The government last week fulfilled its commitment to bring in an Employment Rights Bill within 100 days of taking office, giving nine million workers more rights from day one of their job. But, in a new twist, it seems that most of the changes may not be implemented for at least two years. What will it mean for UK businesses?
Why is this happening?
The Labour party, founded over a century ago to advance the interests of workers, promised in its 2024 election manifesto to strengthen employment rights. It calls the bill, which brings in 28 separate reforms in favour of employees, ‘the biggest upgrade to employment rights for a generation’.
What was promised on unfair dismissal law?
This is the headline reform and one that has, until the very last minute, been the subject of intense lobbying by business and trade unions alike. Traditionally Labour governments have reduced the qualifying period before a claim can be made and the Conservatives have increased it. This time, Labour boldly promised the right from ‘day one’, which sent a panic through businesses, fearful of not being able to correct hiring mistakes without being taken to tribunal.
What will actually happen?
However, in a sign that the government has listened to businesses, there will be consultation on a new statutory probation period of nine months for new hires, which ‘will allow for a proper assessment of an employee’s suitability to a role as well as reassuring employees that they have rights from day one’. Previously it was reported that the period would be six months.
Flexible working to be strengthened
This was expected to be the other major change. In declining a request, an employer will have to show one of the eight usual reasons and that the flexible working would be unreasonable – and also provide reasons why a refusal is reasonable. However, there is no change to the penalty for breach (eight weeks' pay). This perhaps isn’t the game-changer it was heralded to be.
A squeeze on zero hours contracts
The government promised that ‘exploitative’ zero hours contracts would be banned. In practice, there will be a right to a guaranteed hours contract if regular hours are worked over a defined period. The reforms include a right to reasonable notice of shifts and payment for cancellation of shifts at short notice.
Restrictions on firing and re-hiring
The announced ‘ban on fire and re-hire’ is not quite that. The Bill restricts employers’ ability to dismiss and offer re-engagement on different terms by making it automatically unfair to dismiss for refusing a contract variation. There will be a very limited exception for a genuine need to avoid serious financial issues that may threaten the business, and it will be necessary to consult first.
Sick pay
As expected, statutory sick pay will be payable from day one of sickness absence, abolishing the three-day waiting period. Currently the rate is £116.75 per week and there are no plans to increase it by more than the usual annual uprate.
Paternity and parental leave changes
These will apply from day one of employment, when currently employees have to wait for 26 weeks.
Full liability for third party harassment introduced
In a significant and unexpected development, there will be liability for harassment from third parties in the course of employment.
A new Fair Work Agency
A new enforcement body, the Fair Work Agency, will be created with the power to fine employers that breach the new rights. This will probably be more important than many people think.
A boost for maternity rights
There will be 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.
National Living Wage changes
Labour promised large increases in order to make work pay. In practice, the cost of living will be taken into account when setting this and there will be one band, not dependent on age.
Trade union legislation
The bill repeals the anti-union legislation put in place by the previous administration, including the Minimum Service Levels (Strikes) Act.
What’s missing?
Some other changes were expected but instead the government will look to implement them in the future. Subject to consultations, this includes a ‘right to switch off’ (preventing employees from being contacted out of hours, except in exceptional circumstances) and a single status of worker with a transition towards a simpler two-part framework for employment status.
What do the trade unions think of it?
Unions are split on whether the bill goes far enough. Paul Nowak, TUC general secretary, said, ‘After 14 years of stagnating living standards… this bill highlights the government’s commitment to upgrade rights and protections for millions.’ But Sharon Graham, general secretary of Unite, said, ‘The bill still ties itself up in knots trying to avoid what was promised. Failure to end fire and rehire and zero hours contracts once and for all will leave more holes than Swiss cheese that hostile employers will use.’
When will the new rules come into force?
It is rumoured to be as late as October 2026 but speculation on the bill has been wrong in the past so this can’t be relied upon.
What will it mean for tribunal claims?
There will be more claims, raising fears that this will put too much pressure on an overloaded tribunal system. This is on top of a situation where employment tribunal claims are increasing and at the same time are being cleared more slowly.
What will it mean for the economy?
This depends on the view you take. On the one hand, with one in five UK businesses of more than 10 employees reporting staff shortages, the government argues that increasing rights and job security will encourage people to rejoin the workforce and help its growth agenda. Their plan, a ‘pro-business, pro-worker’ approach, will, the Business Secretary John Reynolds said, ‘give employers the flexibility they need to grow whilst ending unscrupulous and unfair practices’. On the other hand, the Federation of Small Businesses has warned that the new rights ‘will inevitably deter small employers from taking on new people, for fear of facing an employment tribunal'.
