A new Employment Rights Bill

An Employment Rights Bill will be introduced within the first 100 days of the new government – so it will be tabled by 12 October 2024 and will then have to proceed through Parliament. It is billed as representing the biggest upgrade to workers’ rights in a generation. It certainly looks radical at a news headline level, but employers will take comfort from the fact that it includes some caveats that indicate the government will take a proportionate approach to recognising business realities.

Fair Pay and National Minimum Wage (NMW)

We can expect an increase to the NMW and this could happen before April 2025. The intention is to remove the NMW age bands for adults (query whether this allows the government flexibility to retain the current lower 16-18/apprentice rate).

The current NMW for over 21s is £11.44 per hour and it seems likely this will be increased to reflect the “genuine living wage” supported by the Living Wage Foundation which currently sets the Real Living Wage at £13.15 per hour in London and £12.00 per hour outside London.

Statutory Sick Pay (SSP) will also increase from the current level of £116.75 per week. The number of employees entitled to receive SSP will increase as the Lower Earnings Limit of £123 per week (the level below which there is no entitlement to receive SSP) will be removed along with the current 3-day waiting period.

Finally, on the topic of pay, the King’s Speech confirmed the government’s plan to establish a Fair Pay Agreement in the adult social care sector and assess how and to what extent such agreements could benefit other sectors.

Preparatory actions

• Carry out a pay audit to establish which staff are paid at or close to the NMW.
• Consider any knock-on impact of an NMW increase on employees at higher pay grades or who may be earning just above NMW. Erosion of pay differentials could pose some knotty issues, so start thinking about your strategy. For example, will you continue with differentiated pay rates or perhaps move to a flatter pay structure? Be innovative; would non-financial rewards and incentives be helpful to facilitate grade/role differentiation?
• As the NMW rate rises so does the risk of technical compliance breaches. This can be the case even for staff considered to be well paid so beware complacency and don’t get caught out. Certain shift premiums and bonuses, for example, are not included in the NMW calculation. Salary sacrifice schemes may bring earnings below the NMW when measured against hours actually worked.
• Armed with the data gained from the above exercises – budget for and model the increased payroll costs and consider whether cost-cutting steps are required. Forewarned is forearmed.
• Consider investment in technology to create efficiencies, remove lower skilled “minimum wage” roles and produce higher skilled roles.

Skip to our discussion on fair pay and national minimum wage here [5:10].

Day-one employment rights

The King’s Speech confirmed Labour’s intention to make parental leave, sick pay and protection from unfair dismissal available from day one of employment. Employers can continue to use probationary periods to assess new hires although no detail is yet available on how this will work and how long those periods can last. The removal of the current 2-year qualifying period to claim unfair dismissal is, without doubt, the most radical change we will see under the Employment Rights Bill. Employers will not need reminding that the current maximum compensation for unfair dismissal is the lower of £115,115 or a year’s gross pay (plus a basic award equivalent to statutory redundancy pay).

Flexible working will also be the default from day one of employment for all workers, with employers required to accommodate this as far as is reasonable. ‘As far as reasonable’ represents a cultural shift and the expectation will be that employers will grant requests unless there are cogent business reasons not to.

The idea is that extending protections to workers from day one will encourage more workers to switch jobs, which is associated with higher wages and productivity growth. However, obviously another consequence (coupled with the planned extension to time limits for bringing claims) is a likely increase in Employment Tribunal claims. It will be interesting to see how this plays out as the Employment Tribunal system is already overloaded and we are currently seeing hearings being listed into 2026. Long waits for hearings will mean that employers will be advised to ‘front-load’ employment claims, for example, by taking witness statements as soon as the claim arrives to avoid the risk of memories fading or the witness moving on. Alternative dispute resolution methods and mediations will also need to be a key focus.

Preparatory actions

• Review and upgrade your recruitment practices to maximise the chances of making sound hiring decisions. This might include additional assessment and filtering steps or additional background checks to ensure, as far as possible, that you are recruiting people who are right for the role and represent a good fit for the organisation.
• Review current probationary periods. Are they long enough to provide a meaningful opportunity for assessment? Do you have policies setting out what to do if new recruits don’t meet expectations during the probationary period? Do managers know what to do and how to obtain HR support if problems arise? You need your managers to be empowered to act from the moment the changes come into force.
• Ensure employee relations matters are properly documented and review document retention periods. As soon as a claim is envisaged, give thought to your disclosure obligations and the preservation of documents.

Skip to our discussion on day-one rights here [11:23].

Skip to our discussion on flexibility, work-life balance, and family friendly policies and rights here [40:07].

Zero-hours contracts

The King’s Speech confirmed that the government will ban so-called “exploitative” zero-hour contracts, “ensuring workers have a right to a contract that reflects the number of hours they regularly work and that all workers get reasonable notice of any changes in shift with proportionate compensation for any shifts cancelled or curtailed.” It is unlikely that zero-hours contracts will be banned altogether given that a significant number of workers value the flexibility they offer. Instead, we will see regulation aimed at ensuring workers receive compensation if their shifts are cancelled or curtailed at short notice and ensuring that workers have a right to a contract reflecting their average hours worked.

‘Fire and Rehire’ and ‘Fire and Replace’ practices will also be addressed and the Speech confirmed that the government will reform the law to provide new remedies and replace the previous government’s statutory code of practice which it considers to be inadequate. As such, we can expect to see higher penalties and compensation uplifts for breaches.

Preparatory actions

• Businesses that rely on zero-hours contracts should plan ahead for the likely changes given that last minute shift cancellations or alterations will incur a cost. Consideration may need to be given to outsourcing arrangements and use of agency workers.
• A workforce audit could be useful to establish whether staff on zero-hours contracts should be moved onto permanent or fixed-hour contracts where, for example, they work regular hours.

Skip to our discussion on “securonomics”, zero-hour contracts and fire and re-hire here [19:12].

Worker status

In its pre-election pledges, the Labour Party committed to simplifying the current law on employment status by moving towards a single status of worker and transitioning towards a simpler two-part framework for employment status that differentiates between workers and the genuinely self-employed. This was not mentioned in the King’s Speech, although this is not that surprising given that it would be unrealistic to come up with a plan for such a fundamental change within 100 days! Simplifying employment status is still on the government’s agenda but our view is that this can be considered a ‘slow burn’ issue. It is one to watch but there is likely to be a lengthy public consultation before anything concrete happens.

Skip to our discussion on worker status here [29:19].

Trade unions

It is absolutely no surprise that trade union rights are front and centre in the King’s Speech. Labour made it clear during its time in opposition that, should it win power, it would update and modernise trade union legislation.

The King’s Speech confirmed previous pledges to grant trade unions new rights, including to access workplaces, recruit members, organise ballots and simplify the recognition process, making it easier for gig and remote workers to organise.

Preparatory actions

• If your business recognises a union (or even if there have been murmurings about trade union recognition), think about how you currently interact and work with them. Could you take any pre-emptive steps to stay on the front food, such as regular meetings and dialogue?
• There is a lot to be said for taking steps to build a collaborative and well-functioning relationship with relevant trade unions and representatives. If existing trade union relationships aren’t so good, consider what might be done to address this and what the overall strategy should be. A culture shift within the organisation may be needed – now is the time to focus on your workforce as your key asset and involve them in business decisions and strategies.

Skip to our discussion on trade union rights here [33:50].

Increased maternity rights

Protections will be strengthened by making it unlawful to dismiss new mothers for six months after returning to work, except in specific circumstances.

Single Enforcement Body

The government will establish a new Single Enforcement Body, also known as a Fair Work Agency, to strengthen enforcement of workplace rights.

Our view is that the Single Enforcement Body is likely to be endowed with a fair amount of power not least because strong enforcement creates a much-needed revenue source.

Collective redundancies

A key one to note for multi-site employers. While not mentioned in the King’s Speech, Labour’s election campaign included a pledge to reform the trigger for collective redundancy consultation. Currently, the obligation is triggered where the number of proposed redundancies at an ‘establishment’ is 20 or more in a rolling 90-day window. ‘Establishment’ has been interpreted as meaning an individual business site – the government intends to change it so that the ‘establishment’ be treated as the whole organisation. This would be a huge change and there are stringent financial consequences for failing to comply with collective redundancy requirements so this change would represent significantly increased risk.

 Preparatory actions

• Multi-site employers will need to have a system in place to keep track of planned redundancies (including voluntary redundancies) across the entire organisation maintained on a rolling basis. Without such a system in place, there will be no way of knowing if the collective redundancy requirements are triggered which could have costly implications.

Draft Equality (Race and Disability) Bill

The King’s Speech confirms that new equality legislation will be published in draft. Firstly, to enshrine the full right to equal pay in law for ethnic minorities and disabled people – which means that claimants will be able to bring equal pay claims on the basis of race or disability pay disparity/differences in contract terms, in addition to claims based on sex as is currently the case. Secondly, it will introduce mandatory ethnicity and disability pay reporting for employers with 250+ employees to help close the ethnicity and disability pay gaps.

The draft Bill is likely to mirror measures in the Equality Act 2010 relating to equal pay and gender pay reporting.

Preparatory actions

• Large employers (those with 250+ staff) will need to consider how they collect and process ethnicity and disability data and how this might be channelled into the future mandatory reporting requirement. One challenge noted by many employers is that, in comparison to gender data, ethnicity and disability data tend to be multi-faceted and not always volunteered by staff.
• The fact that this has been announced as a draft bill (in contrast to the Employment Rights Bill and Skills England Bill) does indicate that this proposal is on a slower burn. The government is likely to undertake further public consultation to reflect the complexities and nuances involved.

Skills England Bill, apprenticeship levy and artificial intelligence

The government will establish a body known as Skills England. This will bring together businesses, training providers, Trade Unions, Mayoral Combined Authorities and national government with the objective of “ensuring England has the highly trained workforce that it needs”. In addition, reforms will be made to the apprenticeship levy. Whilst the speech fell short of announcing an Artificial Intelligence Bill, there is a clear indication that the emphasis in investment on technology will continue, to create a high wage, highly skilled workforce.

The King’s Speech contains a lot of aspirational language on this point but little detail. It quotes one objective as being, “support of economic growth by greater coherence to the assessment of skills needs and training landscape; ensuring training programmes are well designed and delivered to meet these needs; and that regional and national skills systems are providing the skilled workforce needed to enable businesses to thrive and to contribute to the Industrial Strategy at the heart of our growth mission”.

Watch this space!

Our Employment & Immigration team are here to help you plan and prepare. Find out more about how our team can support you here.

Explore our overview of all of the announcements in the King’s Speech here.