The UK Government published its Employment Rights Bill (the “Bill”) within its 100-day deadline on October 10, 2024, announcing that it had unveiled significant reforms to employment rights. Alongside the Bill the Government published its Next Steps to Make Work Pay document, which sets out its visions, objectives and plan for the phased delivery of the manifesto commitments promised in its Plan to Make Work Pay. 

In this update, we summarize some of the key headlines for employers, including likely timings, what’s in the Bill and what’s not.

Key takeaways for employers

• The Bill is expansive as it proposes to bring forward a massive 28 individual employment reforms and is 158 pages long – a lot for employers to get to grips with! 

• The reforms are designed to modernise the employment rights framework with the aim of growing the economy, raising living standards and creating opportunities for all. Taken as a whole, the Bill includes the most significant package of employment law reforms that we have seen in recent decades. The reforms will lead to fundamental changes in key HR processes (such as recruitment and dismissal), a sea change in employee relations (including paving the way for a new era of partnership with unions) and an increased focus on employment law compliance and enforcement – increasing the burdens on businesses whilst simultaneously enhancing workers’ rights.

• The Bill will now make its way through Parliament and may be amended along the way. It is also described as phase one of the Government’s plan for reform, so there’s much more to come before employers can start preparing meaningfully for implementation. The Government explains in the Next Steps document that:
  
  • Consultation will happen on several reform areas in the Bill. Targeted consultations aimed at seeking significant input from all stakeholders are expected to begin in 2025. 
  • Much of the detail will be fleshed out by regulations, codes of practice and guidance – which will come later. 
  • Stakeholders will receive appropriate time to prepare for the changes ahead of commencement and most reforms will take effect no sooner than 2026, with reforms to unfair dismissal no sooner than Autumn 2026. This is welcomed to ensure that the law is not rushed, is well thought through and so that employers and the public can have a say to ensure it is balanced. There will be some earlier reforms too, such as the repeal of the Strikes (Minimum Service Levels) Act 2023 and changes to the minimum wage (which will come into effect in April 2025).

• Given the Government is taking a phased approach to implementation of its Plan to Make Work Pay, there are some reforms that are not in the Bill. For example:
  
  • Reforms that can be delivered outside of the Bill using existing powers or through other means (such as taking forward the right to switch off through a statutory code of practice, which has been promised to be delivered alongside the Bill’s passage through Parliament).
  • Reforms that will be contained in the Equality (Race and Disability) Bill (the “Equality Bill”) such as extending the pay gap reporting regime to ethnicity and disability, which will be subject to future consultation and will be published in draft in this Parliamentary Session.
  • Longer-term reforms, which the Government recognizes will take longer to undertake and implement. These include reviews into the parental leave and carer’s leave systems and the introduction of a single worker status (merging the status of ‘employee’ and ‘worker’).

What’s in the Bill?

We set the key reforms out below:

Day one rights for unfair dismissal

• The two-year qualifying period for unfair dismissal will be removed, making the claim available from “day one” of employment.

• The law will permit employers to operate probation periods by providing an “initial period” during which employers can follow a modified lighter-touch process to dismiss an employee for poor performance, misconduct, capability or some other substantial reason relating to the employee. What this will require in practice will be subject to consultation. However, on the Bill’s current drafting, redundancies during probation periods or dismissals for a substantial reason not relating to the employee will fall outside of this—meaning that in those circumstances the employer will still need to follow the same full process as for any other employee.

• The Government plans to consult on the length of the initial period and has indicated that its preference is for this statutory probation period to be a maximum of nine (9) months. However, even employees dismissed during the probationary period will be able to bring a claim of unfair dismissal, challenging the reason and/or whether the light-touch procedure has been followed, so the number of claims is likely to be increased.

• The Government also intends to consult on what compensation for successful unfair dismissal claims during the probation period will be, with consideration given to tribunals not being able to award the full compensatory damages currently available.

Tough restrictions on fire and rehire and changes to the collective consultation threshold

• The Government says that it will end ‘fire and rehire’ and ‘fire and replace’ by closing the current “loopholes.” It aims to achieve this by inserting new provisions into the Employment Rights Act 1996 to make a dismissal automatically unfair if the reason or principal reason for the dismissal is:
  
  • that the employer sought to vary the employee’s contract of employment and the employee did not agree to the variation; or 
  • to enable the employer to replace the employee with someone else, or reengage the employee, under a varied contract to carry out substantially the same duties as the employee carried out before being dismissed.

• There is a (seemingly very limited) exception where the employer is in serious financial difficulties and the employer could not reasonably have avoided the need to make the variation. However, the scope for imposing changes to contracts through fire and rehire or fire and replace will be much reduced.

• The Bill will remove the “at one establishment” test used to assess whether the trigger for collective redundancy consultation is met, meaning that the threshold will be assessed by looking at the number of people impacted across the employer as a whole, rather than in a single workplace. For employers with multiple sites this will mean that the threshold is more easily triggered and they will need a mechanism to keep track of proposed redundancies across different sites.

• The Government has made a commitment to consult on “lifting the cap” on the protective award if the collective redundancy process is not followed and to look at the role that interim relief could play. Currently that award is capped at 90 days’ gross pay per employee. 

Zero hours contracts not banned but new rules on guaranteed hours

• In respect of zero hours contracts, the announcement confirmed that the Bill will end “exploitative zero hours contracts.” The Bill proposes that employers must make “a guaranteed hours offer” to zero hours workers along with (importantly) those on “low hours” contracts, who regularly work more than these hours, with the ability to move to guaranteed hours contracts which reflect the hours they regularly work over the relevant reference period.

• This does not look like a straightforward reform (far from it) and how this will work in practice will remain to be seen as further consultation is promised on the detail. However, it does not amount to an outright ban on zero hour contracts, but employees will need to be offered an alternative.

Strengthened flexible working rules

• The Government has said that it is making flexible working the default. Changes are being proposed to the existing flexible working regime to ensure more requests are agreed by employers. Employers must demonstrate that both:
  
  • a refusal of a flexible working request is based on one or more of the 8 statutory grounds (which are set to remain the same as the current law) for refusing a request; and
  • that it is reasonable for the employer to refuse the application on that ground (or grounds).

• Again, the Government appears to be committing to consulting on the detail of this. This restricts an employer’s ability to refuse requests for flexible working and will likely lead to an increase in claims. However, the penalty for non-compliance remains a maximum of 8 weeks’ pay (capped at £700 per week), together with an order for reconsideration.

Strengthened harassment provisions

There are some significant changes being proposed to the laws on harassment and sexual harassment in the Bill, including:

• Employers must take “all reasonable steps” (in a strengthening of the law due to come into force this October where an employer must take “reasonable steps”) to prevent sexual harassment. The Bill includes new powers for regulations to be made to specify what steps are to be regarded as “reasonable.”

• It (re)introduces protection against third-party harassment relating to all the protected characteristics covered by harassment (so not just sexual harassment). So, employers will be liable if a third party harasses an ‘employee’ (a broader definition under the Equality Act 2010 (“EA 2010”) including employees, workers and apprentices) in the course of their employment and the employer failed to take all reasonable steps to prevent the third party from doing so. On the current drafting, an employer could be liable for a single act of third-party harassment unlike the previous third-party harassment provisions in the EA 2010 that were repealed in 2013, which stated that employers were not liable unless there had been repeated incidents. 

• Complaints about sexual harassment will be included in the definition of ‘protected disclosures’ for whistleblowing purposes – meaning that those who raise issues about sexual harassment that has occurred, is occurring, or is likely to occur will now be covered by whistleblowing protections (such as protections from detriment or dismissal), provided that they have a reasonable belief that their disclosure is in the public interest. The change also means that NDAs will not be able to prevent such disclosures from being made.

Increasing family friendly rights, including stronger dismissal protection for pregnant women and returners from statutory family leave

• The Bill plans to deliver “stronger protections for pregnant women and new mothers returning to work including protection from dismissal whilst pregnant, on maternity leave and within six months of returning to work.” Further details will be set out in regulations and so we await the detail of how this will operate.

• The qualifying period requirement for unpaid parental leave and paternity leave will be removed.

• The Bill introduces a new right to at least one week’s ‘Bereavement Leave’  but does not yet include powers to require that Bereavement Leave be paid. 

Amendments to gender pay gap reporting

The Bill makes amendments to the EA 2010 (both of which will be subject to regulations) to:

• Require large employers to develop and publish equality action plans showing the steps they are taking in relation to their employees with regard to prescribed matters related to gender equality, which includes addressing the gender pay gap and supporting employees going through menopause.

• Introduce the ability to make regulations on the information about outsourced workers that needs to be included in gender pay gap reporting, including, “among other things,” the identity of the providers or contract workers with whom the employer engages.

New enforcement body with broad powers

• The Bill paves the way for a new Fair Work Agency “bringing together existing enforcement bodies” to be established. It will combine existing bodies’ powers of enforcement over matters such as the national minimum wage and introduce new powers of enforcement in relation to holiday pay.

• There are detailed provisions setting out broad potential powers, including the power to appoint enforcement officers, to obtain documents or information from individuals and to enter businesses to obtain documents etc. However, as with other enforcement agencies, how this affects employers in reality will largely depend on how this is resourced and how long it takes to set up. 

Making Statutory Sick Pay available from day one for all employees

• The Bill makes Statutory Sick Pay a day one right by scrapping the waiting period so that it will become payable from day one of sickness.

• It also removes the lower earnings limit.

Modernising industrial relations

There’s a raft of reforms on the horizon in the Bill aimed at increasing union rights and membership, making it easier for unions to gain recognition and take industrial action, much of which will be subject to consultation to “modernise the legislative framework that underpins our trade unions,” including:

• Employers will have to give workers a written statement that the worker has the right to join a trade union.

• Trade unions will be given new rights to request access to a workplace for union officials to meet, represent, recruit and organize members. It appears the right will apply to all listed unions, irrespective of whether they are recognized or have existing membership within a workforce. If employers refuse, unions will be able to apply to the Central Arbitration Committee. 

• There will be reductions in the thresholds for unions to apply for and be awarded statutory recognition. These reforms are likely to make it easier for a union to establish support within recognition and then gain statutory recognition.

• There will also be changes to make it easier for unions to take lawful industrial action and introduction of new provisions making it unlawful for employers to subject workers to certain detriments for taking part in lawful industrial action.

• Changes to pave the way for electronic balloting to be used for industrial action ballots.

• The repeal of the Strikes “Minimum Services Levels” Act 2023.

What’s not in the Bill?

As predicted, there are some reforms not contained in the Bill, including (but not limited to):

• A “Right to Switch Off,” which is promised to be delivered through a statutory code of practice alongside the Bill’s passage. The Government says this will prevent employees from being contacted out of hours, except in exceptional circumstances, to allow them the rest and get the recuperation they need to give 100%, though it remains to be seen how much “teeth” these changes will have in practice.

• A “strong commitment” to end pay discrimination which will be delivered in the Equality Bill, which will be subject to future consultation and which will be published in draft form by July 2025. This includes measures such as extending pay gap reporting to ethnicity and disability for large employers and measures on equal pay and extending equal pay rights to protect workers suffering discrimination on the basis of race or disability.

• Longer-term delivery of reforms, such as:
  
  • Consulting on the framework for a single “worker” status for employment. This is both big and complicated. It would certainly be a huge change if employment rights currently only available to traditional employees are extended to the current category of “workers” —potentially increasing the impact of all the above reforms.
  • Undertaking reviews into the parental leave and carer’s leave systems.
  • Launching a call for evidence to examine the Transfer of Undertakings (Protection of Employment) Regulations 2006.

How can you stay updated?

Keep an eye out for more detailed updates and our take on the reforms, as we will be updating our Policy Hub in due course. 

We will also be running a series of webinars on the key reforms and the practical impacts of these for employers...watch this space for further details.