Government publishes the Employment Rights Bill

Alongside the legislation, a ‘Next Steps’ document for the Plan to Make Work Pay has been published outlining the government’s long-term plans. 

Many of the proposed measures mirror the proposals in the Labour Party manifesto which we have previously reported on, however, there are some more unexpected changes. Some of the reforms that are included in the Bill were not outlined in the King's Speech in July (for example the changes to the law on protection from harassment) and there are other reforms which go further than was originally suggested.

Timeframe

The reforms will be delivered in phases. Some of the reforms will require a change in the law; others will not. Secondary legislation will be required to implement most of the reforms. The government has also said that it will publish a number of targeted consultations in several areas to inform the government's next steps. As such, we anticipate that the majority of the reforms will not take effect until 2026. In particular, the government have said that the reforms to unfair dismissal will take effect no sooner than autumn 2026.

Changes which will come into force sooner are changes to national minimum wage (NMW) law and the repeal of some industrial action laws introduced by the former government. In July, the Low Pay Commission’s remit was adjusted to ensure that the cost of living is factored into decisions on minimum wage rates. NMW age bands will also be removed to ensure every adult worker will be treated the same in respect of the NMW. In the area of industrial relations the government intends to repeal the Strikes (Minimum Service Levels) Act 2023, which gives the government power to set minimum service levels for key public service during strike action. It will also repeal the regulations allowing agencies to provide replacement labour during strikes.

Key provisions in the Bill

• Make unfair dismissal a ‘day one’ right – the current two-year qualifying period for protection from unfair dismissal will be removed and the government will consult on a statutory probation period for new hires to assess their suitability for a role. There had been discussion that the probationary period would be 6 months but the government has said today that their preference is 9 months.
• Family friendly rights – the government is making a number of changes, including:
  • strengthening flexible working rights by making it the default for all, unless the employer can prove it’s unreasonable.
  • establishing a new right to bereavement leave from day 1.
  • making paternity and parental leave a day 1 right.
  • strengthening protections for pregnant women and new mothers, including protection from dismissal while pregnant, on maternity leave and within six months of returning to work (and providing equivalent protections for employees returning from other forms of family-related leave).
• Strengthen statutory sick pay by removing the current three-day waiting period and the lower earnings limit for statutory sick pay.
• Banning ‘exploitative’ zero-hours contracts – To end exploitative zero hours contracts, the government will give workers on zero hours contracts and workers with a ‘low’ number of guaranteed hours, who regularly work more than these hours, the ability to move to guaranteed hours contracts which reflect the hours they regularly work over a 12-week reference period. If more hours become regular over time, subsequent reference review periods will provide workers with the opportunity to reflect this in their contracts. The government will consult with employers and trade unions on how these subsequent review periods should work. Alongside this, the government has said it will ensure workers get reasonable notice of any change in shifts or working time, with proportionate compensation for any shifts cancelled or curtailed at short notice.
• End ‘unscrupulous fire and rehire practices’ unless there is genuinely no alternative. It will be automatically unfair to dismiss an employee for refusing a contract variation albeit there will be a very limited exception where the employer has a genuine need to avoid serious financial issues that may threaten the business. It will also be necessary to go through a lot of consultation before bringing in changes.
• Measures to extend the time limit for bringing employment tribunal claims – the government has said this will be added to the Bill via amendment during its passage through parliament but has not given any further details at this stage.
• Require large employers to create action plans on addressing gender pay gaps and supporting employees through the menopause. This will be backed up by a Regulatory Enforcement Unit for equal pay.
• Redundancy – the Bill changes when the employer is required to collectively consult. Once the new provisions are in place, employers will need to collectively consult where 20 employees are affected across the whole business rather than just at one establishment. This will mean employers are likely to have to collectively consult more often. To strengthen redundancy protection the government has also said that it is committed to consulting on lifting the cap of the protective award if an employer is found not to have properly followed the collective redundancy process.
• Establish a new enforcement agency, the Fair Work Agency, which will bring together existing enforcement powers and also enforce rights such as holiday pay.
• Trade Unions and industrial action - the government intends to simplify the union recognition process, and bring in a new right of access for union officials to meet, represent, recruit and organise members. The government has also said that alongside the Bill it will consult to modernise the legislative framework that underpins trade unions.
• Protection from harassment – the Bill includes provisions to extend the current duty to take "reasonable steps" to "all reasonable steps". It also changes the law on sexual harassment to protect workers from harassment by third parties. Although this was part of Labour's manifesto it was not part of the King's speech.
• Provisions for introducing sector wide collective bargaining for school support staff and adult social care workers.

Next steps policy paper

Alongside the proposed legislation, the government published a ‘Next Steps’ document setting out its time frames and priorities. It also outlines the reforms that it will look to implement in the future (albeit no timeframe is set out). Subject to consultation, these will include:

• a ‘right to switch off’, preventing employees from being contacted out of hours, except in exceptional circumstances.
• a commitment to end pay discrimination by expanding the Equality (Race and Disability) Bill, which was announced in the King’s Speech on 17 July 2024, to make it mandatory 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.
• reviews of the parental leave and carers leave systems to consider whether there is a need for change.

What does this mean for employers?

There is a lot of information to absorb, however, the Bill leaves employers in no doubt of the government's commitment to employment law reform. What will be reassuring for employers is the fact that many of the changes will not come into force for some time and many will be subject to extensive consultation. We will continue to digest the Bill and will publish more considered analysis of individual parts of the Bill in the near future.

Click here to view the Next Steps and here to view the Bill.