The Employee Rights Bill - should employers stop hiring

The Employee Rights Bill - should employers stop hiring

So far, the Employment Rights Bill announced by Labour last week (10th October) has received a mixed response. Whilst some experts have welcomed the plans, hailing them as a strong first step in improving workers’ rights, and being positive for employers and employees alike, others have criticised the proposals, claiming that they have been both watered down and delayed.

The bill itself won’t be passed into law until summer 2025, and some of the changes within it will take closer to two years to come into effect, after a period of consultation. Despite its lukewarm reception, the Government hopes that the new bill will ‘help deliver economic security and growth to businesses, workers and communities across the UK.’  So what does this ‘pro-business, pro-worker’ approach really mean for employers?

The proposals

Following a range of queries from clients, HR directors and employers, we’ve put together an overview of some of the key changes outlined in the bill, and what they will mean in practice for employers. These include:

1. Protection against unfair dismissal and statutory probation periods

The legislation: Removal of the existing two-year qualifying period for employee protections against unfair dismissal and consultation on a new statutory probation period for new hires.

What this means for employers: The Government is consulting on a new statutory probation period for new hires. However, from day one of their employment start-date, workers will qualify for unfair dismissal protections, meaning that employers looking to terminate an employee’s contract will need to be able to justify their reasons for wishing to do so.

The Government is yet to confirm how long the statutory probation period will be, but their Next Steps to Make Work Pay document states that they are favouring a nine-month probation for all new hires. Whilst employee rights will be protected during this time, the Government is hoping that this period will allow employers the time they need to assess an individual’s suitability for a role.

The Next Steps paper also states that the Government recognises concerns from businesses around the potential rise in legal liability that the removal of the two-year qualifying period could cause, and the impact it may have on hiring decisions. As such, they plan to introduce a ‘fair and proportionate’ process for dismissing workers in their initial periods of employment, providing a ‘lighter-touch’ approach for businesses to follow to dismiss someone who is not right for the job. The paper suggests that this could consist of holding a meeting with the employee to explain the business’ concerns around their performance.

The Government has also made it clear that these reforms will not come into effect any sooner than Autumn 2026, giving employers time to prepare and adjust to any new rules, with the current two-year qualifying period continuing until then.

2. Paternal, parental and bereavement leave, sick pay

The legislation: Paternal and parental leave will become ‘day one rights’, as will bereavement leave and statutory sick pay.

What this means for employers: Paternity and parental leave rights will be brought in-line with maternity leave, which employees are already entitled to from their start date. Employers will also be required to create policies for bereavement leave, which employees will be eligible for from their first day of employment. The full details are yet to be released on this, but bereavement leave entitlement is likely to be a full week.

Statutory Sick Pay (SSP) is currently payable by employers from the fourth day of an employee’s sickness, with a minimum earning requirement of £123 per week. The Bill removes the lower earnings limit and also makes SSP payable from day one of sickness.

3. Reformation of zero-hours contracts

The legislation: An end to ‘exploitative’ zero-hours contracts.

What this means for employers: Employers will have to give staff currently on zero or ‘low’ hours contracts the ability to move to guaranteed hours if they regularly work more than the hours their contract states. The Government plans to consult on what constitutes ‘low hours’, setting those out in subsequent regulations. The new guaranteed contracted hours will need to reflect the hours the employee works over a 12-week reference period. Employers will also have to give ‘reasonable notice’ of any change in shifts or working time, with proportionate compensation offered for any short-notice cancellations. These measures will also be adapted and applied to agency workers.

This proposal can appear confusing at first glance, as zero-hour contracts will not actually be banned. They key is the term ‘exploitative’. The Government recognises that for some individuals these types of contracts work well, so whilst employers will have to offer their workers guaranteed hours, the employees could choose to remain on zero-hour contracts, if they wish.

4. Flexible working

The legislation: Change to the law to make flexible working the default for all.

What this means for employers: As with many of the other proposed changes, the right of an employee to request flexible working will now be applicable from day-one of their contracts. Workers will be able to request flexibility in the number of hours they work, their start and finish times, the days they work and the location. Employers will still have the right to refuse these requests, but they will have to prove that it is unreasonable for their employee to work in the manner they have requested. The Government has outlined eight valid reasons for an employer to refuse an application, which include incurring extra costs that will damage the business, flexible working having an impact on the quality of the work delivered or the performance, and planned changes to the workforce. Before refusing a request, employers will have discuss it with the employee in question.

Should you delay your hiring plans?

Both publicly and anecdotally, many employers have started to voice concerns about the proposed changes. In particular, the laws around unfair dismissals, sick pay and probation periods have been referenced as potential issues. As a result, some employers have expressed nervousness around what this all means for taking on new talent in the future.

In reality,  most employers shouldn’t have too much to worry about – especially when it comes to the proposed unfair dismissal practices and statutory probation periods. Whilst the Employment Rights Bill houses these reforms neatly in one place, UK discrimination legislation has ensured that companies have to follow due process from day one when it comes to dismissal practices anyway.

Similarly, lots of businesses have already implemented flexible working practices successfully – with a large number citing improvements in their team’s well-being and productivity as a result. These changes will likely cause an increase in the number of requests that employers receive, but it won’t prevent companies from denying them. Some businesses may have to update the processes they have in place for reviewing a flexible working request, considering each on its own merits and looking at the potential impact it will have on the business before making a decision. If a request is refused, employers will need to be transparent with their employees, clearly evidencing why it was not possible at that time.

The Government has been clear that it wants the Bill to work for employers as well as employees, and their planned consultations will seek the thoughts of businesses, unions and third sector bodies. The proposals haven’t been designed to hamper the growth of business, so if managed properly, the changes shouldn’t have a detrimental impact on the ability of employers to manage the performance of their teams or to make commercial decisions.

However, for some employers there could still be nervousness around taking on permanent staff in the future, which could lead to more businesses using fixed term contracts for certain roles and positions. Other economies already do this successfully, with 28% of the employed labour force of the Netherlands classified as being in flexible employment in Q1 2024. Dutch employment law states that fixed term contracts cannot exceed three years in total without being converted into permanent ones under certain conditions. This shift in the type of contract offered by employers may well be something we see in the UK to help mitigate any perceived risks faced by businesses looking to fill new roles. But the question will then become how well will the workforce react to such a shift and what will it mean for talent attraction?

Getting the right talent for your company is a big task and having confidence in your hiring decisions can be crucial to the smooth running of your business. The introduction of the Employment Rights Bill doesn’t change that, but for many employers and hiring managers, it might well bring these challenges to the fore.

By working with a trusted recruitment partner, many employers can help mitigate these risks. At Mackie Myers, we work in partnership with our clients to advise on the current market conditions, options and candidate expectations. We also help employers to define and redefine their job descriptions, making sure the right candidates are placed in the right roles.

If you’re planning to make a new hire, or if you have any queries about what these changes might mean for your business, contact us on hello@mackiemyers.co.uk and we’d love to arrange a conversation.

 

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