Labour’s employment law reform

Given that it’s such a long list, how likely is it that we will see any change soon?

Firstly, there is little doubt that Labour are committed to seeing this through having made sure that the Employment Rights Bill (the Bill) and the draft Equality (Race and Disability) Bill were both included in the initial bills announced in the King’s Speech in July.

In order to meet its 100-day pledge the Employment Rights Bill is scheduled to be laid before parliament by the 12 October 2024 and its likely to include all of the items in the table above other than for the discrimination items which will be covered in the draft Equality (Race and Disability) Bill. However, the Bill will need to pass through both houses of parliament, which will take many months and many of the items will also require extensive consultation and secondary legislation for their full implementation.

As a result, employers are unlikely to see any changes to unfair dismissal, zero-hours contracts, fire and rehire, and bereavement leave until late 2025 or early 2026. Similarly, the proposed changes to worker status, the introduction of the Fair Work Agency, and pay gap reporting aren't expected for another four to five years.

There is however the possibility of a few quick wins.

Removing the age bandings from the minimum wage and linking to the cost of living won’t require a change to primary legislation. However given the impact on businesses, especially in hospitality and retail, it will likely require a phased implementation.

The change to SSP, making it a Day One right and removing the three-day waiting period, would require an amendment to primary legislation. However, it wouldn't necessitate much secondary legislation and could feasibly be scheduled for April 2025, provided that the Bill gets Royal Assent promptly. Similar timescales could also apply to the Day One rights to parental leave, however it’s likely that wider consultation will be required to flesh out the detail.

The trade union changes are possible simply through repealing existing anti-strike laws and therefore could be immediate when the Bill receives Royal Assent.

Aside from the timings what are our thoughts on the proposed changes?

The headline item is undoubtedly the move to introduce – Day One unfair dismissal rights. Employers understandably have concerns about the increased cost and risk of terminating new starters that immediately prove to be a bad hire.

Labour have stated ‘We will ensure employers can operate probationary periods to assess new hires’, but what exactly does this mean? Instead of providing an employer with carte blanche to terminate an employer will need to manage probationary periods with ‘fair and transparent rules and processes’ which suggests that probationary employees will also have rights that need to be respected. We anticipate that with greater focus on the probationary period, employers will need to evidence an employee’s prior agreement and have a fully documented and monitored process of work appraisal during its operation. We expect to see ACAS guidelines specifically addressing the process to be followed. It remains to be seen whether there will be a cap on the length of a probationary period and whether extensions will be permitted.

Another headline grabber is the removal of zero-hours contracts and the right to predictable contracts. Labour’s proposals reference the Taylor Review of 2016 which examined exploitative working arrangements and how flexible working arrangements were rarely in the worker’s favour. A zero-hours contract does not provide a minimum level of guaranteed work or pay and according to the Taylor report creates insecurity for the worker. However, for many workers a zero-hours contract provides distinct advantages, and an outright ban may prove detrimental to worker rights. Through consultation there is scope for zero-hours contracts to survive but in a form that removes the ‘exploitative’ aspects, such as providing a minimum number of guaranteed hours. However, whatever form they take employers will be operating with less flexibility in the future leading to greater admin, resourcing challenges and costs.   

However, of all the changes its the reform to trade union rights that casts the longest shadow. Non-unionised employers are wondering whether this will have a direct impact on them. Currently trade unions do not have a general right to enter workplaces to either recruit or organise members. Labour has provided scant detail on its new proposal, but it is possible that unions will have the right to request access to a non-unionised workplace. The proposals also aim to make statutory recognition easier by lowering the voting thresholds including the requirement for the backing of at least 40% of the workers – this latter change could potentially lead to trade union recognition in workplaces with a very low turnout due to an apathetic workforce. Additionally, there will be a requirement on all employers (unionised or not) to include details of the right to join a trade union in the Statement of particulars issued to new workers.

It’s difficult to predict whether the changes will positively influence membership rates, however trade unions are already planning to increase activity as a result of the announcements so it would be prudent for employers to ensure that they continue (or start) to operate an open culture where employees feel they have a voice and consider trade unions irrelevant.

We will continue to track developments in the coming months.