The Labour government has unveiled its new package of workers’ rights reforms, two days before its self-imposed deadline.
The contents of the employment rights bill has been eagerly awaited by both employers and employees, after the Labour Party touted major reform of workers’ rights within its first 100 days in office.
Among the 28 measures that have made it into the final bill are the right to maternity leave and sick pay from day one of employment, a strengthening of flexible working rights and the end of so-called fire-and-rehire practices.
Peter Cheese, chief executive of the Chartered Institute for Personnel and Development, describes the changes as the “greatest shift in employment legislation in decades”.
“Done right, these changes can improve working lives and opportunities and help drive both economic and social benefits,” he says. However, he acknowledges that some details still need to be worked through – specifically in relation to the removal of the qualifying period for unfair dismissal and the introduction of a new statutory probationary period.
Civil servants, trade unions and business groups have been engaged in debate during recent weeks, as the government has sought to reach a mutual agreement over the final contents of the bill. However, not all parties are happy with the final result.
While GMB union leader Gary Smith describes the bill as a “significant and groundbreaking first step to giving workers the rights they’ve been denied for so long”, Tina McKenzie, policy chair at the Federation of Small Businesses, has warned the reforms will stymie recruitment.
“This legislation is a rushed job, clumsy, chaotic and poorly planned,” she says. “Dropping 28 new measures onto small business employers all at once leaves them scrambling to make sense of it all.”
A lot of the legislation in the final bill has been watered down when compared to what was originally proposed by Labour in its manifesto, according to Jo Mackie, partner and director of employment at Burlingtons Legal LLP. “What we will now see is a bun fight between business and trade unions over the rights that are still open to consultation,” she adds.
Despite a number of concessions in the final bill, there is much for people leaders to unpack. As Cheese notes: “The HR profession is going to be on the frontline of understanding and embedding these changes in organisations.”
What’s included in Labour’s employment rights bill?
Unfair dismissal
One of the more significant changes tabled in the bill is the removal of the qualifying period for unfair dismissal, by granting full day-one employment rights to workers. Currently, employees must have two years’ continuous service before they gain dismissal protection.
However, employers warned that making this a day-one right could have a detrimental impact on recruitment as it could make employers take a lower-risk approach to hiring and lead to the increased use of temporary contracts.
A new statutory probation period will be introduced as a compromise. Although workers would still be able to claim unfair dismissal during this period, there will be a “lighter touch” approach to enforcing this rule during these initial months. The government hopes this will allow businesses to properly assess new hires during this period and enable them to take a chance on new recruits.
While a six-month probation period had originally been suggested, a nine-month period is now preferred by the government. This statutory probationary period will remain under consultation until the bill is passed.
The probationary period needs to be clarified soon to give businesses confidence in hiring, Mackie says. “You’re going to see employment rates fall as a result of the uncertainty the government has created,” she adds.
To allow time for a full consultation and for employers to prepare for the changes, the reforms to unfair dismissal will not come into effect until Autumn 2026, at the earliest.
Sick pay
Workers will be entitled to statutory sick pay from the first day they are ill, rather than the fourth day. The lower earnings limit, which applies to those on less than £123 per week, will also be removed and a lesser level of pay will be set for these lower earners.
Parental and bereavement leave
Day-one rights to paternity and unpaid parental leave will be introduced. Fathers are currently only eligible for paternity leave from their 26th week of continuous employment.
Protections for working mothers will also be strengthened, including protection from dismissal while pregnant, on maternity leave and within six months of returning to work.
A new right to bereavement leave will also be established, allowing workers to take unpaid leave following the death of a loved one. It will be down to case law to determine who counts as a loved one, according to Mackie.
Flexible working
Flexible working is set to be made the default for workers from day one, “where practical”. The change in the law will mean the onus will now be on employers to prove any flexible working request is unreasonable.
Zero-hours contracts
Workers on low and zero-hours contracts will have the right to a guaranteed-hours contract, based on the hours they’ve worked over a defined period. However, employees can still opt to remain on a zero-hours contract if it’s their preference.
Employers will also have to give people reasonable notice of changes to their shifts and will have to make payments for any cancellation of shifts at short notice.
Right to switch off
The much-touted right to disconnect is absent from the final bill. This new right was intended to prevent employees from being contacted outside of their usual working hours but has now been put on hold. It will instead be introduced through a statutory code of practice.
Fire and rehire
The Employment Rights Bill will close loopholes that allow companies to engage in fire-and-rehire practices, where staff are sacked and then rehired on lower pay or with worse conditions.
The changes mean any dismissals resulting from an employee’s refusal to agree to a change in their contract will automatically be deemed unfair. But businesses in financial difficulties will still be able to change contract terms.
Minimum wage
The national minimum wage age bands, which set a different minimum hourly rate for workers under the age of 21, are to be removed. In addition, the remit of the Low Pay Commission, which advises the government on the amount the living and minimum wages should be set at, was adjusted in July to take the cost of living into account in its calculations.
Single worker status
Labour had initially tabled the idea of introducing a single worker status, to replace the three that are currently used. Currently, English law recognises three types of employment status: employees, workers and self-employed people. The rights each worker is entitled to varies depending on their status.
The government still hopes to simplify this by moving towards a two-part framework for employment status but this remains subject to continued consultation, as outlined in the government’s Next Steps to Make Work Pay document.
Lucy Lewis, employment partner at law firm Lewis Silkin, describes it as a “thorny issue” and is not surprised it did not make it into the final bill, given the potential knock-on effects it could have for tax and gig-economy workers.
Worker surveillance
New rules around the use of surveillance technologies to monitor employees will continue to be consulted with employers and trade unions.
Pay gaps
Mandatory ethnicity and disability pay gap reporting for large employers will be included in a separate Equality (Race and Disability) Bill. This will follow a similar format to the gender pay gap reporting requirement and will be mandatory for all employers with 250 or more staff.
Sexual harassment
Amendments to The Worker Protection Act 2023 have also been included in the Employment Rights Bill. This will place a legal obligation on employers to take all “reasonable steps” to prevent sexual harassment of their employees.
The Fair Work Agency
A new enforcement body will be introduced to ensure employers comply with the new legislation. The Fair Work Agency will be a new single-point of reference for employers to receive guidance on how to comply with employment laws and will have the power to take “tough action” on companies that flout them.
