What are the employment law changes?

This year, companies across the UK have been monitoring the scheduled changes to employment law, and awaiting clarity on what these changes mean for their business. The updates stem from the Labour Party manifesto, which includes key pledges such as eliminating the practice of "fire and rehire," raising wages, banning exploitative zero-hour contracts, and introducing day-one rights in the Employment Rights Bill 2024.

With ongoing uncertainty around what companies need to prepare for and when these changes will take effect, we’ve gathered information from Government updates and employment law specialists, Consilia Legal to clarify what this means for your business.

What is ‘Make Work Pay’ and what is the Governments’ vision?

The Employment Rights Bill was introduced to Parliament on 10th October 2024, marking the first phase of the Labour Party's mission to "Make Work Pay" and to modernise the UK labour market. This initiative aims to address recent economic underperformance and worker insecurity, particularly for those trapped in low-paying, unstable jobs with weak protections that undermine productivity and growth.

The goals are to improve living standards, enhance employment rights, and make work more flexible and family-friendly. This will support the lowest-paid workers and foster a healthier, more productive economy through the next steps outlined by the Government.

It’s work noting that although the bill was introduced earlier this year, legal experts, Consilia Legal, have advised the bill is expected to pass in 2025 with the majority of changes outlined in this document most likely to take effect by Autumn 2026. Therefore, this article aims to support your business prepare and assess the key changes and the wider impact they may have on your business.

What are the key changes?

Duty to Prevent Sexual Harassment

This addition to The Worker Protection Bill introduces a new requirement for employers to take reasonable steps to prevent sexual harassment in the workplace. For employers, this will require you to take pro-active actions to protect your employees. Your business is responsible for creating a respectful work environment and conduct a risk assessment specifically to prevent SH and provide regular, meaningful training. You will need to set up reporting channels for employees to report incidents if you have not already done so and remind them of these. You'll also need to ensure that line managers are trained to handle these issues effectively.

This change came into play on 26 October 2024 and The Equality and Human Rights Commission (EHRC) provides further guidance on these changes.
 

The Allocation of Tips

The Employment (Allocation of Tips) Act 2023 took effect on 1st October 2024. This law ensures fair and transparent allocation of tips, gratuities, and service charges in the workplace. While this new legislation will not apply to all businesses, it is a significant update for many, particularly those in hospitality and services.

For businesses affected, you should establish a written policy on how tips are managed in your business and make this policy accessible to all employees. The forthcoming Employment Rights Bill will also require employers to consult with recognised trade unions or workers regarding their tipping policy and review this every three years.
 

Trade Unions

Employers will soon be required to remind employees of their legal right to join a trade union, even if the employer does not officially recognise any unions. This reminder must be given regularly to ensure that all workers are informed of their rights.

Additionally, trade unions will gain new rights to access workplaces through "access agreements." This will allow them to meet with, represent, recruit, and organise members more effectively. Importantly for employers, the practice of replacing striking workers with agency staff will be banned.

Day 1 Rights

Unfair Dismissal

Starting soon, employees will receive protection from unfair dismissal from their very first day of employment, provided they successfully complete their probationary period. Employers will be required to follow a “fair” process in any dismissal decisions.

To adapt to this change, employers must effectively use probationary periods  implement robust performance management systems, and review the performance management systems in view of the changes. As a result of the Day 1 Rights, you may see an increase in unfair dismissal claims in tribunals. However,  this may be balanced by a rise in commercially-minded agreements being reached, which can help mitigate potential disputes. For more detailed information on employment rights and eligibility, you can refer to the Government's guidance for HR professionals. Preparing for these changes will be crucial in maintaining a fair and compliant workplace.

Flexible Working and Zero Hours Contracts

Flexible working will soon become the default for all workers from their first day of employment to end ‘one-sided flexibility’. Employers must assume that requests for flexible working should be approved unless they can reasonably demonstrate otherwise based on specific business grounds. While many businesses adopted flexible working after the pandemic, a lack of clarity and enforcement has given employers more control. If a flexible working application is denied, employers must clearly state the reasons for refusal, shifting from handling requests reasonably to making reasonable decisions.

Under the new legislation, employers must offer low-hour contracts alongside guaranteed-hour contracts to workers who consistently work regular hours over a defined period. Additionally, the government will ban exploitative zero hours contracts by prohibiting characteristics that compromise worker security and predictability. Workers will gain the right to a contract reflecting their regular hours, based on a likely 12-week reference period. They will also have the right to reasonable notice of any changes to shifts, along with proportional compensation for cancelled shifts.

For more details on flexible working legislation in the UK, refer to the Government's guidance on flexible working and zero hour contracts.

Changes to Statutory Sick Pay (SSP)

The upcoming Bill will eliminate the 3-day waiting period for Statutory Sick Pay (SSP), making it payable from the first day of absence. Additionally, employees earning below the Lower Earnings Limit will no longer be excluded from receiving SSP, ensuring that all employees, regardless of their earnings, are entitled to this support.

The weekly rate for SSP will be set at £116.75 or a prescribed percentage of the employee’s weekly earnings (whichever is lower).

These changes aim to enhance support for employees during periods of illness, and may have implications that will require updates on workplace policies and payroll processes.

Changes to Leave Entitlements

Under the new legislation, employees will be entitled to take paternity leave and unpaid parental leave from their first day of employment. Additionally, the entitlement to bereavement leave will be expanded beyond parents, allowing any bereaved employee to take protected time off work. A definition of a "bereaved person" will be provided in forthcoming regulations based on the employee's relationship with the deceased.

These regulations will specify that bereavement leave will last for at least one week and can be taken within 56 days of a person's death. If more than one person dies and the employee's relationship to each is covered by the regulations, the employee will be entitled to leave for each deceased individual.

Further details will clarify how bereavement leave is to be taken, and employees will still be eligible for statutory parental bereavement pay in cases where a child under 18 has died.

Collective Redundancies

Currently, employers are required to collectively consult when proposing to dismiss 20 or more employees as redundant at a single establishment within 90 days. The Employment Rights Bill will remove the reference to “one establishment,” meaning that these thresholds will now apply across the entire business.

The government has also confirmed its commitment to consulting on lifting the cap on the protective award if an employer fails to properly follow the collective redundancy process. More information can be found here.

Fire and Rehire Practices

A new statutory ACAS Code of Practice on Dismissal and Re-Engagement came into effect on 18 July 2024, further restricting the use of fire and rehire practices. Under the new legislation, employers will only be able to offer to re-engage workers on new terms if it is part of a restructuring and no other alternatives are available.

If an employer dismisses an employee due to an inability to agree on contract variations, the dismissal will be considered automatically unfair. The only exception will be if there are significant financial difficulties impacting the business's operations.

Although not all the changes are currently in effect, it's important to stay informed about government updates. They have recently released an  Employment Rights Bill Factsheet, which provides an overview of existing regulations and the upcoming phases of the "Make Work Pay" plan.

If your business is uncertain about how these changes may impact your policies, procedures, and people strategies, please reach out to our team for further support and guidance.