Employment Rights Bill: What’s next for workers and employers?

As Labour leader Keir Starmer outlines his vision for the future of the UK workforce, significant changes are on the horizon. The Employment Rights Bill, which is a cornerstone of Starmer’s agenda, brings forward a range of measures that aim to address longstanding concerns in the workplace. At our recent webinar, Paul Chamberlain, Partner and Head of Employment at JMW Solicitors provided an in-depth look at what employers can expect, focusing on the key provisions of the bill as well as wider labour market challenges.

Zero-hour contracts: Addressing worker insecurity

Zero-hour contracts have long been a controversial issue, with some arguing that they leave workers vulnerable to exploitation and financial instability. Although the Employment Rights Bill does not directly ban these contracts, there is a growing call within Labour to address the insecurity they create.

In our recent webinar, Paul highlighted several factors that the bill addresses to prevent exploitation. The key provisions include:

Guaranteed hours contracts: Employers will now be obligated to offer workers on zero hours contracts a “guaranteed hours contract.” This applies not only to zero hours contracts but also to minimum hours contracts. While employers must offer these guaranteed hours, the worker is not obligated to accept them. The guaranteed hours will be based on a retrospective reference period, which may be the past 12 weeks, with an averaging calculation to determine the number of hours to offer.

Reasonable notice for shifts: Under the new provisions, workers on zero hours contracts will have the right to reasonable notice before being required to work a shift. This aims to prevent the exploitative practice of employers giving minimal or no notice for a shift, which often creates logistical challenges for workers.

Notice of shift cancellations: Workers will also have the right to receive reasonable notice if a scheduled shift is cancelled or changed. This provision seeks to avoid situations where workers make plans and incur costs to show up for a shift, only to find that it has been cancelled at the last minute.

These changes reflect the government’s efforts to balance flexibility with protections for workers. However, while the core principles are outlined, the full details – such as the definition of “reasonable” notice – are still to be clarified. Additionally, the bill does not provide a clear timeline for implementation, but the government has indicated that these changes are unlikely to come into force before 2025, with some provisions potentially not taking effect until 2026.

Agency worker protections and zero hours contracts

In addition to these provisions for direct zero hours contracts, Paul also addressed the protection of agency workers. Since many agency workers are engaged through intermediaries like staffing agencies or umbrella companies, the government has recognised that these workers may face unique challenges regarding their rights under the new rules.

There are two options under consideration for who should bear the responsibility for offering these rights:

Option 1: The responsibility should lie with the agency or employment business that directly engages the worker.
Option 2: The responsibility could fall on the end user, the employer who ultimately receives the services of the agency worker.

The government is still seeking feedback on which option is more suitable, with Paul’s suggestion being that the responsibility should likely rest with the agency, given the contractual relationships involved. This consultation is ongoing, and there is yet to be a final decision on agency worker protections.

Day one rights: A win for workers

The introduction of day one rights is one of the most significant elements of the Employment Rights Bill. Currently, employees must have two years of continuous service to bring an ordinary unfair dismissal claim. However, the government is proposing to remove this qualifying period, meaning employees will be protected from day one.

As Paul explained, “The importance of day one rights cannot be overstated. It ensures that every worker, from the moment they start their job, is treated fairly and has access to the same protections.”

While this is a major shift, the government proposes a statutory probationary period of around six to nine months, during which employers will have a clearer opportunity to review an employee’s performance. He noted, “It will be easier for you to terminate their employment in that statutory probationary period than it would be if the ordinary unfair dismissal qualification period reduced to nil.”

In the longer term, the government is considering moving towards a single status of worker, extending the rights of employees to all workers (excluding those who are genuinely self-employed). This would bring workers under the protection of unfair dismissal and statutory redundancy pay, benefits they currently lack.

Statutory sick pay: Extending coverage and support

A key focus for Labour is the expansion of statutory sick pay (SSP). Currently, SSP is paid only from day four of an employee’s absence due to illness, after a waiting period of three days. The government has decided to trigger the obligation to pay SSP from day one, rather than waiting for the fourth day of absence.

Another key change is that SSP eligibility will no longer be limited by the lower earnings limit. At present, employees must earn above a minimum threshold to qualify for SSP. The government has chosen to remove this earnings requirement, ensuring that all workers, regardless of their income, will be entitled to SSP from day one.

Furthermore, instead of the fixed SSP rate, which increases annually, it is likely that SSP will be calculated as a percentage of the employee’s pay for those earning above a certain amount. Paul explained the government’s reasoning: “It will more than likely…be determined by reference to a percentage of that worker’s pay. That might be fixed for people who earn below a certain amount, but for anyone who earns above a certain amount, it’s likely to be a percentage of their pay.” This change aims to ensure that SSP is more meaningful and helps prevent financial hardship for employees who are off sick and lack a company sick pay scheme.

These changes will be particularly significant for those employers who rely solely on statutory sick pay, rather than offering a company sick pay scheme. For employers who already incorporate SSP into their company sick pay, the impact will be less pronounced. However, these changes are expected to affect both the cost of sick pay and the broader policy approach, making it an important issue to monitor as the reforms progress.

Employment Rights Bill: Key provisions

Beyond the areas above, the Labour plan to introduce several important measures, including stronger maternity rights, new protections around sexual harassment, and changes to fire-and-rehire practices. These measures aim to rebalance the relationship between workers and employers in a post-pandemic world, where flexibility and fairness are becoming increasingly crucial.

Enhanced maternity rights: Supporting working mothers

One of the standout proposals in the bill is the introduction of greater protections for women returning to work after maternity leave. While current laws offer some safeguards, the new legislation aims to go further by making it unlawful to dismiss a mother within six months of her return to work, except in very limited circumstances.

“This is a very significant blanket improvement,” explained Paul. “It will significantly increase that burden on employers and reduce flexibility when women return from work after they’ve given birth.” However, it is yet to be understood if this will also apply to Fathers or others that can take parental leave.

While larger organisations may find it easier to adapt, small and medium-sized enterprises (SMEs) could face greater challenges, particularly when managing limited resources. Employers will need to carefully consider how they support mothers transitioning back into the workplace and ensure their policies reflect this enhanced protection.

Sexual harassment: A higher standard for employers

Sexual harassment has been a focal point in employment law in recent years, with new measures already implemented as of October 26th, 2024. Employers now have a duty to take “reasonable steps” to prevent sexual harassment in the workplace. The new Employment Rights Bill raises the bar further, requiring employers to take “all reasonable steps.”

“This is a huge imposition that raises the bar significantly higher than it currently is,” noted Paul. “Employers need to start taking this issue seriously.”

To comply, organisations must ensure they have clear policies, robust training programmes, and effective whistleblowing channels in place. Employers may also need to conduct risk assessments to identify potential vulnerabilities and take action to mitigate these risks. If the business fails to meet these obligations it could result in enhanced compensation of up to 25% in tribunal cases.

Fire and rehire: Eliminating controversial practices

The controversial “fire and rehire” practice is also under scrutiny. The new bill seeks to make this process unlawful except in extreme circumstances where financial hardship leaves an employer with no alternative.

“This Labour Government has taken great exception to the fire and rehire process,” Paul explained. “They’re going to eliminate it in all but the most serious cases.”

For businesses, this change underscores the importance of transparent communication and fair negotiation during times of financial difficulty.

Gender pay gap and menopause support

The bill also introduces obligations for employers with over 250 employees to develop action plans addressing gender pay gaps and providing support for employees experiencing menopause.

While the finer details are still to come, Paul emphasised the importance of preparing for these changes now. “Gender pay gap issues and supporting women through the menopause are big agenda items for the government,” he remarked.

Employers should take a proactive approach by auditing current practices, ensuring transparency in pay structures, and fostering a culture of support for all employees.

Trade unions and collective action

Changes to trade union laws and industrial action rules reflect Labour’s commitment to restoring workers’ rights. The bill seeks to reverse many of the Thatcher-era reforms, making it easier for unions to organise strikes and simplifying the red tape surrounding industrial action.

In addition, employers will soon be required to include a statement in employment contracts outlining workers’ rights to join a trade union.

“This might seem like a fairly innocuous sentence,” Paul explained, “but it’s a first-time reference to this right in a prescribed list of particulars.”

Looking ahead: What employers should do now

The Employment Rights Bill represents a significant shift in the balance of power between workers and employers. While many of the proposals aim to create fairer workplaces, they also place new demands on organisations, particularly SMEs.

Paul’s advice to employers is clear: “Start preparing now.” From updating policies and training programmes to conducting risk assessments and reviewing employment contracts, businesses need to ensure they are ready for the changes ahead.

As Paul concluded, “These are big changes, and they’re coming fast. Employers need to be proactive and thoughtful about how they navigate these new obligations.”

If you have further questions about the upcoming changes to employment law, you can contact Paul directly at paul.chamberlain@jmw.co.uk

Paul Chamberlain, Partner and Head of Employment at JMW Solicitors

November 20, 2024