The Employment Rights Bill: Prepare and beware

Last month, the new-ish Labour government delivered its anticipated Employment Rights Bill seeking to deliver “economic security and growth to businesses, workers and communities across the UK“. Anna Elliot, Partner, Employment, at Osborne Clarke, explains the implications for HR.

Many of the proposed reforms had already been heavily trailed in Labour’s Make Work Play plan during their election campaign but recent months saw increasing speculation as to what may or may not be included in the Bill itself, what further details we might see and when any reforms might ultimately take effect.

What was in the Employment Rights Bill?

The proposals included in the Bill impact the whole spectrum of employment rights and employers of all sizes in all sectors. Notably: 

• Unfair dismissal: This will become a day one right with the removal of the two year qualifying period, which is one of the most significant changes.

• Probationary periods: Provision is made for “a lighter-touch and less onerous approach for employers to follow to dismiss an employee who is not right for the job” during probationary periods; the government has indicated that its preference is for this period to be nine months (subject to consultation).

• Flexible working: This will become a “default for all” but with an employer able to refuse a request on statutory grounds as now but subject to a statutory reasonableness requirement and where a request is rejected, an explanation in writing to the employee.

• Sexual harassment: The new duty on employers to take reasonable steps to prevent sexual harassment which came into force at the end of last month will be amended to provide for an employer to take “all” reasonable steps. Vicarious liability for third party harassment will also be introduced.

• Statutory leave: Paternity and parental leave will become day one rights and stronger protections will be introduced against dismissal for those who are pregnant, on maternity leave and within six months of returning to work. The Bill will also introduce “protected time off work” of one week on a bereavement of a qualifying individual.

• Statutory sick pay: The lower earnings limit to qualify for statutory sick pay to be removed and statutory sick pay to payable from the first day of sickness absence.

• Fire and rehire: “Fire and rehire” will only be lawful in very limited cases.

• Zero hours/low hours workers: Provision is made for workers on zero-hours contracts and workers with a “low” number of guaranteed hours who regularly work in excess, to request a guaranteed hours contract and to receive reasonable notice of any changes to shifts or working time. 

• Trade unions: Provisions strengthening the collective voice of workers through trade unions by simplifying the union recognition process and bringing in a new right of access for union officials to meet, represent, recruit and organise members. 

It is important to remember that these proposals are not yet law. Many of them will now be subject to consultation (four consultation papers have already been published) and many will also be subject to more detailed implementing regulations (which themselves may be subject to consultation) even once the Bill itself becomes law. 

What can HR do now?

The government has indicated that many of the changes in the Bill will not come into force until 2026 and that unfair dismissal will not become a day one right until Autumn 2026. However, given the number and significance of the changes, it is essential that HR understands the changes proposed and starts preparing for them now. 

At the same time as the Bill was published, the government also published a “Next Steps” paper. This makes clear that as well as the proposals in the Bill, employers can also expect the new government to progress in parallel other reforms (set out in its pre-election Make Work Pay paper) outside of the Bill. The remit of the Low Pay Commission has already been changed to enable the national minimum wage rate to reflect the cost of living and there are further proposals for the “age bands” around pay rates to be removed. Other reforms centred around diversity and inclusion will also be pushed forward including a review of family leave and caring rights, further legislation on pay transparency and equal pay rights and provision for publishing of equality action plans on how to address gender pay gaps and menopause. The government has also indicated that it intends to push forward with a non-legally binding Code of Practice on a right to switch off.

While some of these reforms may ultimately be “longer term” legal obligations, it is important that the focus on the Employment Rights Bill does not detract from considering how these proposals will impact, particularly the management of employee expectations in the shorter term. 

Three takeaways for HR

As the new government’s proposals now start taking shape, HR must ensure that it:

1. Keeps track of the legislative progress of the Bill and other reforms being progressed in parallel.

   We are anticipating seeing more detail fleshed out in consultation papers and draft regulations and which will be essential in preparing for the changes. While reforms outside of the Bill such as ethnicity pay gap and disability pay gap reporting may not in reality become law for some time still, these are all areas where employers can start thinking about their potential approach now. 

2. Carry out an assessment of the potential impact of each proposed reform on the organisation (including staffing costs, risks to the organisation, employee relations issues etc.).

   For example, will short-term sickness absence become more prevalent with the removal of the statutory sick pay waiting period? Will the organisation see increasing requests for flexible working? With unfair dismissal becoming a day one right, is there a greater risk of employees moving between competing employers within the same sectors, and related risks to sensitive business information?

3. Identify and take actions to address those impacts.

   For example, what steps can be taken to ensure careful management of short-term sickness absence through policies, line management and return to work interviews? Ensure policies are updated and managers are trained on the new “reasonableness” requirement in relation to flexible working requests and changes to the statutory process when seeking to agree a request. Where there is a risk of employees moving between competitors consider what loyalty incentives can be introduced to control attrition, such as share incentive arrangements or retention bonuses. 

The next few years are set to be a busy time for HR – there will inevitably be a period of uncertainty and a need to manage employee expectations as the proposed reforms make their way through the legislative process and consultations are undertaken. Putting in place a clear action plan now to identify the potential impact for your organisation will be critical to ensure you are ready and on the front foot for when they become law.