Changes to flexible work requests, unfair dismissal rules, zero-hours contracts, and sick pay eligibility are key adjustments businesses will face in upcoming workers' rights reforms.
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Employers operating in the UK will face new obligations and potential enforcement by a newly formed agency under an employment bill unveiled by the UK government on 10 October 2024.
The Employment Rights Bill (the Bill) includes a number of reforms that aim to improve workers’ rights, boost pay and productivity, end exploitative working conditions, and ultimately improve economic security and business growth.
A new Fair Work Agency will be established to enforce workers’ rights including imposing penalties on employers who violate employee rights.
Consultations over the next two years will shape the final provisions before full implementation in 2026. In response to criticism about the time taken to introduce these changes, Deputy Prime Minister Angela Rayner stated, “Some things will take a little bit longer because these are the biggest upgrades in workers' rights in a generation.”
If the proposals are enacted, these changes would require businesses to rethink their employment practices, as well as make changes to policies and operations to ensure compliance.
What are the key provisions of the Bill?
The Bill proposes flexibility and more security for employees across several key areas.
New flexible working rules
Flexible working will become the default where practical unless the employer can prove it is unreasonable.
In April 2024, the UK government introduced the right for workers to request flexible working from day one of employment. Employers can refuse an application if they have valid business reasons, such as extra costs that would harm the business, the inability to reorganise the work among existing staff, or difficulty in recruiting additional staff to cover the work.
This right is retained under the new Bill, but with the additional requirement that a refusal must be is “reasonable”. The employer will also have to set out to the employee why the denial is considered reasonable.
The bill doesn’t define what amounts to “reasonable”, so it’s unclear how different this will be from current rules.
Recent trends show that some companies are asking employees to return to office full time, which they say would improve productivity. The Trade Unions Congress (TUC) in the UK disagrees, citing that “flexible working could improve productivity and retention”.
The proposals under the Bill may however put pressure on these companies to offer flexibility. The move, according to the government, will help support working families, address the evolving demands of modern life and foster a more inclusive and adaptable workplace.
Protections against unfair dismissal
Under the provisions of the Bill, workers will receive protection against unfair dismissal from their first day of employment.
This is a significant change to the existing rules and removes the two-year qualifying period.
This doesn’t, however, apply to fair dismissal practices, such as those based on capability, conduct, redundancy, or probationary periods.
The government is also consulting on a new nine month statutory probation period to allow for a proper assessment of an employee’s suitability to a role from day one.
CEO of Octopus Energy, Greg Jackson, expressed support for this, saying that it reflects a balanced approach for both employers and employees. He said, “… the probation period will allow progressive employers to give a chance to people without typical experience or educational backgrounds, opening up new opportunities for them in great careers.”
Strengthened statutory sick pay
The new proposals introduce mandatory Statutory Sick Pay (SSP) for employees from the first day of their illness. It further scraps the current SSP eligibility requirement of having a minimum earnings threshold of £123 per week. Lower-paid workers and new hires will no longer need to wait or meet an income requirement to get SSP.
Zero-hours contracts
Employers will need to offer a worker on zero-hours contracts the option to switch to a guaranteed-hours contract after they’ve worked consistent hours over 12 weeks.
Research by the TUC shows 84% of zero hours workers would rather have guaranteed hours, highlighting the demand for more predictable contracts.
The new proposal will ensure that zero-hours workers have the right to a contract that reflects a minimum number of hours of work, unlike the current practice where employers are not obliged to change their contracts at any point.
Employees are, however, under no compulsion to accept, and may stay on the zero-hours contract if they prefer.
Changes to parental rights
Under provisions of the Bill, employers must provide paternity leave for employers from their first day of employment. This replaces the current one-year waiting period for eligibility.
The proposals also ensure stronger protections for pregnant women and new mothers returning to work including protection from dismissal whilst pregnant, on maternity leave and within six months of returning to work.
Ending the fire and rehire practice
Employers will no longer be able to make employees redundant and then rehire them on reduced terms and conditions as is the current practice. This, according to the government, leaves employees at the mercy of bullying threats. Ahead of the Bill being enacted, employers can check out this Checklist which explains how employers can properly and legally exercise this right.
The new Fair Work Agency
The Fair Work Agency will have inspection and enforcement powers, including the ability to impose penalties on employers who violate employee rights, such as those concerning holiday pay, the minimum wage, and protections against unfair dismissal.
Additionally, the agency will oversee existing rights, such as enforcing certain provisions under the Modern Slavery Act.
Key implications for employers
Employers operating in the UK will need to carefully access and make changes to their operations, including overhauling HR policies and updating contracts. In addition, employers will need to address the likely culture shift brought in by the changes and rethink their employment practices.
Review and update policies
Companies may need to update their policies to ensure that flexible working is the default and employees know how to apply. In addition, company policies must be updated to include any conditions where flexible working will not be permitted, ensuring these are well-defined and not unreasonable.
Policy changes should be clearly communicated so that employees know their rights and can make informed decisions.
Update employee contracts
Businesses may need to clarify new obligations and employee rights under new contracts. For example, employers may need to offer those who work zero-hours contracts a guarantee-hour-based contract based on work carried out over a 12-week period.
Contracts will also need to specify that employees have protection from unfair dismissal from day one rather than two years.
Parental leave in contracts should be updated to reflect paternity leave eligibility from day one.
This Lexology PRO checklist provides tips on how to review and update the terms of an employment contract, including ensuring all statutory obligations are introduced, and reviewing other documents like employment policies or staff handbooks that might impact contracts.
Prepare for changes to flexible working
Companies may also need to adapt their workflows and potentially technology infrastructure to support remote or flexible work setups.
Employers should also establish formal processes for flexible working requests. This process should capture the required information, such as desired changes, and the date the employee would like the request to take effect from. In addition, employers could consider having dedicated team or trained HR personnel to handle these requests to ensure consistency and fairness in decision-making.
Companies will need to ensure that the requests are thoughtfully assessed, and that a decision is made within the two-month period.
In addition, companies can show their support for the changes by encouraging leaders to model flexible practices and respect employees’ off-hours.
Factor changes into the company budget
Offering guaranteed hours to workers on zero-hour contracts and immediate eligibility for SSP could lead to higher short-term costs for employees.
Businesses may need to review their budgets to accommodate for these increased obligations.
Promote transparency and fairness
Businesses should establish transparent processes for hiring and dismissal. They could also strengthen their procedures for assessing the performance of new hires during their probationary period.
Employers should invest in training managers on the new legal requirements, and the new processes and policies that emerge.