A change in government often brings in a shift in priorities, and the new Labour Government will be no different. Labour’s green paper on ‘Plan to Make Work Pay’ was published in May of this year and contained 10 key proposals to introduce into legislation within their first 100 days in power. Their campaign manifesto in June reaffirmed these pledges, and after the King’s Speech on the 17th July, we have a better understanding of what to expect in the next Parliament.

The new government proposes to implement these pledges in the new ‘Employment Rights Bill’, which is expected to have its first reading sometime in the Autumn of this year and become law in the Spring of 2025, although some change may take effect after this date.

Here are the main takeaways for employers and employees:

Day One Rights – Unfair Dismissal Protection, Parental Leave and Sick Pay

Undoubtedly the biggest change expected to come in the new Employment Rights Bill are what Labour has called ‘Day One Rights’. Currently there are minimum periods of service before employees are entitled to some rights, for example 2 years’ service is needed for an ordinary unfair dismissal claim. This will remove the qualifying periods for rights such as Unfair Dismissal Protection, Parental Leave or Sick pay.

The most significant change will likely be the removal of the current statutory bar of two-years’ service for employees to bring an Unfair Dismissal claim against their employer. If this bar is removed, then an employer will have to show they have a fair reason to dismiss and have acted reasonably in all the circumstances by following a fair procedure from Day One of employment. However, the Government has indicated that this Day One right could be disapplied to probationary periods with caps on probationary period length.

Employers may therefore need to considerably adjust their current dismissal procedures and employment strategies for all employees. Employers might also consider reviewing and/or including probationary periods for new staff as this may help prepare for this change.

Increasing time limits

The Government have pledged to increase the strict time limits in which employees have to make a claim in the Employment Tribunal from the usual three months to six months from the date of dismissal or complaining act.

Ending ‘Fire and Rehire’ Practices and New ACAS Guidance

‘Fire and Rehire’ is the practice of any employer dismissing an employee and then re-engaging them on different and often worse employment terms. Before the election, the Labour Party promised to prohibit this practice by providing ‘effective remedies’ and replacing the current statutory code brought in by the previous government. Very little detail given on what was planned was given and Labour’s commitment to this was not clear.

However, shortly after the election, the Government introduced ‘The statutory Code of Practice on Dismissal and Re-engagement’. The new code of practice sets out employers’ responsibilities when seeking to change contractual terms and conditions of employment and seeks to ensure dismissal and re-engagement is only used as a last resort.

Breaching the code will not give employees a standalone claim, but employers will be expected to follow it and a failure to follow it will be considered by employment tribunals in relevant cases, such as unfair dismissal. A tribunal can also award an uplift in compensation by up to 25% if an employer unreasonably fails to the following the code.

The key provisions of the code are:

• Alternatives to ‘Fire and rehire’ must be sought as ‘Fire and rehire’ is a last resort.
• Acas should be contacted before discussing ‘fire and rehire’ with employees.
• Employers must consult for as long as reasonable, but there is no minimum time frame.
• Employees cannot be threatened with dismissal if they don’t sign new terms and conditions.
• Employers should consider feedback and reassess the situation if agreement is not reached.
• Committing to a future review of the changes should be considered to determine if they are still necessary.

Introducing the code might also just be an interim measure as the Government is believed to be considering further steps to control or prevent ‘fire and rehire’.

Banning Exploitative Zero-Hour Contracts

The use of zero hours has been widely discussed as disadvantageous to workers and carrying the risk of employers being able to take advantage of the lack of clarity over hours and pay.  Zero hours contracts can limit options for individuals tying to secure rental property or mortgage and generally managing their affairs.

The Government has promised to end ‘exploitative’ contracts with one-sided flexibility. They propose to do this by ensuring everyone has the right to a contract which reflects the number of hours regularly worked, based on a 12-week reference period. This change would benefit both employees and workers who will also have to be provided with reasonable notice of any changes in shift and receive compensation if shifts are cancelled without adequate notice.

The previous government’s Workers (Predictable Terms and Conditions) Act 2023 is expected to come into force later this year. This legislation will give workers the right to request a more predictable working pattern and impose an obligation on employers to follow a reasonable procedure, as set out in the act, to deal with these requests. It is unknown at this stage what impact, if any, the new Employment Rights bill will have on this legislation.

Reform of employment status

Our current legal framework divides employment status into three categories: (1) employees; (2) workers; and (3) self-employed, with legal tests to determine status within these categories. While not included in the King’s Speech, Labour’s New Deal green paper promises to do away with the three-tier system to create a single status of ‘worker’ which incorporates both the previous definitions of worker and employee and ‘bogus self-employment’ which denies people of their legal rights.

For people currently employed as “workers”, they would acquire additional rights such as unfair dismissal protection, parental rights and entitlement to sick pay from their first day of service. However, in return for having their rights enhanced, those who previously did tax self-assessments will fall under their employers PAYE tax scheme.

In practice, this may have far-reaching consequences for employers. Employers will have the obligation to cover those previously hired as workers under their PAYE and National Insurance Contributions in the same way as employees. Employers will also have to be conscious of the length of service of these workers when calculating their notice period entitlement and statutory redundancy in the event of a dismissal by reason of redundancy. The cost of both hiring and dismissing employees could increase significantly.

If this does come into effect, employers will likely need to audit their entire headcount well in advance of the date any legislation is announced to avoid being caught by surprise by any financial repercussions of this.

The Government have pledged to conduct a detailed consultation period on the employment status system and acknowledged this be an area which will take longer to review and implement. We will need to wait and see if this is something which will be written off before the new Employment Rights Bill is drafted but nevertheless, it is a potential change that employers should be aware of.

Other changes to look out for

Other provisions to be included in the New Employments Rights Bill are: –

• Flexible Working – establishing a Day One Right for all workers (as far as reasonable to accommodate);
• Enhanced maternity – making it unlawful to dismiss a woman returning from maternity leave for six months, except in specific (though unfortunately not yet stated) circumstances;
• Amending the current collective redundancy consultation threshold of 20 employees at a specific establishment or worksite so that collective consultation is triggered based on the number of people impacted across the employer’s business;
• Establishing a new Single Enforcement Body, known as the Fair Work Agency;
• Establishing a Fair Pay Agreement in the adult social care sector;
• Reinstating the School Support Staff Negotiating Body; and
• Strengthening current trade union legislation.

Here at WBW Solicitors, our dedicated team can offer bespoke advice to meet your needs.

Our Fixed Fee Employment Package offers custom Employment Law advice for your business, including reviewing policies and procedures in place in your workplace and drafting employment related letters and/or documents, such as Contracts of Employment and Staff Handbooks.

With the upcoming changes which are expected to take place, it is more important than ever that employers are fully aware of the law which affects how they operate their business. If you have any queries about any of the changes or any other employment law related matter, please let us know.

Contact us today at 01626 202404 or lawyer@wbw.co.uk.

WBW Solicitors has offices in Axminster, Bovey Tracey, Brixham, Chard, Exeter, Exmouth, Honiton, Launceston, Newton Abbot, Paignton, Seaton, Sidmouth, and Torquay.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.