The long-awaited Employment Rights Bill is published –what actions do employers need to take?

Bill Provisions

 Details

 Impact for Employers

New day 1 rights

One of the most significant changes is "Day One" rights for employees for unfair dismissal, as well as parental entitlements and sick pay. This marks an important departure from the current legal position, whereby two years of service is required for employees to qualify for protection against unfair dismissal.

However, the government has acknowledged that probationary periods are an important tool for employers to assess the capability of new hires within the business. In light of this, the government will be consulting on a new statutory probation period, currently anticipated to be up to 9 months, during which time there will be a "lighter touch" process for employers to follow to dismiss employees who are not right for the role. Further regulations are required to confirm what this will look like, however employers will still need a fair reason for the dismissal, which may be either performance, conduct, breach of law or some other substantial reason.

Additional Day One rights introduced by the Bill include the right to paternity leave, unpaid parental leave and bereavement leave. In the case of statutory sick pay, the effect of the Bill is that all employees will become entitled to statutory sick pay from their first day of sickness absence rather than having to wait three days before the entitlement kicks in.

If the Bill is enacted in its current form, employers will need to make sure that they follow a full and fair process each time they are faced with a potential dismissal situation following completion of the new (currently undefined) statutory probation period. It will also be more important than ever to make sure managers are identifying, managing and addressing issues early during the probation period. 

The government has indicated that reforms of unfair dismissal legislation will take effect no sooner than autumn 2026.

Employers will also need to consider the potential cost implications of statutory sick pay and paternity leave being more readily available to employees earlier than has previously been the case and be prepared to review their handbooks and policies to reflect the new family friendly rights to paternity, parental and bereavement leave, and ensure that payroll systems and processes are re-designed to reflect the changes in entitlements.

Flexible working

The Bill includes provisions which will make it harder for employers to refuse flexible working requests.

An employer will only be able to reject a flexible working request if:

• the employer has a specified ground for doing so (which are the same grounds which already exist); and

• the rejection is reasonable in light of that ground.

When notifying the employee of its decision to reject a flexible working request, the Bill now requires employers to identify the specific statutory reason and to justify why the rejection is reasonable.

The Bill also empowers the Secretary of State to specify steps employers must take before rejecting a flexible working request. The Bill itself does not contain much detail on what would be considered "reasonable" and we await further guidance from the government.

Employees may bring a claim if the employer fails to "act in accordance with" the legal requirements for flexible working.

The Bill potentially limits employers' ability to refuse flexible working requests unless they can show that the refusal is reasonable. This will add a layer of complexity for employers, particularly as there is currently no practical guidance on what employers should consider in order to comply with their new obligations. 

Employers should prepare for these changes by reviewing their current flexible working policies and procedures. Employers should also start considering how they can accommodate future flexible working requests reasonably.

Fire and rehire

The Bill introduces changes to unfair dismissal law which will mean that where an employee is dismissed as a result of not agreeing to proposed changes in their contract of employment, the dismissal will be automatically unfair unless the employer can demonstrate:

(a) evidence of financial difficulties; and

(b) that the need to make the change in contractual terms was unavoidable.

Fire and re-hire was always used as very much a last resort by employers, given that any dismissal through this route already gave rise to a potential unfair dismissal claim.  However, it's now clear that this route should only be considered by employers in circumstances where the business is facing financial distress.

Zero- hour contracts and contracts reflecting hours regularly worked

Under the proposed measures, workers on zero or low hours contracts will be entitled to be offered contracts with guaranteed hours, alongside introducing right to reasonable notice of shifts and payment for cancellations.

The Bill requires employers to make an offer of guaranteed hours, on terms which are overall no less favourable, following an 'initial reference period' (yet to be determined) of the worker's service. The guaranteed hours must reflect those regularly worked during such 'initial reference period'. If a worker rejects an initial offer, an employer must continue to offer the worker guaranteed hours contracts after each 'subsequent reference period'.

Any offer of guaranteed hours offer should contain clear details on the working patterns that will be required (including times of day). The Bill does acknowledge the need for fixed term contracts where reasonable and makes reference to specific tasks or events being potentially reasonable circumstances.

Failure to comply will give rise to the right for workers to pursue employment tribunal claims, with awards reflecting the financial loss suffered by them.

The impact on businesses that rely on flexible working arrangements, such as hospitality and events, may be significant. In particular introducing additional record keeping obligations and internal processes for checking ongoing compliance.

Moreover, as the Bill will require employers to give reasonable notice to workers that they are required to work, this will require greater forward resource planning by employers which, if not done effectively, may lead to the employer failing to meet fluctuating demand. To add to this, failure to give reasonable notice for a flexible worker's shift to be cancelled or curtailed may result in the employer having to pay compensation.

As a result, businesses will need to consider the adequacy of existing enterprise resource planning, payroll and rostering systems in respect to their configuration of work allocations, pay and entitlements, and the capturing of associated data to be able to both effectively staff for business needs, and monitor and demonstrate compliance.

Statutory sick pay

As mentioned above statutory sick pay will be payable from day 1 of sickness. Additionally individuals earning below the Lower Earnings Limit (currently £123 per week) will also be entitled to SSP.

The Bill sets the weekly rate of SSP at £116.75 and a prescribed percentage of the employee’s normal weekly earnings, whichever is lower.  It is understood that a lower rate of sick pay will be extended to those earning below the current flat rate of SSP and there will be a consultation regarding this. 

Many employers operate an enhanced sick pay policy.  However, for those that don't, system changes will be required to accommodate these changes to SSP especially if different rates apply to different staff.

These system changes and the related calculations and data will need to be tested and monitored for ongoing compliance.

Dismissal on return from parental leave

The Bill introduces the ability for the Secretary of State to bring in regulations that prohibit the dismissals of women who are pregnant, on maternity leave, and during a period of six months following their return to work. The Bill guidance notes clarify that there will be exceptions to this prohibition on dismissal in "specific circumstances", although no further details are provided about what these circumstances might be.

Additionally, the Bill provides for the Secretary of State to make regulations regarding dismissal in the period after someone returns to work following adoption leave, shared parental leave and neonatal care leave. This power will also extend to regulations regarding dismissal when someone returns from bereaved partners paternity leave, once that comes into force under the Paternity Leave (Bereavement) Act 2024).

These Bill provisions demonstrate that the government is strengthening protections for pregnant woman and giving new mothers certainty that the law is on their side, but is also looking to extend these protections to a broader range of employees. We await details about how such restrictions on dismissals would work in practice, and particularly what the exceptional "specific circumstances" might be, but the Bill makes clear that employers will need to be aware that a potentially wide range of employees will be protected from dismissal once they return from various forms of family leave.

Employers will need to be aware of the potential costs of needing to keep certain employees employed throughout the specific period of protection from dismissal once they return from applicable family leave, and otherwise think carefully about how they plan and structure any dismissals.

Trade Union provisions

The Bill imposes a new duty on employers to inform all new employees of their right to join a union. This information must be included in the written statement of particulars that employers are required to provide to their new hires.

In relation to statutory recognition, the Bill lowers the level of support unions need to show from workers to gain statutory recognition.

Furthermore the Bill creates a right for trade unions to access workplaces to meet, represent, recruit or organise workers or to facilitate collective bargaining.

With respect to industrial action, the Bill repeals minimum service level requirements during strikes, lowers the level of support required for industrial action and reduces the notice a trade union must give of industrial action to the employer after it has secured a ballot mandate and before any such action is taken (from 14 to 7 days).

The Bill also ensures trade union representatives have sufficient access to facilities, for example office and meeting space.

These proposals mark a seismic shift in favour of unions and workers and create a challenging landscape for employers. Employers could see increasing trade union membership, more extensive calls for recognition and a strengthening of union resolve around the bargaining table.

In light of these proposed reforms, and their potentially far reaching implications, employers ought to review and adapt their current practices and strategies.

The Fair Work Agency

The Bill creates a new Fair Work Agency (FWA) to enforce employment rights, such as holiday pay, NMW, sick pay, agency rules and modern slavery. It replaces the existing separate bodies that deal with these issues, such as the Gangmasters and Labour Abuse Authorities.

The Bill includes the ability to issue "Labour Market Enforcement Undertakings" to non-compliant businesses asking them to take action to improve their practices. LME undertakings would be in place for up to two years.

Businesses that refuse or fail to comply could be subject to a Labour Market Enforcement court order prohibiting or requiring certain actions.

There are broader rights in the Bill, including rights for enforcement officers to inspect workplaces, documents and information.

Non-compliance with an LME order, giving false information or documents, or obstructing the FWA's work would lead to fines and/or imprisonment (up to two years in some cases). 

For employers and businesses, this means a heightened need for compliance with labour market legislation, readiness for inspections and information requests, and awareness of the severe penalties for non-compliance (including liability on individual directors, officers, manager and partners).

Businesses will need to review their internal compliance mechanisms and revise their approach to compliance with the obligations. For example mapping obligations to compliance arrangements and controls, introducing more regular compliance audits and controls testing, monitoring and demonstrating compliance through data and reporting, and enhanced record keeping and data collection.

Gender Pay Gap Reporting and Equality Action plans

The Bill introduces new obligations, alongside existing gender pay gap reporting, for employers with 250 or more employees to develop and publish equality action plans on an annual basis.

The plan must address matters related to advancing gender equality, including addressing areas such as the gender pay gap and supporting employees going through menopause.

Businesses with 250 or more employees will need to review their existing gender pay gap data collection and reporting processes and likely invest time in preparing, developing and updating their Equality Action plans.

Further details will be published on the proposed content of the Equality Action plans, including regulations on how failure to comply may be enforced.

Bereavement leave

What was previously a right limited to parents, the right to take bereavement leave is due to be extended to a broader range of relationships.

Further regulations are required to confirm how a bereaved person will be defined, how long they may take off and when the leave may be taken, however the leave entitlement will be at least one week where the leave is taken in respect of a person other than a child and may be taken until at least 56 days after the person's death.

The regulations are likely to provide certain protections for employees who take bereavement leave, including protection against detriment and dismissal where it takes place for a reason relating to a bereavement. 

Employers should be prepared to review their policies on employee leave to account for this new entitlement once the Bill comes into effect. It will also be important to ensure no detrimental decisions are taken in relation to employees in connection with them having taken time off work for bereavement.

Ability to take paternity leave following shared parental leave

The Bill will remove the restriction on employees taking paternity leave and pay following shared parental leave. Under the new legislation, parents will be able to take their paternity leave and pay after their shared parental leave and pay if they wish. This will be the case both where the new parents have given birth and for adoption.

Employers should be aware that employees will have some additional flexibility in how they structure their family leave and policies may need updating to reflect this.

Protection from harassment

The Bill includes three new provisions to enhance protection against harassment in the workplace. It covers:

1. Amendments to the new duty to prevent sexual harassment

   The forthcoming preventative duty for employers to prevent sexual harassment in the workplace will require employers to take reasonable steps, but the Bill proposes amending this to require employers to take all reasonable steps. This would raise the standard required of employers for compliance with the new preventative duty.

    

2. Third Party Harassment

   The Bill reintroduces a previously repealed provision which places liability on employers for third party harassment. These provisions cover all types of harassment, not only sexual harassment and it creates a direct and independent right of action against employers. The new third party harassment provision imposes a duty on employers not to permit third party harassment and makes employers liable if:

   (a) the harassment occurs in the course of the individual's employment, and

   (b) the employer fails to take all reasonable steps to prevent the harassment.

    

3. Whistleblowing protections

The Bill proposes to amend applicable whistleblowing legislation to recognise a disclosure relating to sexual harassment as a qualifying disclosure. This would give workers who raise concerns that sexual harassment has taken place, is taking place or is likely to take place enhanced protections. It would also unequivocally override any confidentiality clause in a settlement agreement that could otherwise restrict the worker from disclosing the sexual harassment allegations.

All of the proposals emphasise that employers would need to take active steps to tackle harassment (and particularly sexual harassment) in the workplace.

In addition to the new duty to prevent sexual harassment coming into force on 26 October 2024, the proposals, if implemented, would impose a more stringent standard of conduct on employers and require them to take more proactive measures to prevent harassment.

We recommend seeking legal advice on the appropriate action employers need to take, both in respect of fulfilling their preventative duty from 26 October 2024 onwards, but also in respect of the potential wider liabilities proposed under the Bill.

Collective redundancies

The Bill maintains the requirements for employers to collectively consult on redundancies, and to notify the Secretary of State of such redundancies, where the employer is proposing to make 20 or more employees redundant within a 90 day period. However, whilst under existing legislation, these obligations are only triggered if the proposed redundancies are within one "establishment". The amendment removes this limitation and applies to any redundancies the employer proposes throughout the employer business.

This amendment significantly broadens the scope and application of collective consultation and notification obligations. As a result, employers will need to be more diligent in monitoring proposed redundancy numbers across their entire business to avoid inadvertently exceeding the threshold. This means the collective consultation obligations will be triggered more often.

Public sector outsourcing: protection of workers

The Bill proposes to amend the Procurement Act 2023 to enable a Minister of the Crown to make regulations and to impose a duty to publish a statutory code of practice. The guidance notes to the Bill comment that these powers are "intended to be used to set out measures to avoid the emergence of a "two-tier workforce"", i.e. where ex-public sector employees and private sector employees are each on different terms and conditions. Subsequent regulations will aim to ensure that: (i) specified ex-public sector workers are treated no less favourably as workers of the supplier than they were of the contracting authority they were transferred from; and (ii) the supplier's specified other workers are treated no less favourably than the transferring workers.

These changes could give rise to increased staff costs for those companies engaged in contracting with the public sector. Those employers should stay alert for the publication of the subsequent regulations.