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Since the publication of the Employment Rights Bill (ERB) on 10 October 2024, further consultations and calls for evidence have been launched to refine and support the implementation of these reforms.
The ERB successfully passed its second reading in the House of Commons on 21 October 2024, following extensive debate on its economic implications, particularly for SMEs. Opposition concerns included the potential for increased operational costs and industrial action. Despite efforts to introduce amendments, the bill moved forward and is now with the Public Bill Committee for detailed scrutiny, expected to report back by 21 January 2025. Stakeholders are advised to submit any remaining evidence promptly, as the committee may conclude its review before the final deadline.
This update summarises further the latest developments, key consultations, and the potential impacts for employers as the ERB progresses.
Key Provisions and Consultations
- Fire-and-Rehire Practices
The ERB sets restrictions on fire-and-rehire tactics, making it automatically unfair for employers to dismiss and rehire employees on altered terms without demonstrating genuine economic necessity. A consultation launched on 21 October 2024, is exploring additional safeguards for employees, proposing:
- Increased Protective Awards. Consideration of raising the maximum protective award from 90 to 180 days’ pay or even removing the cap entirely.
- Interim Relief for Affected Employees. Proposed new rights to interim relief, allowing dismissed employees to receive pay while awaiting Tribunal hearings if they demonstrate a strong claim success likelihood.
These changes clearly aim to make fire-and-rehire a last resort and place greater emphasis on consultation between employers and employees in challenging economic circumstances.
- Zero-Hours Contracts and Minimum Notice Rights
Reforms to zero-hours contracts require employers to offer guaranteed hours if workers regularly exceed their contracted hours. A call for evidence also seeks input on defining “reasonable notice” for shift changes and cancelations. Two options for extending guaranteed hours are under review:
- Agency responsibility. Requiring agencies to guarantee hours for workers.
- Hirer responsibility. Requiring end employers to offer guaranteed hours which will redefine the agency-worker dynamic.
The consultation runs until 2 December 2024, and seeks to gather insights on balancing flexibility with job security for agency workers.
- Flexible Working
A consultation is underway regarding the implementation of further reforms to flexible working rights, focusing on the feasibility of making flexible working the default expectation. Although flexible working is already a right from day one of employment – a change introduced prior to Labour’s proposals – this consultation explores additional measures to enhance accessibility to flexible working and address costs and logistical implications, particularly for small businesses.
- Equality and Transparency Initiatives
The ERB seeks to increase workplace transparency and equality, with consultations on:
- Gender Equality Action Plans. Employers with over 250 employees may soon need to publish and update gender equality plans. Input is being gathered on defining compliance metrics.
- Disability and Ethnicity Pay Gap Reporting. A separate consultation under the proposed Equality (Race and Disability) Bill is exploring mandatory reporting, potentially complementing the ERB’s broader equality aims.
- Statutory Sick Pay (SSP) Consultation
Following the ERB’s proposal to make SSP available from day one and to remove the lower earnings limit, the Department for Work and Pensions launched a consultation on 21 October 2024, to refine SSP for low earners. The consultation proposes a percentage-based SSP rate, with options ranging from 60% to 80% of average weekly earnings, rather than a flat rate. This adjustment seeks to support low-income employees without creating disincentives for returning to work. Employers and stakeholders are encouraged to submit their views by 4 December 2024.
- Enhanced Parental and Bereavement Leave Rights
Calls for evidence invite feedback on extending parental leave to be a day-one right and broadening bereavement leave beyond the loss of a child.
- New Sexual Harassment Legislation
The ERB introduces a duty for employers to prevent third-party harassment. A consultation is underway to determine the scope of this duty, potentially expanding beyond sexual harassment to all forms of harassment and clarifying the “all reasonable steps” requirement for employers.
- Industrial Relations Modernisation
Updates under the ERB includes reforms to trade union rights and industrial action procedures:
- Union Access Rights. Statutory rights for trade unions to access workplaces to represent and recruit members.
- Reduced Notice Period for Industrial Action. Proposal to reduce the notice period from 14 to seven days, allowing unions quicker responses during disputes.
- Extended Strike Mandates. Extending strike mandates from six to 12 months to reduce the need for frequent re-balloting in ongoing disputes.
- Impact Assessment and Economic Analysis
The government published an impact assessment and economic analysis of the ERB on 21 October 2024. The analysis estimates that the reforms could cost businesses up to £5 billion annually, primarily due to new compliance and administrative responsibilities. However, this cost is approximately 0.4% of the national wage bill and is expected to have a minimal net effect on the economy overall. Notably, businesses reliant on flexible contracts and SMEs may face proportionally higher impacts, particularly in implementing zero-hours reforms. The analysis also anticipates a 15% increase in tribunal claims, highlighting the need more than ever for effective compliance tactics. It is worth noting that the Regulatory Policy Committee (RPC) – the independent regulatory scrutiny body for the government, which assesses the quality of evidence and analysis used to inform government regulatory proposals – recently suggested that the overall assessment for the impact assessment for the ERB is ‘not fit for purpose.’ For more details on the RPC’s opinion, please see our recent article here.
- Business and Trade Committee (BTC) Inquiry
On 31 October 2024, the BTC opened a call for evidence to assess the ERB’s impact on the economy, job security, and labour standards. The inquiry, running until 6 December 2024, is gathering feedback from businesses and unions on potential compliance burdens and economic impacts.
Implications for Employers
The ERB represents a seismic shift in the UK’s employment landscape:
- New requirements for numerous areas, including zero-hours contracts and day one SSP, would increase administrative responsibilities, particularly for SMEs such as in the hospitality sector relying on flexible work. Larger businesses would face additional new obligations, such as expanded equality reporting requirements.
- Provisions such as increased protections for unfair dismissal and interim relief will increase Tribunal claims, and robust HR policies will be all the more essential.
- Employers in traditionally non-unionised sectors may see increased union activity and this will require adaptation to new access and organisation rights.
- Small and medium-sized businesses will be especially conscious of the potential for increased compliance costs and can make their voices heard through the BTC inquiry.
Next steps for Employers
To proactively prepare for the ERB’s potential impact, employers should consider the following steps:
- Assess and adjust policies on the various matters impacted. See our previous article here for more details.
- Anticipate potential administrative costs and budget accordingly and especially if operating in a sector that has a high worker turnover.
- Engage with Consultations mentioned above and the BTC Inquiry. Doing so will allow employers to influence policy implementation and this will be especially pertinent on issues specific to their sectors and businesses.
For further guidance on how your organisation can prepare for the ERB changes, or for support with responding to consultations, please contact Henry Cross and Robert Forsyth.
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