UK government announces new Employment Rights Bill: what does this mean for employers?

What is happening?

A landmark shift in UK employment law is on the horizon, with the government describing it as “the biggest upgrade to workers’ rights for a generation”. The Bill was presented before Parliament on 10 October 2024, and is stated to bring forward 28 individual employment reforms aimed at enhancing employee protections, altering dismissal practices, and improving working conditions.? We set out below the important changes employers need to be aware of.

Please note, that these changes are not currently in force and some reforms are unlikely to be coming in for some time, with the government expressly stating that the proposals around unfair dismissal and probationary periods will not come into force until autumn 2026.

What are the key changes?

1. Day One Right to Unfair Dismissal

• The two-year qualifying period for unfair dismissal claims will be abolished, giving employees the right to claim unfair dismissal from day one.
• To balance this, the Bill introduces a statutory probationary period, expected to be nine months, during which a lighter-touch dismissal process will apply. Employers will be required to hold a meeting to discuss performance issues before dismissal, and the exact process will be defined in future regulations.

2. Strengthened Protections Against Sexual Harassment

• The Bill will extend the new duty on employers to take “reasonable steps” to prevent the sexual harassment of staff in the workplace (which is coming into force on 26 October 2024) to a duty to take “all” reasonable steps.
• The Bill makes clear that this includes third party harassment and gives workers the right to claim compensation for this. The Bill also extends whistleblowing protections to cover disclosures about sexual harassment.
• Employers will also be liable for harassment by third parties (e.g., customers, clients, suppliers) if they fail to take all practicable steps to prevent it.
• What to do now: update workplace anti-harassment policies, including third-party harassment, and conduct thorough risk assessments to ensure compliance. Review training programs to ensure staff and managers are educated on preventing and responding to harassment.

3. Major Restrictions on ‘Fire and Rehire’ Practices

• The Bill makes it automatically unfair to dismiss an employee for refusing to accept changes to their terms of employment. Employers can no longer "fire and rehire" to implement new terms unless the business is facing serious financial distress and the variation is necessary to keep the company operational.

4. Zero-Hours and Low-Hours Contracts

• The Bill introduces significant (and rather confusing!) reforms to zero-hours contracts. Workers who regularly work more hours than they are contracted for will have the right to switch to a guaranteed hours contract based on the average hours worked over a 12-week reference period.
• Employees on zero-hours contracts must also receive reasonable notice of shifts and compensation for cancelled shifts at short notice.

5. Collective Redundancy Consultation Threshold

• The requirement for collective redundancy consultation will change. Currently, employers must consult if proposing 20 or more redundancies “at one establishment” within 90 days. The Bill removes the “at one establishment” qualifier, meaning that redundancies across multiple sites will now need to be aggregated.
• What to do now: Employers with multiple locations will need to carefully track redundancy proposals across all sites to ensure compliance with collective consultation rules. This change increases the likelihood of triggering collective consultation obligations even when redundancies are spread out.

6. Flexible Working Becomes the Default

• The Bill strengthens flexible working rights, making it the default position that flexible working requests should be granted unless there is a reasonable business justification for refusal.
• Employers will still be able to reject requests for one of the prescribed reasons, but the new requirement to act "reasonably" may lead to an increase in disputes.
• What to do now: Employers should revisit their flexible working policies and ensure they have robust justifications for rejecting requests. Clear, consistent processes should be in place to handle flexible working requests to minimise disputes.

7. Statutory Sick Pay (SSP) Reform

• SSP will be payable from day one of an employee's sickness absence, removing the current three-day waiting period. Additionally, the lower earnings limit will be abolished, meaning more low-paid workers will qualify for SSP.

8. Gender Pay Gap Action Plans

• Employers with more than 250 staff will be required to produce action plans outlining how they intend to reduce their gender pay gap. Employers will also need to identify the contractors they use in their pay gap reports.
• What to do now: Employers should evaluate their gender pay gap reporting practices, ensuring they have the data to prepare detailed action plans. Consider whether any contractors should be included in future reporting.

9. New Family Leave Rights

• Paternity leave and parental leave will now be available from day one, removing the previous service requirement. Additionally, new provisions for bereavement leave will be introduced, and protections for pregnant women and new mothers will be extended, making it unlawful to dismiss them within six months of their return to work (except in specific circumstances).
• What to do now: Employers should update family leave policies to reflect these new rights and ensure managers are trained to handle family-related leave requests sensitively and lawfully.

When are the changes happening?

Before the Bill becomes law, it will need to be debated and approved by each House of Parliament, there will be public consultations on the proposals and secondary legislation will also be required to provide further detail. Employers will have the opportunity to engage with the government consultations and should take the time to consider which proposals might affect them most.?

Next Steps for Employers

• Policy Review: Now is the time to review key HR policies, including those related to probation periods, flexible working, harassment prevention, redundancy procedures, and family leave.
• Staff Training: Ensure that managers and HR teams are fully trained on the new sexual harassment duty, dismissal processes, especially around probationary periods, fire and rehire restrictions, and flexible working requests.
• Compliance Audits: Conduct audits of current contracts, shift practices, and redundancy planning to identify areas where updates are needed.
• Prepare for Consultations: Many of these changes will be subject to further consultation and secondary legislation. Stay informed and participate in consultations where appropriate to ensure your business is represented.

What isn’t in the bill?

Although the Employment Rights Bill introduces significant reforms, several high-profile promises and proposals did not make it into the final draft of the Bill. These include:

1. Right to Disconnect: The highly anticipated right to switch off—which would have prevented employees from being contacted outside of working hours except in exceptional circumstances—did not make it into the Bill. However, the government has stated that this will be explored in a future Code of Practice, with consultations expected next year.
2. Single Employment Status: Labour had previously proposed the introduction of a single status for all workers, which would eliminate the distinction between employees, workers, and the self-employed. However, this complex issue has been postponed, with the government intending to consult further before making changes.
3. Ethnicity and Disability Pay Gap Reporting: While gender pay gap reporting requirements have been strengthened, mandatory ethnicity and disability pay gap reporting was not included in this Bill. The government has indicated that this will be considered in future legislation, likely in 2025.
4. Changes to Statutory Maternity Pay: The Bill is silent on any changes to statutory maternity pay rules, despite earlier press leaks suggesting that pregnant new hires would have the right to statutory maternity pay if they started a job while pregnant. This will likely be reviewed as part of future family leave consultations.
5. More Comprehensive Fire and Rehire Ban: While the Bill severely restricts fire and rehire practices, there is no outright ban, and the legislation permits fire and rehire under limited conditions, such as severe financial distress. Critics argue that the Bill leaves loopholes for employers to exploit.

When are the changes coming in?

The government has indicated that it will be consulting on a large number of the proposals with trade unions, employers and other interested parties and many of the proposed reforms will ultimately be implemented through secondary regulations. It has stated that it expects to begin consulting on these reforms in 2025 and anticipates therefore that "the majority of reforms will take effect no earlier than 2026" with reforms of unfair dismissal taking effect "no sooner than Autumn 2026". There are also indications that a number of the proposals will be supported by codes of practice and government guidance.? We will update you as soon as we have any further information on implementation dates.?

The government's intention is that the bill will "help drive growth in the economy and support more people into secure work" providing "flexibility for workers and businesses alike". However, with the extension of workers' rights in relation to family leave, pay, working conditions and protection from dismissal, it is likely to result in a significant shift in employment practices with cost consequences for employers. It remains to be seen whether the government will achieve their aims, but one thing is for sure – employment lawyers and HR practitioners in particular will be kept busy!