How the Employment Rights Bill 2024 Will Affect Your Business: Key Takeaways

This week’s unveiling of the Employment Rights Bill 2024 marks the most significant overhaul of UK employment laws in decades. The bill, which aims to create a more balanced and productive workplace environment, introduces a host of new protections and regulations for workers. Here's a closer look at the key changes organisations should be aware of:

Key Changes Introduced by the Employment Rights Bill 2024

1) Day-One Rights

One of the most significant reforms is the removal of the two-year qualifying period for protection against unfair dismissal. Employees will now have the right to protections, such as paternity leave, unpaid parental leave, and bereavement leave, from their very first day on the job.

2) Extended Probation Periods

Organisations will have the option to extend probation periods (the government’s stated preference is for this to be up to nine months). This change provides stability and security for both businesses and workers and allows for more time to assess new hires' fit and performance.

3) Reform of Zero-Hours Contracts

To address the exploitation of zero-hours contracts, the bill introduces guaranteed working hours after a specified period of employment. (The reference period has been stated as 12 weeks in the government’s “Next Steps to Make Work Pay” guidance.)

4) Sick Pay from Day One

Statutory sick pay will now be available from the first day of illness, eliminating the previous three-day waiting period and lower earnings limit. This change aims to support workers who are ill and provides financial relief more quickly.

5) Flexible Working as the Default

Flexible working will become the default option unless employers can demonstrate that it is impractical. This reform reflects the shift towards more adaptable work environments, especially after the pandemic. The intent from the government is clear on this point – they want these changes to result in more requests for flexible working to be approved.

6) Gender Pay Gap Action Plans

Large employers will be required to create action plans to address gender pay gaps and support employees going through menopause, with the goal of fairer treatment and representation across all levels of the workforce. For the contingent workforce and outsourcing sector, the government’s concern that outsourcing could be used to circumvent equal pay requirements is particularly significant.

7) End of Fire-and-Rehire Practices

Controversial fire-and-rehire practices, where employees are dismissed and rehired on less favorable terms, will be curbed, giving workers more job security and stability.

Challenges for Businesses

While the bill brings many positive changes for workers, businesses may face some challenges as they adapt to these reforms. Here are a few key areas of concern:

• Staggered Timelines: Keeping abreast of the changes and planned timetable will be a challenge in itself. Some of these measures, such as the change to unfair dismissal, will not come into effect until autumn 2026, so this is a long-term play for the government.
• Increased Costs: The removal of the lower earnings limit for statutory sick pay, along with the introduction of guaranteed working hours, could lead to higher operational costs for businesses, especially those operating on tight margins.
• Administrative Burden: Implementing new policies, such as flexible working as a default and creating gender pay gap action plans, will require organisations to invest in administrative processes and resources to ensure compliance. Heavy users of zero-hour arrangements will need to consider a more planned approach to how work is scheduled, which includes the use of agency workers.
• Extended Probation Periods: While the introduction of a statutory probation period gives employers more time to evaluate employees, it may also create uncertainty for organisations and talent alike.

Preparing for the Changes

Although it may take some time for some of these reforms to come into effect, there are steps employers can take now to prepare for the transition. These include:

• Assessing current employment practices and working conditions against the measures outlined in the Employments Rights Bill to understand how the changes will impact your organization and affect not only the internal workforce, but also the external workforce supplying critical skills and talent to your business.
• Reviewing current employment contracts and probationary period guidelines.
• Reviewing and updating workplace policies and staff handbooks to align with the new regulations.
• Considering changes to recruitment and onboarding processes to accommodate the upcoming changes.

What’s Next?

As referenced above, the government has published a “Next Steps to Make Work Pay” document outlining further reforms that are under consideration. These include:

• A Right to Switch Off: Employees may gain the right to switch off and not be contacted outside of working hours, except in exceptional circumstances.
• Reporting on Ethnicity and Disability Pay Gaps: Large employers may soon be required to report ethnicity and disability pay gaps, expanding the existing focus on gender pay equality.
• Simplifying Employment Status: There’s a move towards a single status of worker and transition to a two-tier employment status system. This will also include strengthening the rights of self-employed workers through the right to receive a written contract.
• Parental and Careers Leave: Reviews are under way to ensure these leave policies work for both organisations and workers, with potential reforms on the horizon.

Final Thoughts

The Employment Rights Bill 2024 is poised to reshape the UK’s labour market, creating a more equitable and supportive work environment. However, the transition will require careful planning from organisations, and many are calling for government support to ease the financial and administrative burdens these changes may bring.

While the bill’s goals are clear—fairness and productivity—ensuring a smooth implementation will be critical for both organisations and talent in the months ahead. As businesses prepare for this significant shift, staying informed and proactive will be key to navigating the evolving labour landscape.

For more on key changes and developments in labor markets across the world, check out Magnit's Q3 2024 Regulatory Newsletter.