Labour’s Employment Rights Bill: What key changes will it bring?

Labour’s Employment Rights Bill is the first step towards the new government fulfilling one of its core election pledges by introducing wide-ranging reforms to workers’ rights and enhancing pay protections.

Below is a breakdown of some of the key changes proposed in the legislation, however, there is no need to panic as these will likely take around 18 – 24 months to fully consult on and implement.

Day one rights

One of the headline reforms is the introduction of day one protection against unfair dismissal, which will be estimated to benefit 9 million workers. Under current rules, employees must work for two years before qualifying for this protection.

The bill also extends day one rights to include the right to take paternity leave and unpaid parental leave to bring them in line with the eligibility requirements for maternity leave which is already a day one right.

An estimated 30,000 additional workers will be eligible for paternity leave, and 1.5 million parents will gain new flexibility through unpaid parental leave available from the start of employment. Additionally, employers will be required to introduce bereavement leave as a statutory entitlement.

Sick pay

The bill introduces an extension of statutory sick pay (SSP) from the first day of illness. Under the current system, SSP does not kick in until the fourth day of absence.

SSP is currently set at £116.75 per week for up to 28 weeks, provided the worker earns an average of at least £123 a week. The government has indicated that SSP will be further strengthened by removing the lower earnings threshold, ensuring more workers are eligible. However, some lower paid workers may still receive a reduced rate.

Probation periods

The new government plans to consult on introducing a statutory probation period for new employees. The government suggests that this reform will allow for a “lighter touch” and less onerous procedure when managing issues with the employee during the probation period and an opportunity to part company with employees who are not suitable for the role.

The current preference appears to be for a nine-month probationary period, up from the six months originally floated, following pressure from businesses, though trade unions had advocated for the shorter period.

Zero-hours contracts

Surprisingly, there is no move to ban the use of “exploitative” zero-hours contracts as was widely expected, but employers will be obligated to offer zero-hours workers guaranteed hours. It is unclear exactly how the guaranteed hours will be determined, so this will need to be confirmed, however, it is likely that a specified reference period (likely to be 12 weeks) will be used.

Fire and rehire practices

The bill will curb the controversial practice of “fire and rehire,” where employers dismiss staff and rehire them under less favourable conditions. While the practice will be banned in the vast majority of cases, businesses facing collapse may still be allowed to alter employment terms as a last resort.

Flexible working

Flexible working will become the default option wherever practical, and employers will be required to explain why the rejection of a request is reasonable in writing. The statutory grounds for refusing a request, however, remain unchanged.

Enforcement body

A new enforcement agency, the Fair Work Agency, will be established to oversee compliance with labour laws, including holiday pay and other employment rights. This agency will consolidate the roles of existing bodies, though its full remit will only become clear after all aspects of the bill have been consulted on and implemented.

Minimum wage reforms

Labour intends to reform the Low Pay Commission, directing it to consider the cost of living when setting the minimum wage. Additionally, the bill will remove age-related minimum wage bands, ensuring younger workers are paid at the same rate as older employees. These changes could lead to pay increases for hundreds of thousands of young workers.

Additional provisions

Employers will need to develop action plans addressing gender pay gaps and offering support for women going through menopause. The bill also strengthens protections for pregnant employees and those returning to work from maternity leave, safeguarding them against unfair dismissal.

What’s missing?

Despite the wide scope of the bill, some key promises from Labour’s original “New Deal for Working People” have not yet been included. Labour has pledged to implement at least 30 more proposals, including:

• Right to Disconnect: Guidance (but not legislation) on the right for workers to avoid being contacted outside of working hours, except in exceptional circumstances.
• Pay Discrimination: Future legislation aimed at ending pay discrimination, with plans to require large employers to report ethnicity and disability pay gaps.
• Single Worker Status: A consultation on creating a single status for workers, which Labour has indicated requires more extensive consultation before being implemented.
• Parental and Carers’ Leave: A review of parental leave and carers’ leave systems is also planned.

In conclusion, the Employment Rights Bill aims to deliver substantial improvements in respect of workers’ rights, though the full impact will depend on consultations and implementation over the coming years. While some of the proposed key reforms have been left out of this initial bill, Labour remains committed to advancing a broader agenda for workers’ rights through future legislation and consultations.

So, what does this mean for employers?

Unfortunately, as the plans are in their infancy there is little that employers can do to future-proof at this stage as while we have an idea of the direction of travel, the bill will now start its journey through parliament and may be subject to various amendments before it is confirmed. Once the bill is passed and the consultation documents are published, we should have a clearer picture of things to come, but for the moment the message is “Don’t panic!”