Amendments to the Employment Rights Bill (‘ERB’)
Last week, over 200 pages of amendments to the Employment Rights Bill were published in response to consultation with various stakeholders.
These amendments are wide ranging and cover a number of the new protections, including changes to zero hours contracts, sick pay, trade union law and many other areas. In this article, Penny Morrison summarises and provides insight into the main changes, and sets out what businesses can do now to prepare.
In October 2024, the Government published the ERB, heralding a New Deal for Working People.
Described as the greatest reform to workers’ rights for a generation, the bill has been broadly welcomed by trade unions. However, the recent amendments and the ERB in general should be considered against the backdrop of significant criticism from business and industry. Rupert Soames, President of the Confederation of British Industry has warned the Government that the ERB risks “severely damaging companies’ willingness to invest in the UK” which flies in the face of the Government’s widely publicised strategy for economic growth.
Mr Soames, as reported in Forbes Magazine, has explained that the ERB, when combined with the government’s other recent measures such as a significant increase in employers’ National Insurance Contributions, has saddled UK business with the highest increase in the cost of employing people in decades. According to the Government’s own estimates the ERB will add another £5 billion to companies’ costs.
The Government argues that the ERB will increase productivity and address the low pay, poor working conditions and poor job security that they believe has been suppressing the economy. However, the business community suggests that employers will likely manage the increase in costs and red-tape by hiring fewer people; keeping salaries as low as possible; and reducing investment in UK Plc. In some industries with low profit margins such as hospitality and retail, significant job losses are a real possibility. In February it was reported that UK supermarket giants including Tesco, Sainsbury’s and Asda had warned that at least 300,000 retail jobs will be lost from physical stores over the next three years as cost pressures mount. If that is the impact on such behemoths of retail, the impact on smaller businesses could be catastrophic.
Some of last week’s published amendments will come as welcome news to employers. This includes abandoning the much publicised right to switch off and of course we await the detail on probation periods to counter balance day one protection against unfair dismissal. However, given the raft of incoming changes we query whether these nods to employers are likely to make much of a difference in real terms.
So what are the main recent amendments and how are these likely to impact employers going forward?
Zero-hours Contracts
The ERB will require employers to offer guaranteed hours to zero-hours and low-hours workers; provide reasonable notice for shifts; and provide compensation for short-notice cancellations or changes. The number of hours offered will have to reflect the number of hours the worker regularly works during a specified period (expected to be 12-weeks).
Crucially, the amendments announced last week, extend these rights to agency worker and the landscape is likely to look like this:
Offer of guaranteed hours: the end hirer must make the offer of guaranteed hours to qualifying agency workers.
Shift notices: both the employment agency and the end hirer will be responsible for providing reasonable notice of shifts. The Employment Tribunal will be empowered to apportion liability based on relative responsibility in each particular case.
Short notice payments: in general employment agencies will have to pay for short notice cancellations or curtailments. But in certain cases, they will be able to recoup these costs from the end hirer, provided their contractual arrangements allow for this (or if the contract was entered into before or within two months of the ERB being passed)
This extension has been lobbied for by trade unions to prevent employers from circumventing the new legislation by hiring agency workers. However, from a business perspective, it is claimed this amendment will have a significant detrimental impact on the UK’s flexible labour market as the requirement to offer guaranteed hours to agency workers could make it virtually impossible for certain industries who are heavily reliant on such workers to manage ebbs and flows affordably. The Government has indicated that parties are likely to be able to contract out of guaranteed hours in a collective agreement and businesses will be able to offer temporary contracts where there is a “genuine temporary work need” such as seasonal demand. What this actually means is still to be determined through secondary legislation.
Trade Union Reform
Behind this particular reform is a commitment to removing unnecessary barriers to trade union activity by:
Simplifying information requirements for industrial action ballots.
Reducing the notice period for strikes to 10 days (rather than 7 days as originally proposed).
Introducing e-balloting.
Extending the expiry of mandates for industrial action from 6 to 12 months.
Protections against unfair practices during the trade union recognition process will be strengthened.
Abolishing the 10 year requirement for unions to ballot members on political funds.
Providing for a digital right of access to the workplace for collective bargaining purposes.
A fast track process for approval of access agreements that meet certain criteria together with a mechanism to enforce penalties for non-compliance with access requirements.
At the moment, the 10% threshold for making a request for statutory recognition still applies but the ERB will give a power to amend the law to reduce this threshold to as low as 2%. Whether this occurs remains to be seen.
All of these changes will mean that more employers than ever (including those with no experience of dealing with trade unions) will face a potential increase in successful recognition claims, increased union influence and demands and more possibly more disruption and disputes.
Statutory Sick Pay
The current three-day waiting period and the lower earnings limit for eligibility for SSP will both be abolished making SSP available from day one of absence at a current rate of £118.75 per week (with effect from April 2025) or 80% of pay whichever is the lower. This ensures immediate financial support for workers unable to perform their duties due to illness.
For employers, these reforms necessitate swift policy updates and the SSP changes will increase payroll costs significantly. The CIPD estimates that for businesses with a high rate of absenteeism, payroll costs could increase by up to 15%.
Fire & Rehire/Collective Consultation
One of the main tenets of a Fair Deal for Working People was the promise to end fire and rehire practices and the ERB will make it automatically unfair to dismiss employees who refuse contract changes with a very narrow exception where the employer can demonstrate that such changes were necessary to alleviate serious financial difficulties and could not reasonably have been avoided.
The ERB also strengthens the collective redundancy framework generally. Consultation was undertaken on increasing the maximum protective award and introducing interim relief as a remedy for breach.
The latter proposal to introduce interim relief has been dropped but in the latest round of amendments to the ERB the Government has confirmed that it will double the current maximum protective award to 180 days’ uncapped pay. Tribunals will still consider what is a just and equitable award taking into account the seriousness of the employer’s failures and any mitigating factors. Nevertheless, taken together with the Employment Tribunal’s power to uplift compensation by up to 25% if an employer fails to comply with the Code of Practice on Dismissal and Re-engagement, this amendment could be worth up to an additional 45 days’ uncapped pay. This, alongside an extension of the time limit for filing tribunal claims from three to six months, gives workers a longer window in which to challenge dismissals and a potentially significant compensatory award if the employer is not compliant with its obligations.
There will also be changes to the point at which the obligation to consult collectively is triggered. Currently this occurs when an employer is proposing to dismiss 30 or more employees as redundant at one “establishment”. When the ERB becomes law, dismissals will be calculated across the whole business, not just one establishment although the threshold for collective consultation will be higher in those circumstances. We await regulations to determine exactly how this will be calculated but one proposal is a threshold based on a percentage of total employees. A further concession to employers is in relation to the requirement to consult with all appropriate representatives. This obligation will not require employers to consult all of them together nor will they be required to consult with a view to reaching the same agreement with all of them recognising the challenges in dealing with a multi-site consultation process.
The fire and rehire ban is undoubtedly a good thing for job security and better employer/employee relationships. But it will inevitably restrict a company’s ability to react quickly and cost effectively to market changes by varying staff contracts and/or undertaking redundancy programmes. It will be important for employers to audit dismissal procedures, ensuring robust documentation and fair consultation processes. Legal risks and challenges are greater so it will be vital to invest in line-manager training and compliance tools to minimise those risks.
Fair Work Agency
The Fair Work Agency (FWA) will combine existing enforcement agencies to cover minimum wage, SSP, labour exploitation, modern slavery and holiday pay enforcement. Under the new proposals, FWA would have the power to issue notices of underpayment on employer who have failed to pay certain statutory payments e.g. SSP or the NMW. Employers will be required to pay the amount due plus a financial penalty (which would go to the Government rather than the affected employees) enforceable by a court order in the event of non-compliance.
Perhaps one of the most unexpected and far reaching amendments to the ERB is the power to be given to the FWA to bring Employment Tribunal proceedings on behalf or of workers who are unable or unwilling to pursue a claim themselves. To some this is a draconian state intervention placing huge pressure on businesses to settle even vexatious claims. In contrast, others consider it likely that the FWA will only select high profile and significant cases which in turn will mean that fewer cases need to be brought.
In addition, the FWA will be able to provide legal assistance to workers in employment proceedings (with costs potentially recoverable from employers if the claim succeeds). At present, costs are only awarded against either party in exceptional circumstances.
We understand from some of our global clients that similar laws are in place in other jurisdictions such as California, which is one of the most pro-employee states in the US albeit with a reputation of fewer employee rights than are enjoyed by workforces in European jurisdictions. It remains to be seen what difference these additional powers will make. As with everything surrounding the Government’s expanded employment rights, the devil will be in the detail.
The effectiveness of the FWA will very much depend on its funding but given its ability to recoup enforcement costs it could make the FWA a more able and effective regulator. It will also reduce the pressure on an extremely overstretched Tribunals Service which can only benefit all.
It is hoped that, in practice, for those employers who already adopt fair working practices, the impact of these new powers is unlikely to make any fundamental difference or impose more stringent obligations over and above those imposed by the ERB.
Conclusion
The ERB awaits final passage (most likely in summer this year) with key provisions such as day one rights for unfair dismissal protection delayed to Autumn 2026. However, the amendments published last week suggest a clear path forward – greater workers’ rights balanced with certain business concessions.
Despite the time lag to implementation, it is strongly advisable for employers to take steps sooner rather than later to audit existing policies and procedures against the proposed changes and ensure adequate training is provided to equip line managers with the knowledge and practical skills to ensure compliance.
Osborne & Wise are on hand to help with these tasks.