Labour swept to power with the promise of landmark employment law reform in their first 100 days of office. Just before the 100 days were up, the draft Employment Rights Bill was published.
Comparing what it says back to the manifesto, much is recognisable. However, a few points have been watered down or postponed for now – and the bill is not expected to be enacted for at least two years.
While there will be a slew of consultations before then, and everything remains subject to change, we do have our clearest view yet of Labour’s employment law reforms.
Here’s a look at what we now know…
Unfair dismissal
The removal of the protection for employers from unfair dismissal claims within the first two years of employment (excluding those relating to discrimination) is one of the most significant of the reforms. We are concerned that this will expose hard-working SME owners to more spurious claims which they do not have the resources to fight.
The new regime will not commence until at least the Autumn of 2026 though, and the bill announcement included a consultation on a nine-month probation period during which “lighter-touch” regulation would make it easier to dismiss people who are not right for the job – but it will require a process to be followed.
Zero-hour contracts
Zero-hour contracts have been a bone of contention for some time. Some employers and employees alike welcome the flexibility they bring, but Labour put “exploitative” zero-hour contracts in their sights where there is an imbalance of power.
Under the proposed laws, you will have to make a permanent guaranteed hours offer after a 12 week qualifying reference period, but the worker has the right to refuse this.
Additionally, workers will be intitled to a “reasonable notice” of a change or cancellation of shifts, with a right to the payment if reasonable notice is not provided.
There will be a consultation period on agency workers being subject to the same rules. These zero-hour contract changes are complex, and we await the outcome of the consultation with some trepidation.
Flexible working
While the sound of flexible working becoming the default for all workers may sound seismic, our early reading of the bill is that it may not be too different from the current regime.
A government definition of flexible working as being “a way of working that suits an employee’s needs” is stated. But as with the existing rules, which allow any employee a day one right to request flexible working, there are many legitimate reasons included in the bill as to why an employee may refuse flexible working, such as a burden of additional costs.
Sick pay
The current requirement of three days of sickness absence before sick pay can be claimed is removed under this bill, as is the lower earnings limit of £123 a week. Thanks to their greater resources, many larger companies already offer sick pay in line with what the bill intends. So the impact here may be felt more sharply by SMEs who cannot reclaim statutory sick pay.
Parental and bereavement rights
Parental leave, broadly speaking where an employee can take a week of unpaid leave a year to spend with children, and paternity leave, will both become day one rights. Bereavement leave will also be extended to all employees (not just parents) and be a day one right covering the death of any dependant.
Other changes… plus what is not changing
Rounding off the other announced changes are: the softening of trade union laws to make it easier both to join a trade union and for trade unions to gain access to workplaces; the creation of a new Fair Work Agency which combines the collection of current enforcement bodies (more details will be published in due course); and an expanded remit for the Low Pay Commission to consider the cost of living when advising on the minimum wage, and scrapping minimum wage age bands.
So what’s not changing for now? We are particularly disappointed to see that the move towards a single status of worker is not being progressed yet. Also delayed for now are the touted “right to switch off”, and reviews of the parental and carer’s leave systems.
Start planning
There is a lot being consulted on over the coming months and years, but it is still crucial that you start planning and budgeting now. Please get in touch if you would like bespoke advice on how these changes may affect your business and what steps you need to be taking to prepare.
