The Employment Rights Bill reflects one of the key pillars of the Government's election manifesto, its ambitious plans to reform employment law. Having committed to publishing the Bill within 100 days of taking power, the Government set itself a huge task. Perhaps unsurprisingly, there are several areas where key details are not set out in the Bill itself, but will be set out in future regulations. In addition, several anticipated changes (such as the “right to disconnect”) have not made it into the Bill. But it's already clear that the reforms will have a major impact on employers.
Timing
The changes will be consulted on during 2025, with a view to them coming into force no earlier than 2026. The changes to unfair dismissal will not come into force until autumn 2026, to give employers time to prepare.
Key changes
Unfair dismissal: This was one of the most heavily-trailed changes. The 2-year qualifying period for ordinary unfair dismissal claims will be repealed. However, the requirements for a fair dismissal will be modified during the “initial period of employment” (effectively the probation period), if the dismissal is for conduct, capability, a substantial reason relating to the employee or because their employment is unlawful (e.g. if they don't have the right to work in the UK). The Government is to consult on the length of the IPE/probation period, although it has stated that its preference is 9 months.
The modified procedure and fairness test will be set out in regulations, so we don't have the full details yet. The Government's announcements suggest that it's likely to require that the employer meets with the employee to explain their concerns and gives them the right to be accompanied.
Fire and Rehire: The Bill would make it automatically unfair to dismiss an employee because they refused to accept varied contract terms or to replace them with another employee on the varied terms, except where the employer can show that:
- the purpose of the variation was to eliminate or substantially reduce financial difficulties threatening the business' viability and
- the employer could not reasonably have avoided the need to make the variation.
Effectively, fire and rehire will be unlawful in all but the most dire financial situations. Even if it's not automatically unfair, the Employment Tribunal will need to consider whether the dismissal is unfair, taking into account specific additional factors (including how the employer consulted with employees and whether they offered any “sweetener” for agreeing to the changes).
Zero hours contracts: Although the Bill falls short of an outright ban on zero hours contracts, it creates a new duty for employers to offer staff on zero hours contracts/arrangements (or contracts/ arrangements with a low number of guaranteed hours, with the threshold TBC) a guaranteed hours contract which reflects the hours they have actually worked in a reference period (again, details to be set out in regulations). In most cases, employers will need to ensure that all other terms of the contract are no less favourable (so they won't be able to offer lower hourly pay in return for guaranteed hours).
The Bill also creates rights for these staff to be given reasonable notice of shifts (or cancellation, curtailment or movement of shifts) and to payment of reasonable compensation for cancelled, curtailed or altered shifts. The minimum length of notice and compensation payment will be set out in regulations.
These provisions are complex and much of the detail is yet to come, but it is clear that they will have a major impact in sectors which use zero hours contracts, such as hospitality, leisure and retail.
Collective redundancies: Employers proposing to make 20 or more redundancies in a 90 day period at one establishment are obliged to carry out collective consultation with employee representatives or union representatives. According to caselaw, “establishment” means the entity to which employees are assigned; in practice, this often means a branch/ store for multi-site employers such as retailers. As a result, employers making 19 or fewer redundancies at one site are often not caught.
The Bill deletes the words “at one establishment”, meaning that employers will need to aggregate the number of redundancies across sites when assessing whether they need to consult collectively. As the 90 day period is backwards-looking as well as forwards-looking, and the penalties are significant (starting at 90 days' pay per affected employee) this will create major headaches for large employers.
Flexible working: The basic scheme will remain the same but employers will need to show that a refusal on one of the statutory grounds is reasonable and explain why that is the case.
Trade Unions: a wide range of changes, including a requirement for all workers to be given a statement of their right to join a union along with their written contract, and rights for trade unions to request access to the workplace to recruit members and facilitate collective bargaining.
Harassment: the preventative duty regarding sexual harassment (which comes into force on 26 October) will be converted to a duty to take all reasonable steps, which will be harder for employers to comply with. Regulations will set out the steps to be regarded as reasonable.
Employers will be liable for acts of third party harassment (not limited to sexual harassment) against their staff, unless they took all reasonable steps to prevent such harassment. Again, this will have a major impact in customer-facing environments.
A disclosure that sexual harassment has occurred, is occurring or is likely to occur will now be a specific category of protected disclosure.
Family leave: A new right of bereavement leave will be created (building on existing provisions for parental bereavement leave). Parental leave and paternity leave will be “day one” rights and employees will be able to take paternity leave following a period of shared parental leave. There will also be additional protections against dismissal during and after pregnancy, and after a period of maternity, adoption, shared parental, paternity or neonatal care leave.
Statutory Sick Pay will be payable from day 1 of absence and the lower earnings threshold will be removed.
Tips: There will be additional duties for employers to consult staff about their policy for distributing tips and review the policy every three years.
Enforcement: There will be a new “Fair Work Agency” taking over labour market regulation from various existing agencies. The new agency will have wide-ranging powers of entry and access to documents, but it remains to be seen how much budget will be allocated.
Every employer will be affected by these changes. While the lead-in time is welcome, employers will need to start planning now to ensure that that they adequately prepared for this major shift in the legal landscape.
Want to hear more from us? 
