Employers and businesses are going to be impacted by the new Employment Rights Bill. The new Bill was before Parliament on 10/10/2024. It proposed 28 different employment law reforms, which will amend the Employment Rights Act 1996 (“Act”). Be warned this is not to be ignored as it has a substantive effect on employers, especially SMEs. So, how much do you need to change your contracts, policies and practices?
The Bill has proposed significant changes, including detailed provisions on trade unions and industrial action. However, in this post, we will focus on the key changes to employment laws and the impact and risks of these changes on employers. We will not touch on the trade union amendments:
1. Right to guaranteed hours:
The Bill aims to prohibit zero-hour contracts. It will ensure that workers receive contracts reflecting their typical hours and adequate notice of any shift changes. Employers will need to pay workers for cancelled or changed shifts on short notice and must offer new contracts that guarantee a minimum number of hours based on previous work periods. Workers can claim compensation for breaches of these obligations.
Employers may face reduced operational flexibility, especially in industries like hospitality, where demand is unpredictable. The need for guaranteed hours and fixed patterns may increase costs, forcing employers to adopt stricter scheduling practices and limiting their ability to adjust staffing levels dynamically. This regulatory complexity poses significant challenges, so planning ahead is essential.
Balancing compliance with operational requirements may complicate employee relations. Workers accustomed to flexible arrangements may become frustrated with more rigid hours so open conversations and transparency will be essential. Employers need to consider these changes sooner rather than later to consider recruitment plans, cash flow and long-term strategies to cope with these changes. A review of their contracts and policies will be essential to ensure compliance, and these must be applied without discrimination.
2. Flexible working
In 2023, the Government introduced a right for employees to request flexible working from the first day of employment. It mandated that employers consider requests and provide valid reasons for any rejections. The Bill will now enhance this right by allowing refusals only on specific grounds, requiring employers to explain their reasoning in detail.
Employers must accommodate flexible working arrangements as much as possible to meet the demands of the modern workforce. This will mean careful documentation, a review of policies and practices, and balancing needs and non-discriminatory practices with these new rules.
This enhancement will compel employers to carefully evaluate flexible working requests, as broad justifications will no longer suffice. The need for specific reasoning may require them to consider in-house or outsourced HR resources to protect themselves, reduce administration, and keep the team motivated.
Readdressing your approach and redrafting policies is going to be essential. Accommodating requests may also require operational adjustments, particularly in sectors with fixed hours, prompting cultural shifts towards more flexible work arrangements. Employers who do not adapt may struggle to attract talent and face legal disputes if refusals are deemed unjustified, exposing them to potential claims in employment tribunals.
As such, it is very important to be objective and address each individual’s case with care. Carefully documented decisions and making sure there’s no discrimination in the decisions made.
Employers must also navigate employee expectations carefully to prevent resentment among those who cannot access flexible arrangements, which could impact team cohesion and overall morale. As such, this must be handled carefully, with a plan created now about rolling this out.
3. Statutory Sick Pay
The Bill amends Statutory Sick Pay (SSP) provisions, allowing employees to access SSP from the first day of sickness absence instead of the fourth day. Additionally, it removes the minimum earnings threshold for eligibility, setting SSP at either £116.75 or a percentage of the employee’s weekly earnings, whichever is lower. These changes will likely increase costs for employers, particularly small and medium-sized enterprises (SMEs), as they will have to pay for more sick days and accommodate a larger pool of eligible employees.
Employers will need to update payroll systems and enhance HR oversight to manage the earlier payment and new eligibility criteria. There are concerns that immediate SSP payment may lead to increased short-term absenteeism and potential misuse of sick leave. Therefore, scrutiny, policies, and oversight to monitor this are key. All employment terms will need to be adapted accordingly.
4. Leave Entitlements
Significant changes to parental and bereavement leave are also part of the Bill. It makes paternity and parental leave a day-one employment right. Parents can take up to 18 weeks of parental leave, with the right to return to the same job if more than four weeks are taken as standalone leave.
The Bill also expands bereavement leave, allowing employees to take one week for losses involving individuals other than a parent or child and two weeks for a child’s death. Additionally, employees are entitled to bereavement leave for each deceased person in cases of multiple losses.
These changes mean that new employees can now access leave immediately, impacting employers who depend on new hires for key roles, circumventing probation restrictions and exposing the employer to an immediate loss of staff as a result. This could result in increased short-term absences, which will necessitate improved workforce management strategies, such as cross-training and hiring temporary staff.
Additionally, worries about potential misuse of leave could arise, leading to higher absenteeism and disruptions in productivity. Employers will need to allocate resources to educate staff about the new entitlements and amend policies. We suggest having tight HR practices to monitor this use in case of abuse and to help plan for these eventualities.
5. Protection from harassment
Harassment at work has always been prohibited, but it is now heightened. Employers will be held accountable to prevent sexual harassment, requiring them to take “all reasonable steps,” as opposed to merely “reasonable steps.”
Employers will need to follow specific regulations detailing necessary actions, such as conducting assessments, publishing harassment prevention plans, and implementing effective complaint-handling processes. Additionally, they must protect employees from harassment by third parties, which is particularly challenging in public-facing sectors like retail and hospitality, so a means to report and monitor this and, more so, react and document the action taken.
This will likely require new training programs, policy communication, and an overall increase in operational costs, especially for SMEs. HR or managers need to keep detailed notes of all employee’s complaints and the action taken to avoid claims.
Employers may feel overwhelmed by the expanded obligations, fearing increased legal liabilities and the potential for reputational damage if they fail to comply with the new requirements. The emphasis should be on proactive measures so a means to report concerns, robust policies and training will help employers move in the right direction.
Despite these challenges, some employers may view the Bill as an opportunity to foster a safer, more inclusive workplace culture. It would be advisable to approach it as such. By prioritising employee well-being and clearly communicating harassment policies, employers can enhance morale and retention.
However, they must navigate the complexities of compliance and the increased risks of liability due to non-compliance or insufficient measures, ultimately striving to maintain a responsible reputation while safeguarding their employees.
6. Dismissal
Changes to unfair dismissal laws are the most concerning of all amendments. It eliminates the current two-year continuous service requirement and makes unfair dismissal a day-one right for employees. This will require employers to establish fair and transparent dismissal processes from the outset, even during probation periods, where dismissals must be well-documented and justified. It opens up employers to more potential claims, from those looking to abuse the process which is too heavily favoured towards employees, with no cost to issue a claim and no consequences if this is unsuccessful.
New grounds for unfair dismissal include terminations related to contract changes, meaning employers will need to be cautious when altering employment terms to address economic pressures. While probation periods may still exist, dismissals during this time will necessitate a robust consultation process to avoid claims. Choosing staff is ever so important, and references and checks may become more necessary as employers will no longer be able to trial staff as once before.
The Bill also extends protections to prospective employees, preventing dismissals on grounds such as pregnancy or political opinions even before their employment begins. This means that employers must carefully consider any rescinding of job offers, as it could result in claims for unfair dismissal or required notice payments.
Consequently, the hiring process will require more thorough decision-making and defensible reasoning when withdrawing offers. This could have devastating consequences for small businesses, which are more likely to subcontract and use resources overseas as a result.
7. Equality Action Plans
The Equality Act 2010 will be amended, requiring employers with 250 or more employees to develop and publish an equality action plan focused on advancing gender equality. This plan must address critical issues such as the gender pay gap and support for employees experiencing menopause. Small businesses with fewer than 250 employees and public authorities are exempt from these requirements.
Conclusion
The Employment Rights Bill represents a significant shift in the employment landscape, particularly affecting industries that rely on flexible labour, such as hospitality, retail, and care. It is making it harder for employers, opening up risk for abuse. Further monitoring, referencing, documentation and robust policy creation will be essential for employers to protect themselves. Removing the two-year continuous service requirement for unfair dismissal claims has increased the legal risks and potential costs for employers. There is concern recruitment may be modified, seeing more sub-contracting and outsourcing as a result. Companies will need to invest in robust employment practices and systems to manage compliance, mitigate risks, and maintain positive worker relations.
This is a concerning overhaul as workers require protection, and the widening of these rights places a lot of strain, administration, and potential financial concern on small businesses that are already struggling.
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