The Employment Rights Bill is here – what does it mean for you?

Posted: 10/10/2024

The new government’s radical shake-up of UK employment laws has been much anticipated, with the Labour Party manifesto heralding ‘the biggest upgrade to rights at work for a generation’. Labour had promised an Employment Rights Bill within its first 100 days in power, and on day 98 it duly delivered. 

Despite containing 28 proposals for employment law reform, the bill is only the first step in Labour’s far-reaching Make Work Pay plan, intended to modernise the UK labour market as part of its commitment to economic growth. The government has today also published a ‘Next Steps to Make Work Pay’ document outlining the reforms it plans to implement in the future.  

The majority of proposals contained in the bill will require secondary legislation and/or a consultation process before they become law. Consultations will not commence before 2025, and it anticipated that many proposals will not come into law until 2026, giving employers time to prepare for the new rules. Even the changes that are not subject to consultation will have to wait for the bill to be enacted so employers and employees will not see any changes actually happening until the middle of 2025. 

Over the next weeks and months we will be taking a deeper dive into the government’s plans. In the meantime, we summarise below the key proposals set out in the Make Work Pay plan and what they mean for employers.

What’s in the bill?

Day-one rights
The two-year qualifying period for protection from unfair dismissal will be removed, meaning that all employees will have a right to this protection from their first day of employment. 

The government will consult on a statutory probationary period for new employees to allow employers properly to assess an employee’s suitability for a role. The government is hoping for a nine month probationary period, during which time a lighter-touch dismissal procedure will apply, where the reason for dismissal is related to the employee’s suitability for the job. 

Some will argue that this lengthy probationary period significantly waters down the ‘day-one’ right. However, it does provide employees with some degree of protection from the first day of employment for capability dismissals and, where employees are dismissed for a reason other than capability, such as misconduct, or redundancy, employers will have to go through a full procedure.

Labour has estimated that there are currently nine million employees who do not benefit from unfair dismissal protection. There is little doubt that the proposals will provide greater job security for many, although these changes will not be brought in until the autumn of 2026 at the earliest. 

The government will consult on how the probationary period interacts with Acas’s Code of Practice on disciplinary and grievance procedures. It has also confirmed that existing day-one rights that provide protection for employees from unfair dismissal will not be affected by the statutory probation period.

Redundancy and fire and rehire
An early commitment to abolishing the practice of fire and rehire has been watered down so that an employer’s ability to dismiss employees and immediately offer them re-engagement on less favourable terms will now be restricted. Fire and rehire will, however, still be permitted where the reason for the variation is to  'eliminate, prevent or  significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business, and (b) in all the circumstances the employer could not reasonably  have avoided the need to make the variation' (section 22). What is meant by this provision is likely to be closely scrutinised by the courts.

The bill removes the requirement for redundancies to take place 'at one establishment', meaning that redundancies across a business can be taken into account when considering collective consultation requirements and protective awards.

The government has also committed to consult on lifting the cap of the protective award if an employer is found not to have properly followed the collective redundancy process as well as on the role that interim relief, such as an injunction, could play in protecting workers in these situations.

Zero hours contracts
Zero hours contracts will be banned if they are deemed to be 'exploitative' and workers will have the right to demand guaranteed hours if they work regular hours over a defined period, although they can choose to remain on a zero hours contract. It will be interesting to see how this works alongside the day-one right not to be unfairly dismissed.

Flexible working
One of the headline proposals from Labour’s manifesto was that flexible working would be made the default, building on the previous government’s recent decision to make the right to request flexible working a day-one right. Currently an employer can only refuse a flexible working application on one of the eight statutory grounds. Under the new proposals, an employer will still be able to refuse an application on the same eight grounds, but must also be able to show that it is reasonable for them to rely on one or more of those grounds. While making flexible working the default may mark a shift in the way flexible working is regarded and puts the onus on employers to show why it is not reasonable, in reality workers may not enjoy any greater right to work flexibly than they did previously.

Discrimination and family-friendly rights
Paternity, parental and the new bereavement leave will become day-one rights, and protection against dismissal will be strengthened for pregnant women and new mothers. 

The duty on employers to take reasonable steps to prevent harassment of its employees, which comes into force later this month, is strengthened, so that the duty will be  to take all reasonable steps (our emphasis), and expressly covers harassment by third parties. There is also the power to specify certain ‘reasonable steps’ by means of regulations.

Large employers will also be required to create action plans on addressing gender pay gaps and how they will support employees going through the menopause.

Trade union and strike law
The bill will repeal the anti-union legislation put in place by the previous government, including the Minimum Service Levels (Strikes) Act and the Trade Union Act. It will introduce a number of measures to protect workers from dismissal and blacklisting for trade union activity, to ensure workers understand their right to join a trade union, to simplify the statutory recognition process, and to bring in a new right of access for union officials to meet, represent, recruit, and organise members in workplaces.

Again, the devil will be in the detail, though it is likely that many employers, including those who do not currently have a unionised workforce, will see greater trade union activity.

Sick pay
The bill contains proposals to strengthen statutory sick pay, removing the lower earnings limit to make the safety net available to those on the lowest incomes, and ensuring that sick pay is available from the first day of absence.

Single enforcement body
The government will establish a new Fair Work Agency which will bring together existing enforcement bodies and be responsible for enforcing rights such as holiday pay, minimum wage and statutory sick pay, for the employment tribunal penalty scheme and for labour exploitation and modern slavery. It is hoped that the Fair Work Agency will make it easier for individuals to find help and will provide support for employers looking for guidance on how to comply with the law.

And what isn’t... 

These items are not in the bill, but are in the Next Steps publication:

• a move towards a single status of worker and transition towards a simpler two-part framework for employment status;
• a right to switch off, preventing employees from being contacted out of hours, except in exceptional circumstances;
• a new Equality (Race and Disparity) Bill making it mandatory for large employers to report their ethnicity and disability pay gap;
• removing the minimum wage age bands to ensure every adult worker benefits from a genuine living wage;
• a review of the TUPE regulations;
• reviews into the parental leave and carers leave systems;
• a review of health and safety legislation.

The Secretary of State for Business and Trade, Jonathan Reynolds, commented that: “This upgrade to our laws will ensure they are fit for modern life, raise living standards and provide opportunity and security for businesses, workers and communities across the country.” 

While the full impact of the bill is yet to be determined, with some criticising the government for watering down its manifesto pledges and others taking the view that it places too heavy a burden on employers, particularly small businesses, it is clear that there are significant changes ahead. Employers should ensure that they are prepared for these changes and will be following the upcoming consultations with interest.

For further information on the new bill and how it might affect your organisation please contact Paul Mander or your usual contact in the employment team.

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