public contracts and whether adjustments to their business model are necessary.
Preparing Your Business for Change
The Employment Rights Bill brings significant changes that enhance worker protections but also place new demands on employers. To stay compliant and maintain operational efficiency you may wish to:
- Review your recruitment processes. Can you reduce the chance or the risks of making the wrong appointment?
- Review your absence management policies, and consider investing in tools or software that can help you monitor and manage employee absences more effectively.
- Review and update employment contracts, policies, and procedures to align with the new regulations, once these are clear.
- Plan for potential cost increases related to statutory sick pay, redundancy handling, and guaranteed hours.
- Ensure you and your managers are aware of existing requirements in relation to flexible working requests, protections against unfair dismissal, and your obligations in preventing harassment. Getting things straight now will ensure you are better prepared when the new legislation is in place.
- Engage with employees openly about the changes, providing clear information on their rights and the steps the business is taking to comply with any new regulations.
These changes will require a shift in how businesses manage their workforce, especially in industries reliant on flexibility, such as retail, hospitality, and care services. Staying ahead of these changes by adapting your policies now will help you navigate the new regulatory landscape effectively. If you want to discuss the implications of the Employment Rights Bill on your business, or any other aspect of employee management, please Get In Touch