Employment Rights Bill

Boom –10 October 2024 saw the dawn of a new era as the UK government announced the most significant changes to UK employment law for over 30 years. The government’s draft Employment Rights Bill (ERB) will now make its way through the legislative process but reforms are not expected to come into effect until autumn 2026. Further significant proposals for change were set out in a consultation document called ‘Next Steps to Make Work Pay’.

Key points to note are:

• Unfair dismissal will become a day one right, although not for performance, conduct or some other substantial reason dismissals during an initial period of employment (likely nine months) where employers will be able to follow a ‘light-touch’, slimmed down termination process. What that light touch process looks like is yet to be confirmed. These changes will not take effect until at least autumn 2026.
• Fire and rehire rules toughened up. Proposed changes to unfair dismissal laws will make a fire and rehire dismissals automatically unfair, unless the employer is in very dire financial circumstances. This stops short of a full ban, but the reality is that using fire and rehire or fire and replace to change terms and conditions will be prohibited for solvent employers.
• Flexible working as a default with a new requirement for an employer to act reasonably. There is no change to the list of reasons for refusing a request, and it is difficult to tell how much difference this will make to handling requests in reality.
• Employment tribunal time limits potentially extended. A feature of early promises – but not mentioned much since, nor included in the draft ERB – there is nevertheless a suggestion in the ‘Next Steps’ document that there is an intention to extend the time limits for bringing employment tribunal (ET) claims.
• Enhanced dismissal protections during pregnancy and during and for a period (six months has been suggested) after maternity, adoption and shared parental leave. The draft ERB is silent on this detail, which is expected to be addressed in regulations.
• Change to the trigger for collective redundancy consultation. In a controversial move, the draft ERB proposals to broaden the circumstances in which an employer will need to engage in collective redundancy consultation by removing the requirement for 20 or redundancies to be taking place as a single ‘establishment’. Under the new test, collective consultation would be triggered by an employer proposing to dismiss 20 or more employees in 90 days (or less), regardless if the redundancies relate to entirely separate business units. This could be significant for multi-site businesses, essentially reversing the Woolworths decision.
• Crackdown on “exploitative” zero-hours contracts – new rules will give workers the right to guaranteed hours to reflect what zero- and low-hour contract workers regularly work, unless the workers want to work under zero-hour arrangements.
• Enhanced trade union provisions, including a requirement for employers having to tell workers of their right to join a trade union, giving enhanced rights of access for trade unions and in making trade union recognition easier.
• Employment status reforms to follow. The draft ERB was not expected to feature content on proposals to create a single status of workers as it’s too complicated, but the ‘Next Steps’ document confirms that there are still plans to consult on these reforms.
• Pay Gap reporting changes to follow. The draft ERB includes plans to address gender equality through action plans and menopause support, but we’ll have to wait for the draft Equality (Race and Disability) Bill (expected soon) to deal with mandatory disability and ethnicity pay gap reporting. It’s anticipated for larger employers (250+ employees) but will be subject to consultation and subsequent regulations.
• Potential code of practice on the right to disconnect. Although the draft ERB is silent on this, the ‘Next Steps’ document commits to a code of practice on this topic. This is consistent with previous messaging, the idea being that employers and employees work together to agree what contact is appropriate outside of work.

The Department for Business and Trade has published a series of factsheets on elements of the Bill, as well as its economic analysis and impact assessment. The reforms are expected to cost businesses £5 billion a year, although the economic report describes the direct cost on employers as “no more than a modest increase (less than 1.5%) on total employment costs”.

Interested parties are invited to respond to an inquiry into the Bill and its impact on workers and on business and economic growth. There is also an opportunity to submit written comments to the Public Bill Committee. The government has launched four consultations on specific points to date.

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