The future of employment law following the Employment Rights Bill and the October 2024 budget

There has been a lot of publicity recently regarding various changes to Employment Law since the general election in July 2024. We have seen the ‘Plan to Make Work Pay’, the King’s Speech and now the new Employment Rights Bill as Labour seek to implement their ambitious plans for employment law. In addition, the Government announced their autumn budget at the end of October, Labour’s first in 14 years. So let us help you get to grips with the changes, timescales and what to do to get ahead.

Paula Squire, Partner and Head of the Employment Team in Taunton highlights the key changes and looks at what this might mean for employers.

What are we waiting for

Below is a summary of the biggest proposed changes: It is important to note that the proposed changes may be subject to amendment as the Bill progresses through Parliament, through additional separate regulations and a consultation process on the same. The Bill is expected to become law in the first half of 2025, no less, but many of the new rights will not come into force for some time. The Government has said that the majority of the reforms will take effect no earlier than 2026, so watch this space for updates.

Unfair dismissal

This has probably been the most talked about proposal. The Bill removes the qualifying period for an employee to bring an unfair dismissal claim (currently two years) to make this a “day one” right. An individual will not qualify if they have not actually started work yet (save in limited circumstances). The Bill introduces a new “Initial Period of Employment” or IPE, where a lighter touch procedure will apply for dismissals of poor performance, misconduct, capability or some other substantial reason for dismissal. We do not know yet the length of this IPE. There is suggestion this may be a period of 6 to 9 months. The Government has confirmed that employers will retain the ability to run separate contractual probationary periods.

Our view is that this significant change will result in more employees having unfair dismissal rights. When this change comes into force, employers will need to make sure they get their recruitment right and act quickly to consider if the employment is not working out. However, we are still at early days, and so there is no need to get drafting just yet.

End to fire and rehire

The Bill states that if an employer dismisses an employee for refusing a contract variation, the individual will be deemed to be automatically unfairly dismissed. The right is not only if they dismiss for a refusal but also if the employer dismisses the employee in order to recruit someone else (or the original employee) under new terms. There will be a defence but this will only be permitted in very limited circumstances.

This move goes further than was first thought and bans fire and rehire in all but the most extreme cases (such as the employer’s survival). This change will also have a significant impact on an employer’s ability to change the employment contract. More attention will need to be paid to having a well drafted contract.

Zero-hour or low hour contracts

The Bill proposes a requirement on employers to offer any worker on a zero hour or low hours contract the right to be offered a contract reflecting the hours they regularly work. This would result in guaranteeing them a minimum number of hours. The number of hours offered will have to be reflective of the number of hours the individual worked in previous weeks and it is expected this may be a 12 week reference period.

What will constitute ‘low’ hours is not yet defined. This requirement is to ensure that an employer cannot use this as an anti-avoidance measure. If a contract is not offered, then the worker will have the right to bring a claim in the Employment Tribunal.

There are potentially some limited exceptions to this right, such as where the work is for a limited period, such as a temporary need for staff.

It will be important to see where the Government will set the ‘low’ hours level. If it were set too high, then an employer would need to continually review the operation of the offer of guaranteed hours over different reference periods.

These workers will also have the right to be given reasonable notice of a shift or reasonable notice of cancellation of a shift, where their working pattern is unknown. It is envisaged that separate regulations will determine what is reasonable notice. A worker would also be entitled to compensation where these shifts are cancelled, moved or curtailed at short notice.

Harassment protection

As you may be aware, from last month a new duty was introduced on an employer to take reasonable steps to prevent sexual harassment, including third party harassment. The Bill extends this duty to state that an employer must now take all reasonable steps to prevent third party harassment.

The Bill proposes that the Secretary of State would be given powers to specify what steps will be deemed reasonable, such as risk assessments, policies and processes.

Importantly, a new third party harassment claim would be introduced allowing workers to bring a claim against their employer where they are subject to harassment by a third party and the employer failed to take all reasonable steps to prevent the third party harassment. This would cover other types of harassment where it takes place during the course of employment.

Flexible working

This change seeks to ensure that flexible working is the default position for employees unless an employer can prove that flexible working is unreasonable. The Bill states that an employer will need to state the grounds for a refusal to a request and explain why they consider it reasonable to refuse.

The right to request flexible working is already a day one right. However, the changes would provide employees additional grounds for challenging the handling of their request. We may see more requests for homeworking if an employee is seeking to increase office attendance.

Family friendly changes

The Bill proposes that parental pay and leave will be granted from the first day of employment, removing any service requirement. Bereavement leave will also be extended to anyone who is bereaved as a day one right (it is not clear what level of relationship is required).

In addition, the Bill proposes to strengthen protection for pregnant employees and new parents. Although it is not clear what the terms will be, it is likely that protection from dismissals will be in place for six months after return to work.

Gender equality is also on the agenda, with large employers needing to create and publish plans showing the steps they are taking to address their gender pay gaps. Reporting alone has not brought about enough changes to close the pay gap and so it will be interesting to see what this may mean for gender equality. Employers will also be required to confirm the steps they are taking to support employees through the menopause.

Statutory sick pay

Employees will be entitled to sick pay from the first day of absence rather than the fourth. The lower earnings limit will also be removed.

Likely impacts, where an employer did not offer contractual sick pay, could be an increase in short term absences. Proactive absence management is therefore essential to combat this.

Trade Unions

The Bill looks to strengthen the power of trade unions in the workplace. It includes the requirement to add an additional clause to the contract of employment to inform employees and workers of their right to join a trade union, increased rights to access the workplace, such as for meetings and changes to statutory recognition. The Bill will also make it easier for trade unions to organise, threaten and take industrial action. The impact of this will also be that it would be harder for employers to plan for it.

Looking ahead we will see trade unions having a larger role in employee relations.

What is not included in the Bill

When they were elected, the Government made several promises that do not seem to appear in the proposed legislation. Albeit these will, in time be implemented through other mechanisms. These include:

• A ‘right to switch off’, preventing employees from being contacted out of working hours.
• A requirement for large employers to report their ethnicity and disability pay gap, in addition to the gender pay gap reporting requirements already in place.
• Consultation on single status of worker. Currently there is a three-tier system for employment status, with individuals classified as employees, workers or self-employed. Labour stated their intention to create a simpler two-part framework to differentiate between a ‘worker’ (to encompass current employees and worker statuses) and those who are self-employed.
• Reviews into parental leave and carers leave rights to ensure they are sustainable for employers and workers.

Autumn Budget

Lastly, and bringing us up to date, there were significant changes announced for employers in the October 2024 budget that are not to be missed. These changes present extra costs and responsibilities on employers as follows:

• Increase in employer NI contributions: From April 2025 contributions will increase to 15%. There will also be a lowered threshold for paying the contributions to £5,000.
• Increase in the National Minimum Wage and National Living Wage: From April 2025, the National Living Wage will increase to £12.21 per hour for those aged 21 and above. The NMW will also increase for those aged 18-20 to £10.00 per hour.

Following this announcement, many have expressed concerns regarding the additional cost on employers.

Even though it is likely that it will be some time before the proposed changes in the Bill are implemented, employers should be aware of the upcoming changes and would be best placed to prepare for these ahead of time. Do ensure you have signed up to our regular free employment law update seminars and webinars as we keep you up to date on how the new legislation progresses. Do get in touch should you wish to review your employment issues further. Paula Squire and her team offer a free employment contract and handbook to ensure these documents are up to date, so do get in touch.