Employment Rights Bill: Major changes for employers

The Government has published its Employment Rights Bill which it says will upgrade workers’ rights, tackle poor working conditions and benefit businesses and workers alike. Employers should be prepared for the changes, some of which will have a significant impact on current practices. Although the Government has complied with its promise to introduce the Bill in the first 100 days of government, we believe that the majority of reforms will not take effect until at least 2026. The Bill runs to some 158 pages with much of the detail still to be included in further Regulations. Below, we highlight some of the key provisions, and a high-level overview can be found here.

Unfair dismissal

Unfair dismissal will be made a ‘day one’ right. Currently employees have to wait two years to qualify for unfair dismissal protection, so this marks a significant change. Whilst it will be a ‘day one’ right, employers will be able to impose probation periods during which employees will have much more limited protection. The Government will consult on a statutory probation period for new hires which will allow for a proper assessment of an employee’s suitability for a role. The Government’s preference is for this to be a nine-month period during which employers can dismiss by following a ‘lighter- touch’ process. As a starting point, the Government considers this process should consist of holding a meeting to explain performance concerns (with the employee having the right to be accompanied by a trade union representative or colleague). The Government is also considering a different compensation regime for successful claims about dismissal during the probationary period, with tribunals perhaps not able to award the full compensation otherwise available. These unfair dismissal reforms will take effect no sooner than autumn 2026.

Zero hours/low hours contracts

Zero hours contracts will not be outlawed, but the rules around them will change. Those on both zero and low hours contracts will gain the right to a guaranteed hours contract if they work regular hours over a 12-week reference period. If more hours become regular over time, subsequent reference review periods will provide workers with the opportunity to reflect this in their contracts. Workers can bring tribunal claims and be awarded compensation, capped at an as yet unspecified number of a ‘week’s pay’, with workers being under a duty to mitigate their loss. Workers will be able to remain on zero hours contracts where they prefer.

Workers will also be entitled to reasonable notice of shifts (including details of how many hours are to be worked and from what time on what day), changes to shifts and cancellation of shifts; the length of this ‘reasonable’ notice is not specified. They will also be entitled to payment for cancelled, moved or curtailed shifts, with the amount of the payment to be specified in Regulations, but not exceeding the amount the worker would otherwise have received for the shift.

Fire and rehire

The Government promised to end ‘unscrupulous fire and rehire', and, ‘fire and replace’ practices’ by providing effective remedies. The Bill provides that a dismissal will be automatically unfair if the reason for dismissal is:

• that the employee refused to agree a change to contractual terms; or
• to enable the employer to employ the employee, or another employee, under a varied contract to carry out substantially the same duties.

There is an exception where:

• the reason for the variation is to eliminate, prevent, significantly reduce, or significantly mitigate the effect of any financial difficulties affecting the employer at the time of dismissal, or which are likely in the immediate future to affect the employer’s ability to carry on the business as a going concern or otherwise to carry on its business activities; and
• in all the circumstances the employer could not reasonably have avoided the need to make the variation.

In such cases, the dismissal will not be automatically unfair but could still be unfair. Factors relevant to the fairness of such a dismissal include:

• any consultation carried out with the employee, employee representatives or a recognised trade union; and
• anything offered to the employee by the employer in return for agreeing to the variation.

The Government says it will consult on lifting the cap on the protective award (currently 90 days’ full pay) where an employer has not complied with its collective consultation obligations and will look at whether interim relief (a type of injunction, whereby an employer is ordered to reinstate the worker on full pay pending determination of their claim) could play a role in protecting workers.

Collective redundancy consultation

The Bill changes collective consultation laws relating to places of work. The obligation to consult collectively when proposing 20 or more redundancies (or in some cases changes to over 20 employees’ terms and conditions) will be triggered based on the number of employees affected across the whole business, rather than in a single workplace/site/office.

Leave rights

Paternity leave and unpaid parental leave will be made a day one right and a new right to paid bereavement leave will be introduced through an extension of the current right to parental bereavement leave. Bereavement leave will be at least a week and paid at the prescribed rate. These changes could come in earlier than 2026.

Statutory sick pay

Statutory sick pay will apply from day one of absence. The entitlement will be strengthened by removing the current three-day waiting period and by removing the lower earnings limit so that employees are entitled to statutory sick pay irrespective of how much they earn.

Flexible working

The Government promised to make flexible working the default, so that it was a right to have it instead of a right to request it. The Bill provides that an employer can only refuse a flexible working request on specified grounds (the same grounds as currently) and only where it is ‘reasonable’ to refuse on those grounds. When refusing, the employer will have to explain its reasons for being reasonable to refuse the application on those grounds. These changes could come in earlier than 2026.

Harassment

A new statutory duty on employers to take ‘reasonable steps’ to prevent the sexual harassment of employees in the course of their employment is coming into force on 26 October 2024. The Bill extends this so that employers will be required to take all reasonable steps.

The Bill also provides for employers to be liable for harassment (not just sexual harassment) of their employees by third parties. Employers will be liable where the third party harasses an employee in the course of the employee’ s employment and the employer fails to take all reasonable steps to prevent the third party from doing so; Regulations may specify steps that are to be regarded as 'reasonable'.

The Bill also provides that any disclosure that sexual harassment has occurred, is occurring or is likely to occur will be a protected disclosure for whistleblowing purposes. As a result, employers will not be able to prevent workers from disclosing details of sexual harassment, for example, in a settlement agreement. It also means that allegations relating to sexual harassment could be pursued as a whistleblowing claim in certain circumstances.

Equality action plans

The Bill provides for Regulations to be made requiring large employers (those employing 250 or more employees) to develop and publish an equality action plan showing the steps they are taking to address their gender pay gap and to support employees through the menopause. The Regulations may specify matters such as the content of the plan; the form and manner in which it is to be published; when and how frequently it should be published or revised; and requirements for senior approval.

Protection from dismissal for pregnant women and new mothers

The Government promised to strengthen protections for pregnant women and new mothers, including protection from dismissal while pregnant, on maternity leave and within six months of returning to work. The Bill includes a power for Regulations to be made regarding such dismissals which can include a requirement to offer alternative employment and for a dismissal in breach of the Regulations to be automatically unfair. These changes could come in earlier than 2026. 

Contact us

For further information on how we can support you with the changes mentioned above, please contact a member of our Employment team or submit an enquiry form, below.