The Employment Rights Bill: Labour’s vision & what we can expect

The Employment Rights Bill marks a significant moment in UK employment law, signalling widespread reforms over the coming years. Following the introduction of the Bill, much of the commentary has taken a “these are the headlines, but we await further details” approach. However, if the proposals are read in conjunction with Labour’s justification for implementing these reforms, one can develop a clearer picture of what to expect.

Labour’s vision

After 14 years in opposition, it could be taken as read that Labour would seek to introduce labour reforms – it’s in the name after all.  But how can the largest reform to employment rights in 20 years be reconciled with Labour’s pro-business/investment strategy? Published alongside the Employment Rights Bill, the Policy Paper ‘Next Steps to Make Work Pay’ states that strengthened employee rights will boost productivity. The Policy Paper also sets out reforms that can be enacted using existing powers.

In the Paper, the case is made that insecure work and weak employee protections hurt productivity for the following reasons:

1. workers in low-paid and unsecure work are unable to plan, borrow, or invest towards the future;
2. acquiring employment rights after two years discourages employees from seeking better opportunities, and disincentivises employers from offering competitive benefits; and
3. inflexible working practices are taking parents out of the workplace. Encouraging employers to take a family-friendly approach could result in heightened productivity.

When implementing the below reforms, the government are seeking to balance their mission to ‘make work pay’ with encouraging economic growth.

Key reforms

Having considered Labour’s justification for introducing the reforms, let’s examine the main reforms set out in the Bill and Policy Paper and consider what consequences they may have for employers and workers.

1. Day-one employment rights

   The Bill extends employment rights from the first day of work, including protection from unfair dismissal, parental leave, and sick pay, replacing the previous two-year qualifying period. A probationary period framework will allow for flexibility in early employment stages, though details are still being discussed. Employers may see an increase in tribunal claims, necessitating adjustments in workforce management.

   Potential Consequences – Stricter management of probationary periods/criteria and more tribunal claims could become the new norm. Businesses should adapt their planning and management strategies in anticipation of this change.

2. Reform of zero-hour contracts

   The Bill introduces measures to address insecure zero-hour contracts, allowing workers to request contracts that reflect their average working hours over a 12-week period. Employers using these contracts will need to reassess their staffing models to ensure compliance.

   Potential Consequences – There are a number of ways in which employers that currently rely on zero-hour contracts could seek to restructure their workforce but unless a robust 12-week test is applied consistently, employers may seek to avoid or circumvent the new measures.

3. Enhanced maternity protections

   New rules will prohibit the dismissal of women within six months of returning from maternity leave, except in certain cases, such as company closures. Employers must ensure they have fair processes in place for managing returns from leave.

   Potential Consequences – Sensible employers likely already take a cautious approach in instances where a potentially fair dismissal post maternity leave arises. However, an effectively guaranteed period will grant new mothers and their families greater security.

4. Ban on fire-and-rehire practices

   The Bill phases out the practice of firing and rehiring workers on less favourable terms, introducing stricter penalties for failing to meet consultation obligations. Employers should review redundancy and contract procedures to remain compliant.

   Potential Consequences – Employers may have existing redundancy and contract variation procedures which will become unlawful in the coming years. Many employers are likely to seek to review these sooner rather than later.

5. Creation of the Fair Work Agency

   A new body, the Fair Work Agency, will enforce workplace rights, conduct inspections, issue fines, and initiate legal proceedings on behalf of workers, ensuring compliance with employment law. This agency will likely merge three existing agencies: the Gangmasters and Labour Abuse Authority; the National Minimum Wage Enforcement Unit in HMRC; and the Employment Agency Standards Inspectorate.

   Potential Consequences –The rationale behind unifying three existing agencies is that it will make it easier for employees to raise complaints, and for employers to understand what duties they owe to their staff.

6. Universal living wage

   The Bill introduces a single living wage for all adults, eliminating age-based minimum wage tiers. While special categories such as apprentices may have exceptions, this reform aims to reduce pay inequality and improve living standards.

   Potential Consequences – Young adults looking to enter the workforce may struggle against applicants with more experience. On the other hand, employers may be incentivised to invest in upskilling their youngest workers at an earlier stage in their development.

7. Right to disconnect

   The Policy Paper sets out a “right to switch off,” allowing employees to disconnect from work communications outside their working hours, promoting work-life balance. Employers will need to develop policies that respect this right.

   Potential Consequences – Labour has cited the success of similar policies in Ireland and Belgium, which have improved productivity and promoted healthier working habits. Labour proposes to implement similar measures, so the ‘Code of Practice for Employer and Employees on the Right to Disconnect’ published by the Irish Workplace Relations Commissions offers an insight into what this new right may resemble.

8. Strengthened trade union powers

   The Bill eases restrictions on trade unions, simplifying recognition processes and facilitating industrial action. Changes to balloting rules and increased access to workplaces are likely to boost union activity in some sectors.

   Potential Consequences –In 2022 and 2023, the UK experienced more strike action than in any year since the 1980s.  Despite strengthening trade unions, labour is seeking to reduce the number of strike days taken by encouraging good faith negotiation and bargaining between parties.

Implementation

Considering Labour’s ambitions for the UK workforce gives us a clearer picture of what shape the reforms confirmed on 10 October may take. Improving productivity is central to Labour’s mission of economic growth, as well as a justification for creating a fairer and more secure workforce.

Whether greater protection for workers and a stronger economy can coalesce will likely be dependent on the implementation of these reforms. If exceptions to the new rules are too great, the status quo will continue. However, an overregulated labour market may hurt investment in sectors in which it is sought after most.

Should you have any queries regarding the issues raised in this article, please get in touch with Barry.Nichol@andersonstrathern.co.uk.