Major upcoming employment law changes: What you need to know and how to prepare

On 17 July 2024, during the King's Speech, the newly elected Labour Government in the UK announced the introduction of two new employment bills: the Employment Rights Bill and the Draft Equality (Race and Disability) Bill.

In this blog, our legal experts will focus on the Employment Rights Bill ("the Bill"), outlining the key changes and actionable steps for business owners to prepare ahead of the changes. 

It's important to keep an eye on official announcements for the exact timeline and further details on how these new rights will be rolled out. This article does not contain an exhaustive list of all of the changes, and new guidance may be provided in relation to the Bill at any time.

Summary of the key changes

The new legislation marks a significant shift in UK employment law, aimed at "banning exploitative work practices and enhancing employment rights".

Below is a summary of some of the key changes outlined in the Employment Rights Bill:

- Day-one rights to claim unfair dismissal for all employees;

- A ban on "exploitative" zero-hours contracts;

- Employers must give reasonable notice of cancelled or reduced shifts;

- Ending "fire and rehire" practices;

- Making flexible working the default from day one for all workers;

- Strengthening statutory sick pay rights;

- Enhanced protection for mothers returning from maternity leave; and

- Parental leave will become a day-one right.

When will these changes be effective?

While the precise date for the Bill's full effect may vary depending on the legislative process and any necessary administrative adjustments, the King's Speech confirmed that the new legislation would be introduced within the first 100 days of Parliament. If this ambitious deadline is met, we can expect to see the Bill’s implementation in mid-October 2024.

In the meantime, here is a summary of some of the most significant upcoming changes that may impact small business owners and some proactive steps you can take to prepare ahead of these changes:

Key changes introduced by the Employment Rights Bill and practical tips to prepare

1. Day-one protection against unfair dismissal

What’s changed?

Employees will have the right to protection from unfair dismissal starting from their first day of employment. Previously, employees needed to be with a company for two years before being eligible to bring a claim for unfair dismissal.

Action steps: 

• Review your probationary policies: ensure your probationary procedures are robust, fair, and transparent. Acas is expected to update its guidance on probationary periods and disciplinary procedures, so keep an eye out for any updates on the Acas website.

• Train managers: provide your management team with training on handling probation reviews and dismissals according to the new law. To avoid unfair dismissal claims, ensure you have a valid reason for dismissal and follow a fair procedure, including a thorough investigation, consultation and clear communication throughout.

• Consider alternative hiring models: you may want to explore alternative resourcing strategies, such as agency work, to mitigate the risk of early dismissals leading to legal challenges.

2. Ban on "exploitative" zero-hours contracts

What’s changed?

Zero-hours contracts that are deemed "exploitative" will be banned, and employees will have the right to a contract reflecting their average hours worked. Employers will also need to give reasonable notice of a change in shifts or working time, with "proportionate" compensation for reduced or cancelled shifts.

Action steps: 

• Audit contracts: review your existing zero-hours contracts to ensure they are not exploitative and reflect the actual hours worked.

• Consider employment alternatives: if you rely heavily on zero-hours contracts, start considering other employment models that provide more predictability for both you and your employees.

• Budget for compensation: take into consideration the potential financial implications of compensating employees for late-notice shift cancellations or reductions.

3. Restrictions on "fire and rehire" practices

What’s changed?

The Bill imposes strict limits on the practice of "fire and rehire," allowing it only when absolutely necessary. This practice involves terminating an employee’s contract and then offering to rehire them under new, often less favourable terms.

Action steps:

• Avoid fire and re-hire unless absolutely necessary: Use this practice only as a last resort when pressing business needs arise and voluntary agreements with employees cannot be reached.

• Follow a fair process: ensure that any internal restructuring involves a fair procedure with a genuine consultation process. Failing to do so could lead to claims of unfair dismissal.

• Keep records: if you are required to dismiss and re-engage an employee on new terms, ensure you keep clear, documented evidence of the necessity of this action.

4. Flexible working as the default from day one

What’s changed?

Flexible working will be the default option from day one of employment, unless it is not reasonably feasible. It is not yet clear whether the reasons for refusing a request will become more limited, making it potentially harder to deny requests. In the meantime, consider the following actions to prepare until further guidance is given.

Action steps:

• Evaluate your current ways of working: Assess your current workflows and job roles to identify areas where flexible working arrangements could be implemented. This will help you be proactive in accommodating requests and minimise disruptions to business operations.

• Train managers: managers should be trained on how to assess and manage flexible working requests fairly and in line with the new legislation.

• Update HR policies: update your policies regarding flexible working, providing clear guidelines on how requests will be handled.

5. Strengthening statutory sick pay

What’s changed?

To qualify for statutory sick pay (SSP), employees needed to earn above a certain threshold, known as the "lower earnings limit". However, this limit will be lowered, and there will no longer be a three-day waiting period before employees can start receiving SSP payments, so statutory sick pay will be available to all workers from the beginning of sickness.

Action steps:

• Review and update sick leave policies: reflect the changes in your staff handbook or sick leave policy documents to ensure all employees are aware of the updated procedures for reporting illness and claiming SSP.

• Train HR and payroll staff: provide training for your HR and payroll teams on the new statutory sick pay rules. This will help ensure that they can accurately process sick leave claims and address any related queries from employees.

• Update payroll systems: Adjust your payroll systems to accommodate the changes in SSP eligibility and processing, ensuring that all employees receive their payments promptly and accurately.

6. Enhanced rights for mothers returning to work and parental leave becoming a day-one right

What’s changed?

The Bill introduces new protection for mothers returning from maternity leave, making it unlawful to dismiss a woman within six months of returning from maternity leave (except in specific circumstances). Additionally, parental leave will become a day-one right for all employees.

Action steps:

• Update maternity and parental leave policies: Review and update your policies to ensure they align with new laws.

• Train HR and management teams: Provide training for HR personnel and managers on the new legal requirements for supporting employees returning from maternity leave and handling parental leave requests.

• Communicate new rights to employees: Clearly inform employees about their new rights regarding parental leave and protections for returning mothers.

Will the Employment Rights Bill impact Scottish businesses?

Yes, the Employment Rights Bill will affect businesses across Great Britain, including those in Scotland.

Final thoughts

In conclusion, the Employment Rights Bill will transform several aspects of UK employment law with its predominantly pro-employee provisions. To navigate these new regulations successfully, business owners must take proactive steps. Key actions include updating your policies, training your management team, and clearly communicating the changes to employees. Embracing these updates can improve working conditions and a fairer work environment. Although the changes have not yet been enacted, implementing these steps now will ensure that your business is well-prepared for the upcoming regulations.