Labour’s Employment Rights Bill

Labour’s Employment Rights Bill was published on 10th October, the first stage of their Plan to Make Work Pay, in what’s been hailed by CEO of the CIPD as ”the greatest shift in employment legislation in decades”.

The Bill is the headline plan, there is still lots of detail missing, and some changes that were predicted, have not been included in this stage. The government plans to consult on the reforms next year, and any new legislation will not be implemented until 2026, at the earliest.

Here are the key things you need to be aware of:

Right to claim unfair dismissal will be a day one right, but with a caveat

Currently those dismissed with less than 2 years continuous service can’t claim unfair dismissal at an employment tribunal.  This requirement for 2 years service will disappear, and any employee would in theory have the right to make a claim.

However, there will be consultation on the use of a statutory probation period to allow for an initial judgement about a new joiner’s suitability for the role. Indications are this will either be a 6 or 9 month statutory probation period. The suggestion is that there will be a simplified process for dismissal during the statutory probation period, but there is still much detail to be provided prior to 2026 about how it will work in practice.

Employers will be thinking about how they can make their recruitment processes more stringent, so the right hiring decisions are made at the start, with some employers saying that they are less likely to take risks at the appointment stage, for example offering a role to a candidate who lacks experience but shows enthusiasm.

Flexible working will be the default, but with a caveat

Flexibility will be the default, unless the employer can prove it’s unreasonable, for a potentially valid reason, including the burden of additional costs, a detrimental effect on ability to meet customer demand, an inability to re-organise work among existing staff or recruit additional staff, and a detrimental effect on quality or performance; all of which are currently justifiable reasons for rejecting a flexible working request.

Currently employees with any length of service can request to work flexibly, and this request can only be refused on specific grounds – which are similar if not the same as those included as a valid reason for disallowing default flexibility. There is a change of emphasis and there will be a greater requirement for the employer to demonstrate why the role can’t be done flexibly as requested.

Employers will be thinking about how they manage the selection and onboarding processes so there is transparency about the employee’s requirement or desire for flexibility and what is reasonable, from the start.

Zero-hours contracts will stop, but with a caveat

Workers will have the right to be offered a contract with guaranteed hours, based on their regular hours worked over a defined period, expected to be the previous 12 weeks.  However, workers can opt to remain on a zero hours contract if they prefer.

This replaces previous legislation due to be implemented where workers could request a predictable working pattern if they had 26 weeks’ service.

Employers will be considering how they currently use zero hours contracts, if there’s an alternative contract (for example a fixed term contract), and review the hours their zero hours workers currently work to see how they may be impacted.

Parental rights will be strengthened with expanded leave entitlements

Employees will have a day one right to paternity, parental, and bereavement leave. Currently employees need 26 weeks of continuous service to qualify for statutory paternity and ordinary parental leave.

Bereavement leave will extend beyond the existing entitlement for parents who lose a child. Broader compassionate leave rights are expected but the details of how long and whether it will be paid remain uncertain.

Employers will be considering what the financial and practical impact of this change might be, looking at the demographics of their workforce, allowing for planning and mitigating risk.

Employees will get sick pay from their first day of illness

There will no longer be any ‘waiting days’ before an employee who is off work due to sickness will be eligible for SSP.  This pay will now be available from the first day of their absence, provided the employee meets the eligibility criteria. The criteria are also likely to be changed to make it more accessible for all employees, regardless of their earnings level.

Employers will be looking at their current sickness absence figures, and planning for the increase in costs of the additional 3 days SSP applicable.

There will be a ban on ‘fire and rehire’ practices, but with a caveat

The government will shut down the ‘loopholes’ that allow ‘fire and rehire’ and ‘fire and replace’ to continue. The practice of terminating an employee’s contract and rehiring them on different terms will be restricted, and these dismissals will be treated as ‘automatically unfair’, unless employers can evidence financial hardship as the reason for the change to terms and it was unavoidable. Employers will need to show such a change was a ‘last resort’ after thorough consultation and consideration of alternatives.

Employers will be considering what other changes they could make should there be a need to reduce costs across the business, before looking at forcing through changes to worker terms and conditions, so they can demonstrate it is a last resort.

Collective redundancy consultation and notification requirements will change

When an employer proposes making 20 or more redundancies at one establishment, there is a requirement to notify the DBIS and collectively consult.  The changes proposed mean there will be a requirement to collectively consult if the Company intends to make more than 20 redundancies, regardless of which establishment in the UK the losses will apply.

Employers will need to review their policies and internal procedures for establishing the need for collective consultation processes and plan accordingly should redundancies be necessary.

Requirement to prevent sexual harassment of workers will be extended

On 26 October, the Worker Protection Act 2023 came into force, introducing a new duty for employers to take ‘reasonable steps’ to prevent sexual harassment of their employees.  The Labour government has set out its intention to require employers to take ‘all reasonable steps’ to prevent sexual harassment, rather than just ‘reasonable steps’. It will also make employers vicariously responsible for protecting workers against harassment by third parties, a measure which was removed from the Worker Protection Act during the parliamentary process.

Employers will need to go ‘belt and braces’ with the preventative steps they can take in their business to prevent sexual harassment and tighten up how they can reasonably prevent harassment by a third party, as well as how they should respond to a complaint in light of this new liability.

Firms will be required to publish their intentions around improving equality

Large organisations (250+ employees) will have to develop and publish an equality action plan to show the steps they are taking in relation to gender equality.

 A new Fair Work Agency will crack down on unscrupulous employers

The government has announced it will establish the Fair Work Agency, combining existing enforcement functions around minimum wage, statutory sick pay, the employment tribunal penalty scheme, labour exploitation and modern slavery, to create a “strong, recognisable single brand” that will make it easier for individuals to know where to go for help. The Fair Work Agency will also cover a new area of enforcement – the holiday pay policy.

The Strikes Act and Trade Union Act 2016 will be repealed

The Bill will repeal the minimum service levels legislation introduced in 2023, and will repeal all but two parts of the Trade Union Act 2016.

The new government has set out plans to introduce new rights of workplace access for trade union officials and employer obligation to inform employees of their right to join a union.  The bill also brought forward measures to modernise trade union laws, including a reduction in the threshold for a recognition application from 10 per cent of the workforce.

Employers may want to introduce a ‘staff forum’ as a preventative measure to minimise the likelihood of union presence or recognition, or how they could engage proactively with unions in a positive way to build good employee relations. Contracts will need to be revised to include employee’s rights to join a union, and a communications plan to ensure the need to remind them will need to be devised.

Other plans outside of the Employment Rights Bill

The government has stated some of its commitments will be delivered outside of legislation, and they believe they can deliver more reform and therefore do not need all the commitments to be included in the bill.

This includes:

  • Introducing the ‘right to switch off’, to prevent employers from contacting staff outside of their working hours.
  • expanding the Equality (Race and Disability) Bill making it mandatory for large employers to report their ethnicity and disability pay gap.
  • consulting on single worker status, aiming to transition towards a simpler two-part framework for employment status
  • reviewing parental leave and carers’ leave systems

As a reminder, Labour’s Employment Rights Bill is subject to consultation as well as the usual passage through the House of Commons and the House of Lords, before it will become law in 2026, so there is plenty of time to prepare. More information is available here.

If you need help preparing, please get in touch.

An employer’s guide to ‘rolled-up’ holiday pay changes

In 2019 a Supreme Court ruling (Harpur Trust v Brazel) meant that permanent part-year workers, and irregular hours workers were entitled to 5.6 weeks’ holiday pay, based on their average weekly pay during the weeks they worked (disregarding any periods where no work was done). This meant that in theory, part-year workers would be disproportionately advantaged, when compared with their full-time colleagues.

Before the Conservatives left government in July 2024, they changed the statutory regulations, to allow for irregular hours or part-year workers to have their holiday paid to them on the basis of a 12.07% calculation of their pay received during the pay period. This calculation can be used during any holiday year which starts after 1st April 2024.

The 12.07% calculation is based on the statutory minimum amount of holiday. If contracts provide a more generous holiday allowance, then the percentage must be amended accordingly.

What qualifies as an ‘irregular hours worker’?

The new regulations define irregular hours workers as ‘wholly or mostly variable’ paid hours under the terms of their contract in each pay period. This could mean a casual or zero hours contract, or a contract which states their hours are variable, provided that the reality is that their working hours vary week to week.

What qualifies as a ‘part-year worker’?

A part-year worker is defined as a worker who is only required to work for part of the year, and there must be periods in the year of at least a week during which they are not required to work, and for which they are not paid. These workers may have fixed hours for the times they are working (unlike irregular hours workers).

Practicalities

The changes mean that in one pay period (for example a month, if paid monthly; a week if paid weekly) you can calculate holiday pay based on the relevant percentage calculation (12.07% for statutory minimum holiday) and pay this directly to the worker, provided it’s listed separately as ‘Holiday Pay’ in their payslip.  This is now referred to as ‘rolled-up holiday pay’, even though it’s not incorporated in to the worker’s hourly rate.

This means that those workers would not request and take their paid annual leave, as this payment covers their statutory entitlement to holiday, and is on record as having been paid in this way.

Employers can continue to use the current 52-week reference period to calculate holiday entitlement and pay, if the worker takes paid holiday, and the government have provided further guidance on this here.

 

Here are 2 worked examples:

Employee A is entitled to statutory holiday (5.6 weeks holiday per full year), and they are an irregular hours worker. The company holiday year started on 1st April 2024. Employee A is paid monthly.

In July, Employee A worked a total of 50 hours, on a normal pay rate of £15 per hour.  They also worked 8 hours of overtime on x1.5 their hourly rate. Therefore their pay for July is calculated as follows:

50 x £15 = £750

8 x £15 x 1.5 = £180

Employee A’s total pay for July is £930.

In order to calculate Employee A’s holiday pay, this would be 12.07% of their pay for that month. As they are entitled to statutory holiday, you would do the following calculation:

£930 x 12.07% = £112.21

The holiday pay that can therefore be processed for July 2024, with the employee’s normal pay would be £112.21

 

Employee B is entitled to contractual holiday which totals 6.4 weeks for a full year, based on a full-time entitlement. They are a part-year worker, and the holiday year started on 1st July 2024. Employee B is paid monthly.

In July the employee didn’t work at all. However they worked full-time hours during August, which totalled 165 hours, at a normal pay rate of £20 per hour.

Employee B’s pay for July is zero, therefore they would not be entitled to holiday pay for that month.

However in August their total pay was 165 x £20 = £3,300.

In order to calculate Employee B’s holiday pay, you first need to establish the correct percentage to use.  This is calculated as follows:

52 weeks – 6.4 weeks = 45.6.

6.4/45.6 = 14.04

Therefore the correct percentage holiday pay accrual for Employee B is 14.04%

To calculate their holiday pay for August you would therefore do the following calculation:

£3300 x 14.04% = £463.32

The holiday pay that can therefore be processed for August 2024, with the employee’s normal pay would be £463.32

 

Employers however should be mindful of the details of their worker’s contracts.  If they stipulate that the worker is entitled to paid leave, in order to change to rolled-up holiday pay, employers would need to seek the written agreement of the worker in order to make this change to their terms of employment.

If you’re not sure what the changes and new rules means for your staff, get in touch.

 

Managing Probationary Periods

When you hire a new team member, there will usually be a probationary period. This is a time during which both parties can establish if hiring them was the right decision. It’s a fixed amount of time, so proactively managing probationary periods is important. If it applies, details of a probationary period must be included in employment contracts. Wording should include the duration, the right to extend, and areas of their performance and conduct which will be considered.

Many companies have rebranded the probationary period, using terms like ‘Introductory Period’ or ’90-day journey’. They mean the same thing; Was hiring the new joiner the right decision?

Probationary periods ensure that an employee’s expectations are managed. They understand that what they do during that time matters and can affect their ongoing employment.  If the end of a probationary period goes left unchecked, the default position is that they have successfully passed.  This may result in changes to their entitlements and notice period, and it’s more difficult to address those issues after that.

Areas to consider

When it comes to assessing whether the hiring decision, it shouldn’t just be about technical ability in their field of expertise. It’s about the behaviour they demonstrate, their understanding of the business or their desire and enthusiasm to learn and make a positive contribution. In an SME one person can make a big difference to the team dynamic and the success of the business. Therefore, it’s important that you use the probationary period to determine if you made the right decision. The probation period is also about the employee deciding if this is the right place for them. It’s important that you engage in two-way dialogue about how they’re getting on.  The probationary period provides an opportunity to ‘course correct’ if things doing seem to be going to plan, either for you, the team or the new hire.

Tips for managing a successful probation

Managers need to spend time proactively managing probationary periods. It should be expected that more management time will be spent on this person during that time. The time you spend is an investment which will hopefully lead to a direct return.

So what should managers be doing during their new hire’s probation?  Here are our top 10 tips:

  1. Clear job information: Make sure all the relevant information is clearly communicated during the recruitment process. That way there is no ambiguity about the role and what it involves
  2. Effective induction: Ensure you have an effective induction programme. This should include information about their job, the team, the business and the way it’s structured. It should also include where they fit in, the values of the company and how you expect employees to behave at work
  3. Introductions to key people: Ensure the new hire is introduced to key people on day one or at least during their first week. That way they know where to go for support if they have questions. No-one can know everything from day one
  4. Meet regularly: Meet with the new hire 1-1 regularly and frequently, and make sure it’s diarised and a written note is taken and shared with them in a timely way. In these meetings you can ensure they know what they should be doing. You can provide regular feedback about how it’s going, both from the perspective of their work, as well as their behaviour. For example if their work has been accurate, or you have noticed they have been late multiple times during their first week / month. Flag what you have noticed, ask how they feel it’s going and if there is anything they’re not sure about
  5. Set SMART objectives: Set some agreed objectives for the first month, and / or overall for their first 3 or 6 months. Progression towards meeting the objectives should also become an area of feedback in your weekly meetings, and follow up on email with the key points
  6. Be accessible and approachable: Have ad hoc informal catch-ups with the new hire on the ‘shop floor’. Ensure your new hire has the opportunity to ask any questions they may have
  7. Flag issues and concerns: If there are issues, flag them sensitively, but honestly. Explain why it’s a problem, and what you expected instead, or better still, ask them how they could have avoided the issue
  8. Timely feedback: Ensure your feedback is given in a timely way. If something serious is wrong, don’t wait for the next 1-1 meeting
  9. Preparation for meetings: Provide feedback in a confidential setting away from colleagues to protect their dignity. Prepare feedback properly to ensure it’s objective and delivered thoughtfully
  10. Act prior to the end of probation: Make sure you meet with the new joiner before the end of the official probationary period to confirm formally if they have passed their probation. Alternatively, probation can be extended if there are ongoing issues which need to be addressed. Equally if there are too many issues you may have to deliver the news that the probation has not been successful. (i.e. you give notice to terminate their employment)

As people managers it’s in your interests to do all you can to set this person up to succeed. This avoids unnecessary additional time and resource in sourcing a new hire twice in a short period of time. That said, sometimes things don’t work out. If that’s the case, dealing with it promptly and decisively will save time and money.

Recruitment can be expensive and time-consuming, so making sure your initial recruitment process was appropriate will help.  Read our previous blog here about recruitment if you want more tips for successful recruitment.

If you would like support managing probationary periods, or you have an issue with a new hire, get in touch.

What is a Written Statement of Employment Particulars?

In April 2020, it became a requirement for all employees to receive a ‘Written Statement of Employment Particulars’. This is a document which needs to be provided on or before their start date with their employer.  In addition, employees who joined their employer before 6th April 2020 can ask for a Written Statement at any time. On receipt of a request, employers must provide it to the employee within one month of their request.

The legal requirement

With this change it became a requirement that the Written Statement included certain terms and conditions. It is no longer sufficient to rely on a basic offer letter confirming job title, salary and start date.  The terms and conditions that must be included in a written statement are as follows:

  • the employer’s name
  • the employee or worker’s name
  • the start date
  • the date that ‘continuous employment’ started
  • job title, or a brief description of the job
  • the employer’s address
  • the normal places or addresses of work
  • pay, including how often and when
  • working hours and days, or if it’s variable
  • holiday entitlement, including an explanation of how its calculated if the employee or worker leaves the employer
  • the amount of sick leave and pay applicable
  • any other paid leave
  • any contractual benefits
  • any non-contractual benefits
  • the notice period either side must give when employment ends
  • how long a temporary job will last
  • any probation period, including its conditions and how long it is
  • if the employee will work abroad, and any terms that apply
  • what training that must be completed by the employee or worker, including training the employer does not pay for

As an employer, you need to have all these terms detailed in Written Statements you issue to new joiners. You need to quickly define your current practices and policies.  That way you will be ready for requests for a written statement from existing employees who started prior to 6th April 2020, as well as new hires.

In addition, the law allows for other terms to be provided at a later date, within 2 months of the employee starting. These other terms relate to pension arrangements, collective agreements, non-compulsory training (if provided), and disciplinary rules.

Benefits of providing a Written Statement

As well as the legal requirement to provide details of these specific terms of employment, there are benefits for both parties in having these points clearly written down.  Both parties will know and understand what to expect from the other, and what their obligations are.  This avoids ambiguity and inconsistency, which helps to prevent unnecessary problems or employment issues.  Doing this may also prevent potential allegations of discrimination if employees are treated differently (whether inadvertently or not).  Employees will feel secure in their relationship with their employer, which is more likely to develop trust and loyalty.

If you fail to provide the relevant documentation to your employees within the timelines specified by law, the potential penalty would be between two and four weeks’ pay.

Benefits of a Contract of Employment

The requirement under law is for a Written Statement of Employment Particulars, as detailed above, however many employers opt for a full contract of employment for their employees.  This is because in a full employment contract you can include terms which protect the business interests, for example clauses around confidentiality, post-termination restrictions, intellectual property and conflict of interests.  Having everything included in one comprehensive document also reduces administration time for the business, and provides clarity for the employee.

It’s important that employers are on the front foot when it comes to providing employees with details of their terms and conditions of employment as there are clear timelines to meet and clear advantages to providing this information.

If you would like to ensure that you’re protecting your business interests, and are meeting your legal requirements to provide employees with details of their terms of their employment, get in touch.