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This afternoon (Thursday 10th October) the Government published the Employment Rights Bill (ERB), promised as part of their manifesto and the Plan to Make Work Pay. Labour's promise to deliver the Bill in the first hundred days of their government has (just about) been met, and the 28 measures included in the Bill are set to overhaul employment laws. However, notably absent is the path to a single worker status (more on that below), and the proposals in the Bill aren't the final product. Labour have confirmed further consultation on many of the proposals will continue into 2025. Almost all of the changes to legislation won’t come in to force until 2026. Some of the areas for this have been set out in more detail in the supplementary document Next Steps to Make Work Pay, also published today.
The need for consultation on much of this gives the REC time to continue to influence the Government, and businesses time to prepare their organisations for the changes. We have had a seat at the table with the Deputy Prime Minister and Secretary of State over the past few months – the only recruitment and staffing body to have this – and we are pleased by the openness and practicality of the discussions, even though they are challenging.
But what are the key elements of the Bill, and what are the potential implications for the recruitment industry and wider labour market?
Zero Hours are central to the ERB and Labour are keen to deliver on their long-standing commitment to ban exploitative zero hours contracts. The Government has made explicit reference to agency workers, with confirmation that specific consultation will take place to ensure the Bill’s provisions on zero hours contracts are effectively and appropriately applied to agency workers.
The proposal in the Bill is to give workers on zero and low hours contracts a right to move to a contract that reflects their regular hours across a 12-week reference period. Additionally, workers will be entitled to reasonable notice of changes in their shifts, with compensation for shifts cancelled at short notice. On these proposals, the specifics of what counts as low hours, what constitutes a worker's regular hours, and how much notice is reasonable remain unclear currently. These are areas that the Government has said they will consult on with business. The Government has also acknowledged that some zero-hours workers may genuinely prefer to work in this manner and have stated in the Bill that workers can choose to remain on zero-hours contracts if they wish to.
The Government has also made explicit reference to agency workers, with confirmation that specific consultation will take place to ensure the Bill’s provisions on zero hours contracts are effectively and appropriately applied to agency workers. This was a key REC ask, so that regulation is appropriate to our industry. As drafted, the Bill does not include agency workers in the new rules – but takes powers to do this.
Labour's original proposal was to introduce protection against unfair dismissal from day one, compared to the two-year qualification that is currently in place. The ERB introduces protection from day one, but also introduces a proposed 9-month probation period where employer's will be able to dismiss workers without a full dismissal process if dismissal is related to their performance. The detail remains to be seen on how much lighter the pre-9-month process is compared to the full dismissal process, and this will form part of the consultation with business. The Government's current proposal would require at least one performance review meeting is held with the employee. REC had previously suggested a 12-month window, so it is good to see the Government recognising the need for this delay, and the Bill does also allow for further consultation on this timeframe.
The Government is removing the lower earnings limit to qualify for Statutory Sick Pay (SSP) as well as the 3-day qualifying period to become eligible to receive the payment. The Government is aware of the impact this could have on agency workers and have promised a consultation to ensure provisions around SSP are applied effectively and appropriately to agency workers. The REC will reiterate our concerns over the potential cost-burden of the new SSP laws, particularly to smaller agencies.
In the ERB and the supporting documents, Labour set out that flexible working will become the default for all workers, unless the employer can prove it is an unreasonable request. There are eight business reasons listed in the Bill which count as unreasonable, these are the same as the reasons currently in place to reject a flexible working request. It is unclear currently what the process an employer would need to go through to demonstrate this is, and this detail will be set out in subsequent regulations. The process for this needs to be developed in consultation with businesses, trade unions and third sector bodies. Maintaining consistency with the current reasons that exist for employers to reject a requests will help to deliver the clarity employers need to handle the proposed changes. The REC is in favour of flexibility in the labour market, but the new plans need to be pragmatic.
The introduction of a new Fair Work Agency (a rebadged version of the Single Enforcement Body originally proposed by Matthew Taylor in his 2018 report) has been set out in the Bill as expected. Enforcement does need an overhaul in the labour market, to make it more efficient for workers to protect their rights, but questions remain about the resourcing and structure of the FWA. Combining the remits of the Employment Agency Standards Inspectorate, the Gangmasters Labour Abuse Authority and HMRC's National Minimum Wage enforcement team makes sense, so workers get a one-stop shop for enforcement. But it is important that the expertise of each organisation is maintained so the quality of service doesn’t falter. This is particularly pertinent when it comes to the role of the EAS and enforcement in the temporary labour market, where their experience in dealing with legislation specific to the recruitment industry must not be diluted. Labour's proposals also include the expansion of SSP enforcement to be within the remit of the FWA. This is something businesses will really need to be aware of considering the expansion of SSP entitlement.
The Government has been clear about its intention to end fire and rehire practices. To do this they will reform the law to allow workers to claim compensation in such circumstances – hoping this will act as a deterrent to employers. The Government will consult on removing the cap on awards to workers who have been dismissed without a proper redundancy process as part of this. However, the Bill also sets out that businesses will still be able to restructure their organisation and workforce to remain viable where no other alternative is available. The detail of how and when this would be applicable remains to be seen.
The ERB amends legislation to remove the qualifying period for parental and paternity leave for all workers, making both of these a day one right. This will be followed by a wider consultation on the parental leave system to ensure it is accessible and works for all working parents. Making work more family-friendly is a welcome change, and the opportunity to consult on this to make changes as effective as possible is welcome. Similarly, leave for carers will also be reviewed through consultation. Additionally, a new right to bereavement leave is established in the Bill, expanding the current entitlement from only applying to parents.
Under the proposals in the ERB, the Government is able to introduce a Fair Pay Agreement for the Adult Social Care Sector. The ERB also allows for the creation of an Adult Social Care Negotiating Body to handle issues related to pay and other terms and conditions in the sector. Given the importance of the sector it is good to see the Government taking pay for care workers seriously. Of course the public sector is the largest employer of carers in the UK so this will require significant investment from central Government, and Local Authorities may need more support on how to get best value for money when it comes to staffing. Hint – the answer isn’t just to cut agency provision.
The ERB repeals the legislation put in place by the previous Government such as the Minimum Service Levels (Strikes) Act. Alongside this the Government will also seek to modernise the wider framework for Union representation in employment, aiming to ensure industrial relations are based on good faith negotiations. The REC is supportive of any measures that foster positive workplace relations and encourage open dialogue between workers and employers. It is only through effective tripartite communication between business, unions and individuals that we can achieve the best balance around worker rights.
The proposal to merge the current employment statuses of employee and worker into a single category of "worker" is not included in the Bill. This does not mean that this is off the table permanently. It remains part of the Government’s long-term plan, but by not rushing through a proposal in this Bill they have demonstrated an understanding of how complex and difficult a proposal this will be to implement. Combining employment statuses is not something the REC supports, and our concern remains that doing so would undermine the temporary labour market in the UK. A long-term commitment to consult on a simplified framework has been set out in the Government’s next steps but the timings around this remain unclear.
Part of the Plan to Make Work Pay was a commitment to introducing a Right to Switch Off, preventing employees from being contacted out of hours, except in exceptional circumstances. This right is not in the ERB and the Government has instead confirmed that this will not be legislated for. There will instead be a statutory code of practice which we have advocated as being a better way of improving rights around work life balance. It is important that the code of practice allows businesses and their employees to exercise a degree of discretion and common sense over what is appropriate, particularly in agency work where out of ours contact is often required to offer and accept shorter notice shifts.
The majority of proposals in the ERB are not quick fixes, and the Government has set out a realistic timeframe for consultation and implementation of these changes. We expect the bulk of consultations will begin in 2025, however the consultation on the application of the changes to zero-hours contracts to agency workers is likely to begin sooner than this. Given the detail and number of responses expected, it is therefore unlikely that the majority of these reforms will be introduced before 2026. Indeed, the changes to rules around unfair dismissal are not expected until Autumn 2026. As and when consultations are published the REC will respond to offer the perspective of our members, and there will be opportunities for members to engage in the consultation process also. We encourage you to engage where possible.
In the meantime, the ERB itself will continue to progress through Parliament. The second reading for the Bill is currently scheduled for the 21st October, and we will monitor this for any further details. Ahead of this, the REC will be seeking clarity on aspects of the Bill that could potentially have a negative on our sector. And we will be lobbying MPs (in particular from the opposite benches) to ensure our concerns are heard in parliamentary debates on the matter. The first debate on this bill will take place immediately after the second reading. As the Bill progresses to committee and subsequent readings, we will continue to engage with all stakeholders to push for amendments and changes where necessary. The Bill is expected to receive Royal Assent and become law in summer of 2025, with the implementation of the new legislation following through 2026.
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