This year's Kings Speech, delivered on 17 July 2024, saw the new Labour Government set forth the priorities in their legislative agenda for the next parliamentary year. 40 bills were included within this speech and the accompanying memorandum, two of these being carried over from the previous parliamentary session.
As was expected with workers’ rights being a focal point of Labour’s manifesto, changes to existing employment legislation were proposed through, not one, but two employment bills. The Employment Rights Bill and the (draft) Equality (Race and Disability) Bill covers a wide range of proposed changes, which could have enormous implications for employers over the coming months and years.
Employers are, understandably, keen to gain a greater understanding of the potential changes being proposed and, importantly, when these might come into effect. This article looks to provide an overview of what was discussed in respect of the two employment law bills and the likely timings of these changes to help employers better prepare for the future.
The Employment Rights Bill
The Labour Party manifesto was clear that, if elected, Labour would seek to enact a wide array of changes to existing employment law and would introduce a bill covering this within the first 100 days of entering office. Following their election victory, the Employment Rights Bill was swiftly drafted and, to meet the manifesto promise, this will need to be laid before Parliament by the 12 October 2024.
So, what does The Employment Rights Bill contain and how might it impact your business?
The key incentive behind the Bill is Labour’s commitment to ‘Make Work Pay’, which focuses on prohibiting exploitative practices in the workplace and enhancing employment rights. As a result, there are several proposed changes, including:
- banning “exploitative” zero our contracts;
- restricting the current practices around ‘fire and rehire’;
- providing additional day one employment rights, including for unfair dismissal, parental leave, and sick pay;
- increasing flexible working;
- strengthening protections for new parents;
- changes to minimum wage bands and bans on unpaid internships;
- stronger rights for self-employed individuals;
- the right to organise unions in the workplace and simplification of union recognition;
- stronger protections for whistleblowers with sexual harassment to be added to whistleblower protection;
- the extension to time limits for bringing tribunal claims from 3 to 6 months; and
- the introduction of the ‘Fair Work Agency’ with power to inspect workplaces.
The impact of these changes will be business dependent, taking into account the nature of work undertaken, the size of the business and set up of the workforce. We have focused below on providing a more detailed overview of those proposals expected to have the most a significant impact on employers.
It is important to note that, amongst other proposals, Labour has promised to work towards a single status of “worker” in the future, rather than separate employment statuses (with different rights and level of protection) for “employees” and “workers”. It is likely to be a complex task to create a new single-status with appropriate employment protections afforded to it, and therefore this proposal may take some time to materialise (if at all). However, if it does, this could result in the expansion of several of the below proposals to a much wider proportion of the workforce for employers.
Day One Rights
Labour has confirmed that it intends to bring basic individual rights from day one for all workers, thus significantly expanding the existing employment law rights.
This included a number of proposals however, for many employers, the proposed changes to unfair dismissal protections will require the most adaptation as, from day one, employees will have the same rights as those with 2 years’ service, in that will have the right not to be unfairly dismissed. The full details around this proposal remain unclear, but Labour has confirmed it will not prevent fair dismissals where there is a fair reason, or during probationary period, provided a fair a transparent process is followed. It is a topic of much debate as to how probationary periods will play into this legislative change, but they are likely to be much more significant moving forwards.
The change to unfair dismissal protection is a fundamental change for employers to keep an eye on and, coupled with Labour’s manifesto proposal to extend Employment Tribunal time limits from 3 to 6 months, is likely to result in a higher volume of tribunal claims being raised.
Additionally, Labour promises that new starters will be entitled to Statutory Sick Pay (“SSP”) from day one, removing the current three-day waiting period which results in SSP not falling due until day four of sickness absence. It also proposes to remove the lower earnings limit which it is currently a requirement to meet to be eligible to receive SSP, widening those who will qualify for payment.
Whilst there were substantial reforms to family-friendly rights back in April 2024, Labour is not quite done! The Labour Party plans to expand these rights further, including a review of the parental leave system to make this a day one right. At this time, it is unclear if the reference to “parental leave” is to that specific type of leave, or to family-friendly leave more generally, but this will be confirmed in due course. In addition, under Labour’s plans, workers may also benefit from a change to the flexible working rights. While requesting flexible working is a day one right currently, the new government plans to make flexible working a day one right with the onus on the business to make a case on why such a working practice would be unreasonable.
Fire and Rehire
The practice of 'Fire and Rehire’, which was put into the spotlight during the P&O Ferries scandal of 2022, is another target for the new Labour Government. This practice refers to where a business dismisses staff, only to hire them back immediately on new terms (these often being less favourable). Under current rules of unfair dismissal, the practice of “Fire and Rehire” can potentially be fair, but employers must consult with their employees first to seek agreement on any changes to terms and conditions of employment, have a good business reason to make any such changes.
Whilst a new code on this very practice was introduced recently on 18 July 2024, Labour has confirmed that it does not consider this is sufficient and aims to replace this with a stronger code, which it is thought will greatly restrict the circumstances for fairly using such a practice.
Zero Hours Contracts
Labour has made clear that it considers employees deserve a certain degree of predictability in their income and, therefore, will take steps to ban “exploitative” zero-hour contracts (the finer details of what will be considered “exploitative” are still to be confirmed). Instead, contracts which reflect the regular hours (based on a 12-week reference period) worked will be required.
We appreciate that such changes could have an impact on a large number of businesses who benefit from having flexible labour costs throughout the year and have therefore created a podcast specifically on this proposal. Please click here to listen.
Equality (Race and Disability) Bill (draft legislation)
In addition to the Employment Rights Bill, Labour plan to draft the Equality (Race and Disability) Bill.
The draft Equality (Race and Disability) Bill is aiming to redress the inequality for ethnic minority and disabled workers.
The key proposals for this bill include:
- extending the right for equal pay claims to ethnic minority and disabled workers; and
- compulsory ethnicity and disability pay gap reporting for employers with over 250 employees.
Plans outlined for pay gap reporting look to mirror those used for gender pay, and it is hope that this type of pay reporting will mirror the effect seen on the gender pay gap, which, has seen a drop of approximately 25%, according to the Office for National Statistics report published 26th October 2022, since 2017 when such reporting was introduced. However, confirmation on this is yet to be announced.
In addition to these proposals, the new government has sought to address the issues of people experiencing the menopause. The new proposal would require employers with more than 250 members of staff to create Menopause Action Plans, outlining how they will support employees during the menopause. Additionally, the government will publish guidance for companies of all sizes on uniform and temperature issues, flexible working arrangements, and logging menopause-related leave and absence.
Conclusion
Whilst the finer details on many of the proposals are yet to be decided and delivered, it is clear that the new Labour Government plans to pass through a raft of changes to employment rights and that the effects of these changes will be felt across the board, from smaller business all the way through to large multinationals the effects of these changes will be felt across the board. It is, therefore, vital that employers are aware of the incoming changes and prepare accordingly.
Businesses should also be vigilant and remain alert for further announcements with policy proposals and parliamentary amendments likely to happen over the coming year. Already discussions have been had about a Skills Bill, Artificial Intelligence Bill, a Digital Information and Smart Data Bill and an Audit Reform and Corporate Governance Bill, all of which could further impact the rights of workers, and in turn those of the businesses who employ them.
If you would like to discuss the proposals further at all or would like our advice on taking steps to prepare in advance of proposed changes coming effect, please do not hesitate to contact a member of the Employment Law team.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
