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Preparing for change
Is your business ready for the new Employment Rights Bill?
Following the General Election on 5th July, Labour introduced a new Employment Rights Bill, which is currently in the consultation phase.
This Bill sets out to protect workers rights and has implications for business of all sizes.
The bill was introduced into the House of Commons on 10 October 2024. The government has pledged to ensure that businesses have time to prepare for the implementation of these reforms and are planning that most reforms in the bill will take effect no earlier than 2026.
As new practices take a while to embed, business leaders need to prepare for these changes to employment laws now in order to ensure their SMEs can respond quickly and find the commercial advantages the proposals could represent.
Is your business ready for the Employee Rights Bill?
Take our free Employment Rights Readiness Check to find out where you need to focus first with tailored insights to prepare for change
What are the key employment law changes?
Day One rights
Employees to access rights such as making a claim for unfair dismissal, redundancy and flexible working from day one of employment.
Providing that employers have robust recruitment processes and operate transparent performance management processes, particularly during probationary periods, dismissal cases should be an exception rather than a common occurrence.
Removing lower earnings limit on Statutory Sick Pay so all workers are eligible and removing the current 3 ‘waiting days’
Equal pay & discrimination
Enhanced protections and mandatory pay gap reporting gaps based on gender, disability and ethnicity.
Strengthening protections for pregnant women by making it unlawful to dismiss a woman who is pregnant for six months after her return, except in specific circumstances.
Single ‘worker’ status
Currently there’s a clear distinction between workers and employees. Under the proposals ‘workers’ become eligible for addition rights such as sick pay and protection from unfair dismissal. If this went through it would require us to re-visit our employment practices in operations
A single enforcement body
This would have the power to inspect workplaces and bring civil proceedings against businesses that breach worker employment rights.
Zero hours contracts
Ban on exploitative zero hours contracts after the first 12 weeks of work, rather than an outright ban.
Now would be a good time to review which members of your team will benefit from being on a zero-hours contract while a detailed consultation process is underway.
Genuine living wage for younger workers
Labour have proposed removing the current age bands, so that everyone aged 18 and over will get the same hourly rates of pay.
Audit the number of 18-20 year olds you employ in your business and understand the costs that the changes to their pay scale will involve. Plan ahead to prepare for the cost increases and look at where savings and tax efficiencies could be made.
Right to disconnect or switch off
A proposal that everyone should have the right to ‘switch off’ and disconnect from work (outside their contractual hours), a legal right which is currently offered in other European countries, including Ireland. This could significantly impact SMEs. It’s very unclear how this would be measured or defined but it would likely impact the use of out of hours communication tools such as email, Teams, and could drive businesses to adjust hours or deploy out of hour rotas, so they can continue to operate 24/7.
Impact on businesses
The King delivered his speech setting out Labour’s plans on 17th July. In a nutshell, while the Employment Rights Bill aims to improve conditions for employees, it places the burden on businesses to adapt and potentially invest in new systems and processes to ensure compliance and maintain operational efficiency.
We expect a clearer picture to emerge over time, but the Employment Rights Bill is expected to have several significant impacts on SMEs. Here are some key areas:
Increased costs
You might face higher costs due to the need to comply with new regulations. These costs can arise from
- Administrative costs involved in implementing the regulations and increased record-keeping
- Training costs due to upskilling your team, particularly management
- Payroll costs due to the scrapping of age-related pay bands and zero-hours contracts.
- Flexible working rules may require you to invest in technology and cybersecurity measures to support remote work.
Enhanced worker protections
The bill aims to provide greater protection for workers, which can impact your business in several ways:
- Increased or more flexible leave entitlements could require you to adjust staffing plans to cover absences.
- Ensuring compliance with equal pay and anti-discrimination laws might require you to carry out audits and adjustments in pay structures.
- The new rules around flexible work may mean you need to look at how adjustments to scheduling and work hours could impact how you manage your teams.
Dispute resolution
Currently employees have 3 months to bring a claim, the new proposal would increase this to 6 months:
- Make sure that you have robust procedures in place on how to handle internal grievances.
- Ensure your managers are trained in how to manage performance reviews and hold difficult conversations so that you can effectively record and monitor employee capability.
Recruitment and retention
Improved employee rights can positively impact recruitment and retention:
- Review your current recruitment, onboarding and probationary period processes and relevant documentation to enable you to operate with these new day 1 rights in place
- Enhanced rights along with a robust induction programme can lead to higher employee satisfaction and engagement, potentially reducing turnover.
What do I need to do to prepare my business?
While action may not be required immediately, it would certainly be recommended to focus on your people processes, policies and practices, and make sure your business is fully fit for the future. Following the introduction of the Bill to Parliament on 10th October, a Government factsheet states that the Bill will ‘provide better support for those businesses who are engaged in good practices.’ You will need to incorporate good practices into your long-term business plan.
- Review your current recruitment, onboarding and probationary period processes and relevant documentation to enable you to operate with these new day 1 rights in place. Review discrimination policies.
- Review and agree notice periods with both employee and employer for new hires from October 24 onwards. Ensure all contracts reflect regular hours worked
- Do some cost analysis based on the proposed changes to sick pay and hourly rates for employees in the 18- to 20-year-old age bracket. Prepare for expanded reporting requirements for gender, ethnicity, and disability pay gaps
- Develop a robust performance management process so that you can effectively record and monitor employee capability (a fair reason for dismissal)
- Ensure your disciplinary and grievance procedures demonstrate fair procedures when dismissing employees
- Have a brainstorm with the Senior Leadership Team on what the right to disconnect / switch off could mean for your business – how will this affect your current policies
- If you operate using zero-hour contracts – what are the changes and associated cost with moving your people onto permanent contracts
- Keep up to date with legislative changes. We recommend checking the CIPD website for updates.
- Communicate with your people about what the changes are and why you are making them. Keeping them involved will make it easier all round and improve buy-in.
Questions to ask yourself
What kind of employer do you want to be?
How do you want your people to feel about your business?
How do your current processes support that aspiration?
Do you consistently find brilliant people when you’re recruiting?
How can you enhance onboarding and development to make the best even better?
Do you have the right internal focus on people?
How People Puzzles can help?
People Puzzles helps ambitious businesses overcome barriers by taking a commercial and strategic approach to people planning to achieve bottom-line growth. While preparing for change in business is never easy, there are always ways to manage it to ensure a smoother experience for your people, and a positive outcome for commercial performance. Our team of fractional People Directors have operated at board-level in some of the UKs top brands, so there is no issue that will take our team by surprise!
You may already have an existing HR function that just needs a bit of steering, or you may need to start from scratch aligning a people plan to your business goals. If you want help reframing these changes as an opportunity to set the foundations to be an employer of choice and create business growth, we can help from as little as a day a week.
We can provide leadership and management training to help your leaders stay compliant. Our experts can improve your culture and make your business more appealing to top-quality talent.
Drop your details below to request a no obligation call with your local Regional Director
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