What reforms are included in the Employment Rights Bill?

Now that the Employment Rights Bill has been published, along with Next Steps to Make Work Pay policy paper and the Explanatory Notes, our employment lawyer Sungjin Park breaks down what the Bill will mean for employers.

Unfair dismissal and probationary period

Removal of the current two-year qualifying period has been confirmed, although the right is still limited to ‘employees’ only. The same qualifying period will apply to the employee’s right to make a request for written reasons for dismissal which is currently two years (except in relation to pregnancy dismissals or dismissal following a childbirth).

There will be an ‘initial period of employment’ (the length of which will be consulted on but indications point to nine months), during which an employer can dismiss an employee for reasons relating to the employee’s conduct, capability or qualifications for performing the work for which they have been employed (note, there is no mention of redundancy here).

There will be a light-touch procedure for dismissing an employee during the initial period of employment which would consist of holding a meeting.

This is by far the biggest change from the current law. It won’t come into force for a while as there will be a long consultation period. The length of the probationary period and the procedure required to dismiss within the probationary period will likely be the biggest discussion points during the consultation period.

Flexible working

There will be a further shift in the balance of flexibility towards employees, although the changes here are not as dramatic as expected.

Flexible working must be afforded unless:

1. the employer considers that it should be refused on one or more of statutory grounds (the same as the current eight business reasons for refusal), and
2. it is reasonable for the employer to refuse on that ground or grounds. This requirement is new and obliges the employer to explain why it believes it is reasonable to refuse flexible working.

There is a higher pragmatic burden on employers to refuse a flexible working request, but this may not be the sea change that was expected.

Protection from harassment

The duty to take reasonable steps to prevent sexual harassment in the workplace under the new s.40A of the Equality Act 2010 (due to be enforced on 26 October 2024) will be amended further to oblige the employer to take “all” reasonable steps. This increased burden will demand much more of the employer to prevent sexual harassment than even the incoming changes this month.

The Bill will introduce protection from third-party harassment for the first time, to provide that an employer will be liable if a third party harasses an employee in the course of their employment and the employer has failed to take all reasonable steps to prevent that harassment by the third party.

This liability extends not only to sexual harassment but harassment related to other protected characteristics.

Zero-hour contracts

There will be a new requirement to offer guaranteed hours to a worker on a zero-hour or low-hours contract after the end of every relevant reference period which reflects the hours the worker worked during that reference period.

Further, the employer will be required to provide reasonable notice of shifts and changes affecting shifts to qualifying workers on zero-hour contracts.

Statutory sick pay

Two changes will be introduced; first, the removal of the current waiting days which will oblige employers to pay sick pay from day one of the sickness absence; and second, the removal of the lower earnings limit.

Employers with a company sick policy will likely not be impacted by the change, although sickness absence policy should be reviewed regularly in any event.

Family leave

The current qualifying period for paternity and parental leave will be removed and become a day-one right. Employees will also be able to take paternity leave and pay after shared parental leave and pay, which is currently prohibited.

The parental bereavement leave will be expanded to provide at least one week of leave to be taken within 56 days of the person’s death.

Fire and re-hire or replace

The Bill introduces a new type of automatic unfair dismissal if the employer dismisses the employee for failing to agree to a variation of their employment contract or the employer dismisses the employee to replace or to re-engage them on varied contractual terms.

To avoid such liability, the employer must demonstrate that the reason for the variation was to eliminate, prevent, significantly reduce or mitigate the effects of financial difficulties which, at the time of the dismissal, were affecting the employer’s ability to carry on the business as a going concern.

Even if the employer can demonstrate this, the Employment Tribunal must also consider whether the dismissal was fair in all the circumstances.

Collective redundancy

The obligation to consult will change under the Bill as the reference to ‘one establishment’ will be removed where an employer is proposing to dismiss as redundant 20 or more employees at one establishment. The result is that the trigger point for obligation to consult will be lower where the employer has more than one site or branch across the UK.

Tips and gratuities

For the summary of changes under the Employment (Allocation of Tips) Act 2023 which came into force on 1 October 2024, click here.

The Bill will amend s.27I of the Employment Rights Act 1996 to require employers to maintain a written tipping policy and to consult with the representatives of recognised trade unions or worker representatives, or where there are no such representatives in place, workers likely to be affected by the policy. Such consultation must be carried out before the employer produces their written tipping policy.

When will these reforms be implemented?  

Most of the reforms, with the exception of statutory sick pay, will not be implemented until 2026 since consultations won’t begin on them until 2025. As for the dismissal changes, these will not come into force until late 2026 due to the length of consultation required.

If you need advice or have any questions on the Bill, please contact Sungjin Park.