Employment Rights Bill – key takeaways for employers

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Making flexible working the default

This had been one of the most talked about changes in the run up to the election and the publication of the Bill. Some newspaper headlines had even gone so far as to suggest that the reforms would allow employees a right to a 4-day working week. 

The pre-election commitment in the ‘Make Work Pay’ Paper was to make flexible work the default from day one for all workers, except where it is ‘not reasonably feasible’.

The current position is that since April 2024 employees have had the right from day one to make a request for flexible working. This may be in relation to their hours of work, time of work or place of work. Since that date employees have also had the right to make up to two requests per year. 

The request for flexible work can be rejected based on any of the eight grounds specified in the legislation.

The current wording in the Employment Rights Act 1996 (ERA) provides that the employer “shall only refuse the application because he considers that one or more of the” grounds apply. That means it is the subjective view of the employer that is the deciding factor. If the employer considers that one or more of the grounds applies, then the test is satisfied. There is no right to challenge the decision on the basis of the reasonableness of their judgement. 

The Bill inserts new wording into the flexible work sections of the ERA. Whilst the grounds on which a request can be refused remains the same, the provision dealing with an employer’s refusal changes to “may refuse the application only if … the employer considers that the application should be refused on a ground or grounds listed and it is reasonable for the employer to refuse the application on that ground or those grounds.”

There is also a proposed new additional requirement that where an employer refuses an application, they must not just state the grounds but also “explain why the employer considers that it is reasonable to refuse the application on that ground or those grounds.”

The new words highlighted are important. Whereas currently there is no challenge available to the decision on the grounds of reasonableness and the employer can only face a claim where the decision was based on incorrect facts, this change will give the Employment Tribunal (ET) the right to look behind the employer’s decision-making process.

Bereavement leave

The current entitlement to two weeks’ parental bereavement leave will continue. 

A new right to one-week’s bereavement leave for all employees who have suffered a bereavement will be introduced. The detail of how an employee will qualify is to be set out in future Regulations.

Paternity leave 

Currently, paternity leave is available only to employees who have 26 weeks’ service. The Bill removes the requirement for any minimum period of service. The entitlement to two weeks’ leave to be taken within the first year after a child’s birth or adoption remains the same.

Parental leave

Parental leave is a right to unpaid leave to care for children. An employee may take up to 18 weeks’ unpaid parental leave for each child at any time before the child’s 18th birthday. It is however the default that no more than four weeks’ leave in respect of any individual child can be taken during any particular year.

The Bill removes the requirement that the employee has to have one year’s service to be entitled to take this leave.

Dismissal protection for pregnant employees and new parents 

Existing protection in a redundancy situation for employees who are pregnant, taking family leave or having recently returned will be extended. The Bill adds that protection will also apply in relation to non-redundancy dismissals. Details will be provided in future Regulations which are expected to restrict the circumstances that an employer will be able to dismiss an employee during the protected period. 

Unfair dismissal  

This is the aspect of the Bill which has received by far the most press attention, and with good reason.

The Bill proposes to remove the two-year qualifying period before an employee can claim unfair dismissal. This will mean that an employee will be able to claim unfair dismissal if they are dismissed even after only one day of employment.

However, during the initial period of employment an employer will still be able to dismiss an employee if they are unsuitable after having followed a very basic procedure. The initial reference period being proposed by the Government is nine months. This will in effect become a statutory probation period. During this new statutory probation period only limited protections against unfair dismissal will apply. This key change in relation to unfair dismissal rights will not be implemented until there has been a consultation on the new ‘statutory probation period’ which means there will be no change before Autumn 2026. 

Fire and rehire

The Government had said before the election that it would end the practice of fire and rehire and yet their policy paper also accepted that “it is important that businesses can restructure to remain viable, to preserve their workforce and the company when there is genuinely no alternative, but this must follow a proper process based on dialogue and common understanding between employers and workers”.

Out of all the reforms in the Bill, it looks like the provisions in this respect appear likely to achieve that objective.

So where do things stand currently?

The ‘Code of Practice on fire and rehire’ came into force on 18 July 2024. This must now be taken into account by Employment Tribunals hearing relevant claims (i.e. about dismissals made to seek to achieve a variation to an employee’s contract) and an unreasonable failure to follow the Code may result in compensation for certain claims, including unfair dismissal, being increased by up to 25%. 

The Bill creates a new category of automatic unfair dismissal where the employee is dismissed for refusing to accept new terms and conditions. The employer’s only defence is where it can show the reason for the variation was to allow it to continue as a ‘going concern’. 

The full wording refers to the reasons for the forced change in an employee’s terms being “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 “in all the circumstances the employer could not reasonably have avoided the need to make the variation.”

This strongly indicates that where there are contractual changes being proposed, the agreement of the employee will be needed (and given without any background threat of dismissal) unless there is a potential insolvency situation. This could be a very high bar to meet. A new Code of Practice, when published, is likely to clearly highlight this for employers.

Furthermore, there will also be consultation on the potential for greater protective awards (where collective consultation applies) in fire and rehire scenarios and the possibility of making interim relief available.

Interim relief is currently limited to claims that someone has been dismissed for having made a protected disclosure. The individual must make an application to an ET for interim relief within seven days of their dismissal, together with making a complaint of unfair dismissal (without having to go through Acas early conciliation first of all), and this application will then lead to an expedited ET hearing. If at that hearing they are able to persuade an ET judge that the claim for automatically unfair dismissal that they have brought, the ET can order the employer to continue to pay the dismissed employee at their pre-dismissal rate of pay until such time as the full hearing of their unfair dismissal claim. This could be several months’ away. An application for interim relief could be successful even if a later ET hearing decides that the dismissal was not in fact unfair.

If the right to seek interim relief is extended to fire and rehire situations, particularly if the employer has dismissed several employees at the same time as part of that process, interim relief applications could become more commonplace. It is a powerful weapon open to employees.

It will be important for employers to prepare for this change in law by taking steps now to ensure that contracts contain terms that expressly allow for variations and flexibility regarding the way that work is carried out, so that there will at least be some grounds to argue that there is no variation of the employment contract’s terms.

Collective redundancy consultation

The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) provides that where an employer proposes to make 20 or more employees “at one establishment” redundant within a period of 90 days or less it must consult on its proposal with representatives of the affected employees and also notify the Secretary of State.

The Bill removes the reference to “at one establishment” – which will extend the duty on employers to collectively consult where it proposes to make 20 or more redundancies within a rolling 90 days in different locations across the business. 

This will be a big, new administrative issue for employers considering that any dismissal for redundancy or some other substantial reason (SOSR) will be within scope. 

Harassment

The Bill includes two big changes relating to harassment.

1. It introduces liability for third-party harassment where the employer has failed to take all reasonable steps to prevent it.
2. It changes the new duty to take reasonable steps to prevent sexual harassment to a duty to take all reasonable steps to prevent sexual harassment.

The impact of the new duty to take steps to prevent sexual harassment, in force from 26 October 2024, has caused some concern already given the risk of greater awards of compensation in ET claims which include allegations of sexual harassment, and the possibility of enforcement action by the EHRC. The further changes proposed in the Bill are likely to mean that employers will be under a great deal more pressure to ensure that they have in place safeguards to show that they have done everything possible to protect their staff against harassment.

Usefully, there is also a commitment in the Bill that the Government will produce future regulations specifying what will constitute the ‘reasonable steps’ required to comply with the statutory duty to prevent sexual harassment. This is likely to lead to an update of the guidance recently produced by the EHRC to take into account the new wording.

Zero hours contracts

The Bill does not ban the use of zero hours contracts, but it does require employers to offer workers on these or ‘low hours contracts’ a new contract which guarantees them a minimum number of hours. That minimum will be set by reference to the amount of work the worker has carried out in the ‘reference period’. This may be a 12 week period, but the length of the reference period will be one of the issues that will be subject to consultation. 

This will be a continuing obligation. The Bill sets out that “an employer must make a guaranteed hours offer to a worker … after the end of every period”.

The zero hours worker may reject the offer of a guaranteed minimum of hours and the employer will need to make the offer again based on the hours worked in the next reference period.

The Bill also permits the Secretary of State to make regulations requiring that the offer not only guarantees the same number of hours as in the reference period, but also the same days and times or working pattern as in the reference period.

Claims may be made to the ET for failing to make the offer when required or for failing to make the offer with the correct terms. 

There are also new rights to claim compensation where there is cancellation of a shift where insufficient notice has been given. This will apply where there is a zero hours contract or flexible working hours contract. The details of what would be reasonable notice and what level of compensation will be subject to consultation. 

These changes are likely to result in zero or low hours contracts being regarded as burdensome and unattractive for employers that currently use them. Remember that there will also be statutory protection for workers in respect of exercising these rights too. 

There is also the question of what is a ‘low hours contract’? This is not defined in employment legislation so far. The Bill extends the protection to these workers to avoid the obvious loophole that employers may take to avoid the protection being applied to zero hours contracts by guaranteeing one or two hours of work. 

Tips

The Employment (Allocation of Tips) Act 2023 only came into force on 1 October 2024.

It regulates how employers allocate tips among workers by introducing obligations to ensure that workers receive ‘tips, gratuities and service charges’ in full, and that those tips are allocated in a fair and transparent way.

One of the key requirements is for the employer to have a tipping policy which is available to the employees. 

The Bill requires employers to consult with the recognised union, employee representatives or, where there are none, the workers when developing or revising these policies, and to review them at least once every three years with appropriate representatives.

The fact that many employers will have produced a policy without going through a worker consultation process means that upon review there may be a much greater risk of challenges.

Public sector outsourcing

The Bill provides for future regulations that will create a right for public sector employees who are outsourced to private sector employers to maintain the same rights as those still employed by the supplier. The aim here is to avoid there being unfair differences in terms across the workforce. Firms contracting for public sector work will need to be aware of these changes.

Equality action plans

The Bill provides that regulations may require large private sector employers (those with 250 or more employees) to develop and publish an ‘equality action plan’ showing the steps that they are taking in relation to their employees with regard to gender equality, including addressing the gender pay gap and supporting employees going through the menopause. The regulations may also set out certain requirements in respect of the plan, such as its contents, frequency of publication and any other requirements.

Negotiating bodies

Sectoral collective bargaining sets an industry minimum. There might be collective agreement ‘locally’ that provides better terms but the whole industry will have to comply with a sectoral agreement. The creation of pay negotiation bodies to create these agreements across most suitable industries has been called for by unions for a number of years. 

The Bill includes provisions establishing the School Support Staff Negotiating Body and (SSSNB) allowing for regulations to be made to provide for a body to be known as the Adult Social Care Negotiating Body (ASCNB). These bodies will set terms that will apply in relation to workers within the education sector and care sector.

Whether sectoral collective agreements may be extended to other working sectors remains a possibility. 

Statutory sick pay (SSP)

Currently, workers earning less than £123 per week cannot claim SSP and workers who do qualify have to wait three days before the entitlement is triggered on the fourth day.

The Bill removes the lower earnings threshold requirement and the waiting days provisions, meaning that workers will be entitled to SSP from the first day they are ill, rather than the fourth day. 

Where an employee is earning less than the current threshold wages, the entitlement to sick pay will be less. The amount will be confirmed in future regulations but is likely to be a proportion of the pay the worker would have received had they been fit to attend work. 

Union membership and industrial relations

The Bill contains provisions to strengthen the protection of workers from dismissal in relation to trade union activities and to encourage union membership through changes to ensure workers understand their right to join a trade union which will mean the statutory written statement of particulars of employment that every employee and worker should receive will need to expressly reference it. 

Access agreements

The Bill introduces a new ‘access agreement’ for unions to agree with employers the arrangements under which officials may meet, represent, recruit or organise workers (whether or not they are members of a trade union) and ‘to facilitate collective bargaining’.

The access right does not apply to unions to have access to the employer’s site for the purpose of organising industrial action.

The access agreement will need to be requested by the union in a prescribed form. The employer may agree or refuse. If no response is made or the request is refused the request may be made to the Central Arbitration Committee (CAC). 

Union recognition

The Bill makes provision to simplify the statutory recognition process for unions. The Bill removes the requirement for 10% of the proposed bargaining to be shown as members and replaces that with ‘required percentage’ which will be decided following consultation. The TUC has stated that it will push for this to be as low as 2%.

In relation to where a ballot is necessary, the current rules require that a majority of those voting are in favour of recognition and that this represents at least 40% of the workers in the bargaining unit.

The Bill will remove the requirement for 40% support in relation to the recognition ballot so requiring a simple majority of those voting.

Time off

The Bill includes provision for trade union representatives to have sufficient access to facilities and gives time off rights to union equality representatives. 

Industrial action

The Bill removes requirements for industrial action ballots to show minimum levels of support or turnout rather than an overall majority. The notice that the trade union must give the employer of industrial action will be reduced from 14 to 7 days.

Requirements for unions to arrange appropriate supervision of pickets will be removed, as will time limitations on protection against dismissal for strike action.

Protection will be introduced against detriment for taking part in official protected industrial action. Requirements to maintain minimum service levels in key public services during strike action – introduced only recently by the previous Conservative government – are also to be abolished.

In overall terms, if all of these proposed changes to trade union membership and industrial relations rules are implemented, it is likely to lead to a significant increase in collective bargaining arrangements in workplaces. Further, an easing of the hurdles that are needed for ballots for industrial action to be valid may well lead to an increase in strike action, but at the same time may well lead to more compromises being achieved in collective dispute situations.

Labour Market Enforcement

The Government made a commitment to establish a Fair Work Agency to enforce some of the most basic employment protections. The Bill provides for ‘enforcement officers’ to be appointed in relation to the compliance of certain employment rights including SSP; national minimum wage; statutory paid leave and rolled-up holiday pay; conduct of agency rules and modern slavery rules.

The Fair Work Agency will replace the existing enforcement bodies: the Gangmasters and Labour Abuse Authority, the unit that polices the National Minimum Wage and the Employment Agency Standards Inspectorate.

It will have wide-reaching powers to enter premises and inspect documents and may issue Labour Market Enforcement orders which could result in an employer being subject to a fine and even imprisonment for non-compliance. 

The extent of the role that these enforcement provisions will be applied will depend to a large extent on the resources that are made available to the new body. However, the proposal to include statutory holiday pay obligations within its remit is notable as holiday pay claims (brought either as a claim under the Working Time Regulations 1998 or as an unlawful deduction from wages claim under the ERA) are among the most common type of claim made to ETs. If claims of that type are to be dealt with by the new agency, it ought to free up time and resource in the ET system to help alleviate the backlog of other claims which are frequently taking far longer to reach a full hearing than before the pandemic.

Employment Tribunal Time Limits

Currently the standard time limit for bringing a claim in the Employment Tribunal is three months. Subject to any extension of time for the purpose of Early Conciliation through ACAS the claim form must be submitted within the time limit or it may be dismissed.

As part of the employment reforms that had been promised it had been expected that this time limit would be extended and on 26 November 2024 amendments to the Employment Rights Bill were announced that provide for a change in the standard time limit from three months to six months.

This will mean that employees will have a longer period to bring their claim and is likely to result in more claims being issued.

Conclusion

Whilst many of the changes outlined above will take some time to come into place, the Government is not standing still on this, as four consultations on different aspects of the Bill have commenced: the changes to zero hours contacts, collective redundancy consultation and ‘fire and rehire’, the changes to SSP and to trade union practices. The consultations run until early December 2024.

There is no doubt that the Bill sets out a broad range of changes which will have a significant impact on employer-employee relationships. The Government’s own impact assessment estimates that the cost to UK business of complying with the Bill will be £5bn. It is in employers’ best interests to begin to prepare for the new wave of employment legislation now, so that they are best prepared for when it is formally introduced and do not fall foul of potential claims being brought against them by employees.