What the Employment Rights Bill means for employers

If you’re an employer, you’ll need to get to grips with the Employment Rights Bill, which has been hailed as the “biggest upgrade to workers’ rights in a generation”.

This article covers the main changes proposed to workplace rights, how they may affect your business, and how you can best prepare for them.

Here’s what we cover:

What is the Employment Rights Bill and how will it affect businesses?

The Employment Rights Bill 2024 was unveiled to the UK public on 10 October 2024.

The 150-page Bill proposes 28 significant employment law reforms that promise to modernise the world of work by:

• Upgrading workers’ rights
• Alleviating poor working conditions
• Benefiting businesses and workers alike.

There’s no confirmed date for when it will be passed into law but it’s worth understanding the proposed changes so you can prepare for them.

Proposed changes to the National Minimum Wage and Statutory Sick Pay

Some of the proposed changes may create disproportionate impacts to small businesses.

Here’s the key takeaways to look out for:

1. Increase in National Minimum Wage

The Bill makes it compulsory for your business to pay workers at least the National Minimum Wage—(£12.21 per hour is the rate from April 2025).

This includes workers on zero-hour contracts.

2. Extend Statutory Sick Pay to all workers from the first day of sickness

To claim Statutory Sick Pay (SSP), your workers will no longer need to be sick for more than three consecutive days or earn a minimum of £123 per week (it will be £125 from April 2025).

Note, this threshold is the Lower Earnings Limit.

Workers will be entitled to claim SSP from day one of their illness and employment.

If your business breaches any of the rules relating to SSP, it will be subject to penalties by the Fair Work Agency.

This body also has the authority to investigate and address matters relating to pay disparities, enforce holiday pay entitlement, and encourage transparency in wage practices.

Although small businesses constitute 47% of businesses overall, they will pay 60% of costs associated with the reforms.

With this in mind, you should review your work contracts to reflect this change along with attendance, absence, and return-to-work policies to ensure your business has an updated sick pay system that reflects the new law.

5 more proposals that could impact businesses

Below are five other proposals in the Bill that are likely to have an impact to your business.

1. Protection against unfair dismissal from day one

Under the Bill, your workers will have the right to claim unfair dismissal from the first day of work in your business.

This will remove the current two-year qualifying period and replace it with a nine-month statutory probation period.

This compromise measure will give you more time to make a proper assessment of a worker’s fitness for a role in your business while strengthening their rights from the first day of their employment.

Small businesses are more likely to be affected by higher legal risks and potential litigation costs, which means you’ll need to do sufficient due diligence during the recruitment process to ensure (as far as possible) that candidates’ skills and experience are the right fit for the job in the long-term.

This may include providing more support to your workers during the onboarding stage.

You’ll also need to exercise caution about dismissing workers and implement robust HR procedures and practices that help you avoid litigation.

This may require you to update standard documentation, such as workers’ contracts (particularly the probation period clause), your staff handbook, and any performance management procedures.

2. Right to guaranteed hours

The proposed changes mean you’ll be required to offer guaranteed hours to workers you’ve recruited on a zero-hour contract.

But they can opt to continue working on a zero-hour contract basis if they prefer.

This guaranteed-hours contract will be based on regular hours your workers worked over a 12-week reference period.

Some 74% of small businesses employ at least one worker with a zero-hours contract.

This compares to 93% of medium-sized businesses and 94% of large businesses.

But due to their larger workforce, bigger businesses are better positioned to cope with the reduction in flexible, on-demand labour that zero-hour contracts provide.

Having to offer guaranteed hours after just 12 weeks can be onerous for small businesses that need to be responsive to seasonal and fluctuation demand, particularly those operating in the retail, hospitality, and agriculture sectors.

If your business uses zero-hour contracts, it’s a good idea to use technology, such as HR and payroll software or time-tracking tools, to establish:

• How the number of hours worked is monitored
• How you can manage a reference period
• How many workers are on this type of contract (and whether this number is feasible).

You can then build a robust model of how this will affect your business.

3. Right to reasonable notice of shifts on zero-hour contracts

The Bill will require you to give your workers reasonable notice ahead of any alteration to their shift pattern.

If you’re a small business owner, you may have more relaxed employment practices and additional workforce planning can put an administrative burden on your business.

However, this Bill ensures your workers are treated fairly, which will strengthen your relationship with them and their loyalty to your business.

4. Right to payment for shifts cancelled, moved, or curtailed at short notice on zero-hour contracts

According to the new provisions in the Bill, the workers you recruit on a zero-hour contract will be entitled to compensation if their shifts are cancelled, moved, or curtailed at short notice.

The costs of compensating workers are much more likely to constitute a greater proportion of total costs for small businesses.

5. Restriction on “fire and rehire” practices

There’s another proposal that isn’t thought to have a disproportionate cost to small businesses, but is nevertheless a relevant change to bear in mind.

This refers to businesses firing their workers, then rehiring them on less advantageous terms, such as lower pay, fewer contracted hours, or differing start and finish times.

The Bill only allows you to fire a worker and rehire them to avoid serious financial threats to your business, such as being at risk of becoming insolvent.

If this is commonplace in your industry, you may need to explore other ways of restructuring, such as:

• Incorporating flexibility clauses into your work contracts.
• Obtaining worker consent to changes in their work contract.

Final thoughts

The Employment Rights Bill marks a significant overhaul of employment law.

Although its proposals seek to provide your workers with more pay, protection, and job security, they also pose challenges to your business.

These include an increased administrative burden, legal risks, and costs.

But these challenges aren’t insurmountable.

Your business can overcome them by employing the right software to improve administration and implement correct HR practices.

By making these adjustments now, your business will be able to successfully navigate the complexities of the forthcoming legislation and ensure its continued growth and success, while improving the rights and happiness of your workforce.