What does the Employment Rights Bill mean for employers?

Michael Page, in partnership with Hill Dickinson law firm has hosted a webinar session discussing the Employment Rights Bill – which you can watch here.  

In addition, Hill Dickinson have prepared the following article, detailing the most important questions raised throughout the webinar, and most importantly, the steps that law firms can take to prepare for the changes introduced by the Employment Rights Bill.

The Employment Rights Bill, which is currently progressing through Parliament, will enact many of the government’s manifesto commitments to improve the rights of employees and workers. The Bill, which has been heavily amended in recent months, is one of the biggest employment rights shake-up in a generation. Some of the Bill’s provisions may be implemented later this year, although the main changes are expected to occur no earlier than Autumn 2026. In the meantime, there are lots of steps employers can take to prepare themselves for the coming changes.  

In summary, some key highlights of the Employment Rights Bill include:

1.  What changes will the Employment Rights Bill introduce regarding unfair dismissal protection?

Create a day-one right to unfair dismissal protection: employees will no longer need two years’ service to bring an unfair dismissal claim, rendering this protection a day-one right. Employers will be able to dismiss during the “initial period of employment” (expected to be between three and nine months) for capability, conduct, illegality or some other substantial reason (but limited to reasons related to the employee). As redundancy is not included, unfair dismissal in relation to redundancy can be claimed from day-one. Regulations will specify the ‘lighter-touch’ process employers must follow during the initial period, and it is expected that compensation will be capped at a lower level. Prospective employees whose job offer is withdrawn for specified prohibited reasons will be able to bring unfair dismissal claims. These changes are expected to bite in Autumn 2026. Meanwhile, to prepare for these changes, employers should take steps now to enhance their recruitment procedures/pre-employment vetting and strengthen their procedures for assessing the performance of probationary employees.  Hill Dickinson have produced a video to assist you in relation to assessing employee performance during probationary a snippet of which can be seen here.

2a. How will the Employment Rights Bill affect zero and low hours contracts?

2b. And what impact will the Employment Rights Bill have on agency workers?

New restrictions on zero and low hours contracts: although zero-hours contracts will not be ‘banned’, but there will be a new right for zero, low or irregular hours workers to a “guaranteed hours offer” reflecting the number of hours they have regularly worked over a reference period (expected to be 12 weeks). Employers will be required to provide eligible staff with specified written information about their rights. There are also new provisions designed to give workers reasonable notice of shifts and to proportionately compensate them when shifts or working times are cancelled/curtailed by an employer without reasonable notice. These rights will be extended to agency workers:  

• the employment agency will have duties to make the guaranteed hours offer and pay the agency worker any payments due for short-notice shift changes, curtailments or cancellations (although recoupment provisions can be agreed with the end-user/hirer); and  
• the employment agency and end-user/hirer will jointly have the duty to provide the agency worker with reasonable notice of shifts, including shift changes, curtailments and cancellations. 

3. What new restrictions will be placed on fire and hire practices under the Employment Rights Bill?

Restrictions on fire and hire / fire and replace:  there will be a new automatically unfair reason for dismissal in both fire and rehire, and fire and replace scenarios, where the employer sought to vary the contract and the employee did not agree to the variation, and is seeking to employ another person, or re-engage the employee under a varied contract of employment, to carry out “substantially the same duties”. The employer can only avoid an automatically unfair dismissal if it is able to satisfy the employment tribunal both that:

• the reason for the proposed variation was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were 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 the activities constituting the business; and that in all the circumstances the employer could not reasonably have avoided the need to make the contractual variation.  

If both those conditions are satisfied, the tribunal will go on to consider whether the fairness of the dismissal(s) in the usual way. The maximum penalty (protective award) for non-compliance with collective consultation obligations will also double from 90 to 180 days’ gross pay per worker.

4. What is the Fair Work Agency and what powers will it have?

• Fair Work Agency to enforce employment rights: a newly created single enforcement body – the Fair Work Agency – will be responsible for enforcing worker rights such as holiday pay, national minimum wage, SSP, labour exploitation and modern slavery. The Fair Work Agency will have strong powers to:  

  • issue notices of underpayment (including for national minimum wage, statutory sick pay and holiday pay) going back up to 6 years (but uprated to current rates);  
  • issue penalty notices of 200% of the underpayment (minimum £100, maximum £20,000 per underpaid worker);
  • bring employment tribunal proceedings/provide legal assistance to workers, and recover costs from the losing side; and
  • recover its enforcement costs from the defaulting employer (regulations will specify how these enforcement costs will be assessed).

  We anticipate it will take at least one year to create the Fair Work Agency, so employers should use this time wisely to ensure they are fully compliant with laws around holiday pay, national minimum wage, SSP etc.  Hill Dickinson are able to carry out a low price fixed cost review to assess your risk here.

5. How will statutory sick pay (SSP) be reformed under the Employment Rights Bill?

• Sick pay reforms: the Bill removes both the requirement to earn at least the lower earnings limit (currently £125 per week) to be entitled to statutory sick pay (SSP), and the current 3-day waiting period for entitlement to SSP (meaning that SSP will be payable from day one of absence). Those earning below the lower earnings limit will be entitled to whichever is the lower of 80% of average weekly earnings / flat rate SSP.  

In addition to the above changes, the Employment Rights Bill will also introduce wide-sweeping changes, amongst other things, in relation to: collective redundancy, protection from harassment, trade union legislation / recognition, tipping, public sector two-tier workforce, equality action plans, umbrella companies and for the adult social care and education sectors. This is an abridged version of a more detailed employment right bill tracker, which explains the details of those proposals.

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