Fundamental changes ahead – the Employment Rights Bill

What’s changing?

From the abolition of the two-year qualifying period for unfair dismissal protection to reform of trade union law, the changes are wide ranging. We’ve set out a summary of the key changes below and proposed next steps, together with some recommended actions for employers to consider.

• Unfair dismissal to be a ‘Day 1’ right

  As hotly anticipated, a fundamental change is the abolition of the two-year qualifying period for unfair dismissal so that employees can claim unfair dismissal protection from day one. In good news for employers, the right to claim unfair dismissal will be subject to a probationary period.  Whilst not specifically included in the Bill, the Government has indicated that it is currently proposing a nine-month period and that a ‘lighter-touch’ process could be followed.  It’s subject to consultation in 2025 and further regulation so we will have to wait and see how it will operate in practice.  However, the Government has suggested that this would consist of holding a meeting with the employee to explain their concerns, at which the employee could chose to be accompanied by a trade union representative or colleague.

  The Government anticipates that the reforms to unfair dismissal will take effect “no sooner than Autumn 2026” so there is time for employers to get their house in order.  Employers will need to review their probationary periods, practices and policies carefully to ensure they are as tight as possible and think about retraining managers to ensure any potential issues with employees are addressed quickly and without delay.

• Parental leave, paternity and bereavement

  Removal of requirement to have qualifying service for parental leave and paternity leave

  Currently, an employee has to be continuously employed for at least a year to be eligible to take up to 18 weeks’ unpaid parental leave to care for a child who they have responsibility for.  And, to be eligible for up to two weeks paternity leave, an employee must currently have been continuous employed for at least 26 weeks at the relevant time. In both instances, the qualifying service requirement will be removed, meaning employees will be eligible for parental and paternity leave from day one of employment.

  Extended eligibility for parental bereavement leave

  The provisions which currently give parents the right to take up to two weeks’ leave following the death of a child under 18 or a stillbirth, will be extended to apply to a ‘bereaved person’ who satisfies conditions in respect of their relationship with a person who has died.  The details remain undefined, but it means that more than just parents who have lost a child will be able to take a specified period of bereavement leave in the event of loss.

  Employers will need to ensure that their policies are updated at the relevant time to reflect these changes.

• Statutory Sick Pay (SSP)

  Removal of the waiting period for SSP

  Currently, employees are not eligible for SSP for the first three days they are off sick.  The three-day waiting period will be removed, making employees eligible for SSP from the first day of absence.

  Removal of the lower earnings limit for SSP

  Currently, in order to be eligible for SSP, an employee must have average weekly earnings of not less than the lower earnings limit (currently £123) based on the eight weeks before they became sick. This requirement will be removed, and employees will no longer have to earn a minimum amount to be eligible for SSP.

  Employers will need to ensure that their sickness absence policy, and any other relevant policies, are updated, and that their payroll teams are aware and prepared when these changes come into effect.

• Tackling zero hours contracts and ending one sided flexibility

  Some of the most extensive and complex provisions of the Bill relate to the Government’s aim to end ‘exploitative zero hours contracts’.

  The provisions are too complex to go into in detail here.  However, in summary, the key points are:

  A new right to guaranteed hours

• An employer must make a ‘qualified worker’ a ‘guaranteed hours offer’ at the end of every ‘reference period’. The offer must be for a minimum number of hours, based on what was worked during the last reference period. So, if, over time, a worker continues to work increased hours, an employer will be obliged to keep offering them new contracts which accurately reflects their increased hours. Further legislation may also be introduced to require employers to provide certainty on the exact working pattern during which it will make work available.
• A ‘qualified worker’ covers workers on zero hours contracts, but also those on contracts set to a low number of minimum hours. The idea being that employers will not be able to circumvent the legislation by putting workers on contracts for, say, 1 hour per week. Workers will also need to meet requirements such as in relation to the number of hours worked, or the regularity of them, during a reference period.
• We are still waiting for the details on what the reference period will be, but it is thought it will be 12 weeks.
• Whilst a worker may reject an offer of guaranteed hours, it seems that an employer will still be required to make new offers, should the legislation be triggered in the future.
• There are limited exceptions to the duty to offer guaranteed hours to a qualifying worker, but this includes when a worker resigns (otherwise in circumstances which would amount to constructive dismissal) and when there has been a ‘fair’ dismissal of the worker. Interestingly, this part of the Bill extends concepts to workers which we have, to date, only considered in respect of employees.
• Workers will have 3 months to bring a claim if their employer fails to offer them a guaranteed hours contract, and we are still waiting for details on the level of compensation which may be payable.
  

  Reasonable notice of shifts and changes
  

  Employers must give workers on zero hours contracts ‘reasonable’ notice of shifts. We are still waiting to find out what ‘reasonable’ notice is.

• Where a worker has agreed to work a shift, and the employer wants to cancel or change it, the employer must give ‘reasonable’ notice of the cancellation or change. Again, we are still waiting for the detail on what amounts to ‘reasonable’ notice.
• Where a shift is cancelled, moved or curtailed at short notice, an employer will be required to make a payment to the worker. We are still waiting for details of the level of payment that will be required. We are also waiting to find out what amounts to ‘short notice’, although we know this will not be more than 7 days.
• Again, workers will have 3 months in which to bring a claim and we are still waiting to find out the level of compensation that could be payable.In its Next Steps to Make Work Pay document, the Government has also said that it will consult to ensure the Bill’s provisions on zero hours contracts are effectively and appropriately applied to agency workers.Despite the extensive provisions in the Bill, there is an awful lot of important information which we are still waiting on and which will be picked up as part of consultation on the Bill, including information on the potential liability for a breach of the provisions. This will be key to employers whose business relies on zero hours workers. The amount of additional administrative burden also cannot be underestimated here – if the new rules go ahead in the form as drafted, employers will need to ensure their systems and HR teams are able to keep on top of the many requirements of the Bill.

• Flexible working
  

  The proposed changes to flexible working largely build on the changes that came into force earlier this year (which allow employees to make two requests in any twelve month period and for employers to deal with requests within two months).  The eight statutory reasons to decline a request remain the same.  In addition, the maximum compensation when an employee successfully claims their request has not been dealt with in the required timescale has not changed.  Currently, this is a maximum of eight weeks’ capped pay, totalling £5,600.

  However, going forwards, the proposed legislation will only allow employers to refuse the application if they are able to rely on one of the eight statutory grounds and it is reasonable for them to rely on this ground.  Currently the law requires employers to “deal with the application in a reasonable manner”, but that is different to their reliance on one of the eight statutory grounds being reasonable.  The new legislation will therefore be more onerous for employers.  This adds another layer of difficulty in light of the changes that were made earlier this year, and is a clear indication of the Government trying to move towards flexible working by default.

  Employers should also be prepared for this change to happen sooner than many of the other changes detailed here.  The Government’s ‘Next Steps to Make Work Pay’ document indicates that making flexible working the default will be an “immediate” change.  We will keep you updated with any further developments on this point.

• Dismissal and re-engagement (otherwise known as “fire and re-hire”)
  

  Fire and re-hire has been the subject of many news stories over recent years, being labelled as a controversial method of an employer forcing through unagreed changes to employment contracts, often on large scales.  Prior to being elected, the Labour Party were clear about their intentions to crack down on these kinds of situations, so it is unsurprising that, now elected, fire and re-hire features strongly in the Bill.

  The previous Conservative government had introduced a Statutory Code of Practice on dismissal and re-engagement in July 2024.  The Code put some barriers in place to try and deter employers from firing and re-hiring without a proper consultation process.  Among other things, it said that employers should only use fire and re-hire as a last resort and should contact ACAS for advice before considering the measure.  However, it is clear from the Bill that this Government do not think this went far enough.

  The proposed legislation therefore includes some of the most drastic changes that we have seen, to significantly reduce the circumstances in which an employer can use fire and re-hire, without it being an automatically unfair dismissal.

  In summary, if the proposed legislation comes into force as currently drafted, an employer will only be able to fairly dismiss and re-engage an employee if:

• The reason for varying the contractual term was to significantly reduce/mitigate the effect of any financial difficulties affecting the employer’s ability to survive as a business; and
• Taking everything into account, the employer could not reasonably have avoided the need to make the change. To decide whether the two bullet points above are applicable in a particular situation, a Tribunal would analyse (in summary):
• Any consultation carried out between employer and employee and, if applicable, a relevant trade union;
• Anything the employer offered the employee as an incentive to agree to the proposed variation; and
• Anything else the Secretary of State has specified in later regulations.
  This is a significant increase on the current obligations on, and considerations for, an employer contemplating dismissal and re-engagement.  So much so, the circumstances in which dismissal and re-engagement can be use fairly will be almost abolished, reserved only for the most extreme situations where an employer has no other reasonable choice but to force through changes to employer contracts, or face winding up the business.

• Sexual harassment
  

  The duty to prevent sexual harassment

  With effect from 26 October 2024, employers will have a duty to take reasonable steps to prevent sexual harassment in the workplace.  This requirement, introduced by the Worker Protection (Amendment of Equality Act 2010) Act 2023 (‘the Worker Protection Act’) follows a long period of debate and consultation.  The initial intention was to require employers to take “all” reasonable steps but the word “all” was removed during the draft legislation’s passage through the House of Lords.  However, the Bill now seeks to reintroduce the word “all” and, as a result, strengthen the obligation on employers in this area.  The Bill also allows for Regulations to be made which may specify what steps will be considered as reasonable for employers to take in this context.  It suggests such steps may include the publishing of policies, steps related to sexual harassment reporting and the handling of complaints.

  The EHRC has recently published amended technical guidance which is designed to assist employers in understanding the steps which they need to take to comply with the duty introduced by the Worker Protection Act.  Given that, at the point of writing this article, this particular duty is not yet in force, it is difficult to say how much more will be required of employers should the Bill come into force as currently drafted.  For the moment, employers should familiarise themselves with the duty to prevent sexual harassment under the Worker Protection Act and ensure that they carefully consider and comply with the EHRC technical guidance.  This will undoubtedly put those employers in the best possible position to deal with the higher bar which the new Bill seeks to introduce further down the line.

  Changes to protected disclosures and confidentiality provisions relating to sexual harassment

  The Bill also expands the list of protected disclosures which are protected under whistleblowing legislation to include a disclosure that “sexual harassment has occurred, is occurring or is likely to occur”.  In doing so, the Bill makes allegations of sexual harassment something which cannot be stifled by a confidentiality agreement.

  Harassment by third parties

  The Bill also proposes to introduce a new duty to prevent harassment by third parties.  It should be noted that this duty relates to all types of harassment and not just sexual harassment.  It covers harassment of an employee by anyone other than their employer or a fellow employee of that employer and covers harassment taking place “in the course of… employment”.  Employers will be liable for such harassment if they have failed to take all reasonable steps to prevent it.

  This follows on from debate around the Worker Protection Act which was initially intended to include a similar provision related to sexual harassment.  Whilst this provision was removed, the EHRC guidance which supports the Worker Protection Act does suggest that employers should be taking steps to prevent third party sexual harassment.  Employers would therefore be well advised to familiarise themselves with this guidance in anticipation of the new more formal duty being introduced.

• Trade unions and Industrial Action
  

  New rights
  

  The Bill proposes to make wholesale changes to the rights of trade unions and the rules relating to industrial action.

• Written statement of right to join a union – Workers will have the right to receive a written statement from their employer informing them of their right to join a trade union at the same time as receiving the s.1 statement.
• Right of union to request access to employer’s workplace – Trade unions will have a right to request (via a detailed process set out in the Bill) physical access to an employer’s workplace for the purposes of meeting, representing, recruiting or organising workers (whether or not union members) and to facilitate collective bargaining.
• Right for union equality representatives to be provided with time off for union duties
• Right for union officials, union learning representatives and union equality representatives to be provided with facilities at the employer’s workplace
• Protection against detrimental treatment for taking part in industrial action – Workers will be legally protected against detrimental treatment where the sole or main purpose is preventing or deterring the worker from taking protected industrial action or penalising the worker for doing so. A claim would be brought in the Employment Tribunal within three months of the detriment.
• Provision for the government to introduce the use of electronic balloting in industrial action at a later date
  Changes to existing law
• Reduction in the level of union members required for a recognition application to be admissible – Currently, a trade union needs at least 10 per cent of the proposed bargaining unit to be union members for its application for recognition to be admissible. This will be replaced with a “required percentage test”, which currently remains at 10 per cent. However, the Bill permits the government to change the “required percentage test” to any value between 2 and 10 per cent.
• Reduction in the level of support required for trade union recognition – Currently, for a union to obtain recognition: (i) the majority of the workers voting in the ballot must vote in favour of recognition; and ii) the votes in favour must form at least 40 per cent of the workers constituting the bargaining unit. The second limb of this test will be removed, so that, if a majority of the workers voting on recognition vote in favour, recognition will be granted to the union.
• Reduction in turnout and support thresholds for industrial action –
• Removal of the requirements that:
  • at least 50 per cent of those entitled to vote in a ballot for industrial action must do so; and
  • for important public services, that at least 40 per cent of those who are entitled to vote in the ballot, vote in favour of industrial action.
• Instead, a ballot for industrial action will be valid in any sector if the majority of those who vote, vote in favour of industrial action.
• Reduction in employers’ notice of industrial action – The time period for trade unions to notify employers of industrial action following a successful ballot will be reduced from 14 days to 7 days.
• Enhanced protection against dismissal for taking part in industrial action – The ability for an employer to potentially fairly dismiss an employee for taking part in industrial action that has been ongoing for 12 weeks or more will be removed.
• Wholesale removal of minimum service levels for strikes in important public services

Employers should pay careful attention to developments in this area over the next few months. Whilst nothing will be changing in the short-term, there is a lot of further information awaited on exactly how these new rights/duties will operate and what exactly employers will need to do to comply. One thing that employers can start to consider is what facilities it could offer to trade union officials and equality representatives within their workplace if requested.

• Enhanced rights for pregnant workers
  

  The Bill paves the way for further amendments to be made to existing legislation to enhance the rights of pregnant workers and new mothers. The Government has said that it will make it unlawful to dismiss a pregnant woman for six months following her return to work, except in limited circumstances.

  The Bill also proposes amendments to enhance protection from dismissal following various periods of family leave, including maternity, adoption and shared parental leave.
  We will need to wait for further detail on these changes, which we expect to get from secondary legislation yet to be published and consultation.

• Tips – requirement to consult on tip allocation policy
  

  The Bill introduces a requirement on employers to:

• Consult with affected workers before producing the first version of a written policy on the allocation of tips, gratuities and service charges; and
• Review the written policy at least once every three years and consult on the policy as part of each review process.From 1 October 2024, all businesses where tips, gratuities and service charges are paid on “more than an occasional and exceptional basis” must have a written policy on how it deals with them. Whilst recommended by the new Code of Practice on tip allocation, there is currently no express requirement on businesses to consult with the workforce about this policy.  There now will be.Businesses who are required to have a policy dealing with tips will (or should) already have one by the time the Bill comes into force.  The requirement to consult is therefore likely to be first triggered once the policy comes up for review. Employers should have mechanisms in place to ensure the policy is reviewed every three years, and to consult with staff as part of the review process.

• Changes to the rules on collective redundancy consultation
  

  The Bill follows through on the Government’s commitment to make collective consultation apply to more employees facing redundancy.

  Currently, collective consultation only applies if an employer proposes to dismiss as redundant 20 or more employees in any 90 day period at a single establishment (place of work).  Going forward, an employer will need to consider the number of employees proposed as redundant by the same legal entity across its entire business.

  This will be huge for businesses operating across the UK in multiple locations such as the retail sector. Employers should ensure that by the time the change comes in, it has a process in place for a ‘live’ central record of all redundancies across the UK.

  Although said in the context of reform to the law on ‘fire and rehire’, the Next Steps To Make Work Pay document also commits the government to consulting on lifting the current cap (a maximum of 90 days’ pay) on the award to employees should an employer not follow the rules on collective consultation.

• A new single enforcement body
  

  The Government has delegated power to the Secretary of State to set up a new enforcement body, called the Fair Work Agency.

  The Fair Work Agency will have the power to enforce certain pieces of employment legislation including national minimum wage, holiday pay, statutory sick pay and some parts of the legislation relating to employment agencies and modern slavery.   In addition, it is proposed that the new enforcement body would also be able to enforce financial penalties awarded where an employer fails to pay compensation awarded by an employment tribunal.

  It’s not yet clear how the Fair Work Agency would be resourced, what its remit would be and, importantly, what powers it would actually have for enforcement.  Therefore, it’s likely that the Fair Work Agency will be the subject of further consultation and won’t be up and running for some time.

  We will keep you updated but, for now, we suggest that employers make sure they keep clear records relating to national minimum wage, holiday pay, statutory sick pay and the other areas in scope for enforcement through the Fair Work Agency so that they are in a strong position to demonstrate compliance.

  Further reform
  

  Alongside the Bill, in its ‘Next Steps to Make Work Pay’, the Government outlines additional proposed changes which will be subject to consultation. We’re not anticipating further reform any time soon, but the consultation will include:

• Mandatory pay gap reporting for large employers to report their ethnicity and disability pay gaps.
• 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 being contacted out of hours, other than in exceptional circumstances.
• Reviews into the effectiveness of the statutory parental leave and carer’s leave regimes.
  

  Impact for employers
  

  Our employment law specialists will be discussing the impact of these reforms in a webinar next month.  Keep an eye on your inbox for further details soon.

  John Macaulay will also be posting a series of strategic insights on LinkedIn over the coming weeks.  Click here for John’s profile, if you’re not already connected.