The New Employment Law Changes in the UK: Implications for Small Businesses
Posted on October 26, 2024
The landscape of employment law in the UK is undergoing significant changes, with the Government following through on their commitment of introducing new rights aimed at modernising the workplace and addressing the evolving needs of both employees and employers. These changes are particularly relevant for small businesses. Whilst the Employment Rights Bill published on 10th October contains some significant changes, it is not likely that these changes will take place until 2026 as they will need to go through the parliamentary process.
In this blog, we will explore the key aspects of the proposed new employment law changes, their potential impact on small companies, and the implications of the rumoured increase to business National Insurance contributions.
An immediate change in legislation does come into effect regarding sexual harassment.
Sexual Harassment
The new duty for employers to take reasonable steps to prevent sexual harassment in the workplace comes into on 26th October 2024.
The new legislation introduces a number of notable changes to harassment under the Equality Act:
- Employers will be placed under an obligation to take all reasonable steps to prevent sexual harassment. The Bill opens the door for the Government to publish regulations specifying what steps will be regarded as “reasonable”.
- It introduces liability for third party harassment on employers, including an obligation to take all reasonable steps to prevent it. Third party is defined broadly as anyone who is not the employer or an employee of the employer.
- A disclosure about sexual harassment will become a “protected disclosure”, entitling anyone who makes it to protection under the current whistleblowing regime.
As an employer, these obligations fill me with fear as it is challenging on how you can prevent a 3rd party, such as a client being inappropriate to a member of my team. However, you need to consider reasonable steps which may include what messaging and signage you include on premises and clear commitments in documentation when working with clients. Having a clear policy in place which is communicated is a great first step. This will clearly need to be tested through tribunals and clarity will then start to emerge in terms of reasonable steps.
Flexible Working as a Default:
Since April 2024, the right to request flexible working has been a day one right for all employees, irrespective of their length of service. As an employer you should consult and consider any flexible working request and respond to requests within two months. Requests can be refused for a number of reasons as outline in the Employment Rights Act 1996.
This is an interesting proposal given that new employees can make a request anyway on day 1 of employment, at the moment. Essentially the change is placing a clearer onus on the employer to review a request.
Simply, going forward a new employee can assume that they have a right to work flexibly, rather than have a right to make a request, unless the business makes a case to reasonably reject the proposal. The reasons for rejecting a request looks like they will be maintained. Obviously, you would expect a potential employee to discuss openly about any flexible working requirements they might have during the recruitment process and hence a business will have an opportunity to consider these, but you may wish to consider the questions that you ask throughout the recruitment process to tease this out.
So in summary, no real change for most employers despite the headlines, if current flexible working requests are dealt with appropriately , and the merits of flexible working are certainly here to stay, whether we agree with them or not. It can’t not be argued that for employers and employees flexible working really works when it aligns to their Business strategy and culture. However, this isn’t always the case and making yourself aware of the statutory reasons to refuse flexible working is worthwhile.
For more information on how to deal with a flexible working request please use this link.
Enhanced Redundancy Protections for Pregnant Women and New Parents:
The new rules extend the period of protection from redundancy for pregnant women and new parents, ensuring they are not unfairly targeted during organisational restructures.
Additional protection is currently given to pregnant women and those on or returning from extended family leave in a redundancy situation. The Bill will strengthen protections for pregnant women and new mothers. The Government indicates it intends to make it unlawful to dismiss a pregnant worker within six months of their return to work, except in specific circumstances.
The specific details about how this will operate in practice will be subject to consultation and secondary legislation so I guess we will have to wait and see, but we would suggest that you are really clear on your criteria if you are in a redundancy situation.
Right to Request a More Predictable Contract:
The new Bill suggest that workers on zero-hour contracts or those with unpredictable working patterns can request more stable and predictable contracted hours.
While workers can stay on zero hours contracts if they’d prefer to, the new Bill means they’ll have the right to a guaranteed hours contract if they work regular hours over a defined period. In addition, workers will have the right to reasonable notice if they are required to work a shift, or if a shift is cancelled or changed.
Compensation will also be payable for any shifts which are cancelled or curtailed at short notice.
The issue here is in the detail, for example, how do you define a regular period of time to review actual hours worked? As yet, we also don’t have any information about what will amount to ‘reasonable’ notice or “proportionate” compensation when considering the impact of shift changes.
The specific details about how this will operate in practice will be subject to consultation and secondary legislation so I guess we will have to wait and see, however ensuring that you have systems in place to allow you to measure hours and have clear record of what is planned and what is worked will invariably help when the detail is confirmed.
Unfair dismissal
Currently employees must have at least two years’ service, known as a qualifying period, to bring a claim for unfair dismissal (subject to a few exceptions where dismissal is deemed automatically unfair, such as pregnancy, whistleblowing or trade union membership). There are also no specific statutory restrictions on the length or terms of probationary periods, which tend to be governed by an individual’s contract of employment.
The Employment Rights Bill will remove the qualifying period for unfair dismissal protection altogether and hence it becomes a day 1 employment right subject to some caveats as follows:
- The Government intends to legislate to “introduce fair and proportionate processes for dismissal” during probationary periods.
- What that process will look like isn’t clear, though the Government indicates it will introduce “a lighter-touch and less onerous approach for businesses to follow to dismiss someone who is not right for the job”. As a starting point, it suggests holding a meeting with the employee to explain performance concerns (at which the employee could be represented).
The Government intends to undertake consultation on the details of this proposal, to look at:
- The length of the statutory probationary period, indicating a preference for nine months.
- What “meaningful safeguards” should be put in place during that time.
- How any new process might interact with the ACAS Code of Practice on disciplinary and grievance procedures.
- What compensation should be available for a successful claim for dismissal during the probation period, with a suggestion it should not be as high as the current compensatory levels.
It is also confirmed that the new unfair dismissal protection will not apply to:
- Employees who have not yet started work.
- Workers – Despite a suggestion in the King’s Speech that protection from unfair dismissal would be available “for all workers”, under the Bill it will be available for employees only (the Government has confirmed a review of worker status will be a longer term aim).
The good news (despite the spin) is that this change is not one which will happen quickly. The Government has indicated that “reforms of unfair dismissal will take effect no sooner than autumn 2026”, in order to ensure sufficient time for detailed rules to be confirmed and for employers to prepare. Until that point the current two year qualifying period will continue to apply. Of course, we should always be considering how anyone is managed whether it’s in their first few months or later on in their career!
Fire and re-hire (dismissal and re-engagement)
Dismissal and re-engagement refers to the practice where an employer dismisses an employee and offers to re-engage them on new, often less favourable, contractual terms.
Many employers, specifically larger employers, have flirted with this approach to changing employee terms and conditions. It wasn’t until P&O Ferries sacked almost 800 dedicated seafarers and replaced them with low paid agency workers in March 2022 that this approach became headline news.
In perhaps the biggest change in the Employment Rights Bill, the Government is pushing ahead with its plan to end fire and rehire (and fire and replace).
The Bill will therefore make it automatically unfair to dismiss an employee if the principal reason for the dismissal is either:
- The employer sought to vary the employee’s contract of employment, and the employee did not agree to the variation; or
- To enable the employer to re-engage the employee, or employ another person, under a varied contract of employment to carry out substantially the same duties as the employee carried out before being dismissed.
The Bill does provide an exception to this, if an employer can show:
- The reason for the variation was to prevent or significantly reduce financial difficulties that the business might be experiencing.
- The financial difficulties were affecting the employer’s ability to carry on the business as a going concern.
- In all the circumstances the employer could not reasonably have avoided the need to make the variation.
- In determining fairness, the Employment Tribunal must consider whether any consultation was carried out about varying the contract and if anything was offered to the employee by the employer in return for agreeing to the variation. Although, it’s not so well known that P&O got around this requirement by paying the fired workers the equivalent pay that was equal to the consultation period it would have undertaken anyway.
This appears to be a high bar for employers to meet. The Government is serious about ensuring fire and rehire will only be available where there is “genuinely no alternative”.
As drafted, these provisions are likely to have extensive ramifications for employers seeking to restructure or change contractual terms in an unfair way. It’s our view that if you undertake structural or contractual changes properly you are unlikely to be impacted by these changes.
Statutory sick pay (SSP)
Currently, employees are only entitled to SSP from the fourth day of sickness and if they meet the lower earnings threshold (currently at least £123 per week). The new legislation removes both the waiting period for SSP and the earnings limit, meaning all workers will be entitled to SSP from their first day of illness.
The Government will need to consult on what rate of SSP those earning below the earnings threshold should receive as this level of detail remains unclear.
Parental and paternity leave
The new legislation will remove the qualifying service requirement for paternity leave (currently 26 weeks) and unpaid parental leave (currently one year). Both will become day one rights.
Bereavement leave
Current provisions on parental bereavement leave will be extended beyond parents to create a general right to bereavement leave. It will be confirmed in later regulations what conditions about relationship will apply to this leave. Leave will remain as two weeks following the death of a child, and will be one week for any other bereavement.
The Impact of Increased National Insurance Contributions
In addition to the new employment rights, the UK government is likely to increase National Insurance contributions for businesses in the October budget. This change is expected to have significant implications for small companies, which often operate on tight margins and may struggle to absorb additional costs.
For many small companies, labour costs represent a significant portion of their overall expenses. An increase in National Insurance contributions will lead to higher payroll costs, which may force small businesses to make difficult decisions regarding hiring, increasing wages, and continuing employee benefits.
Conclusion
The new employment law changes in the UK represent a significant shift in the rights and protections afforded to workers. While these changes offer numerous benefits, including enhanced worker protections, increased transparency, and support for vulnerable employees, they also pose challenges for small businesses. The potential burden of implementing new regulations, coupled with the proposed increase in National Insurance contributions, may create additional financial pressure and complicate workforce planning for small companies.
As the landscape of employment law continues to evolve, it is essential for small business owners to stay informed and proactive in adapting to these changes, so please do sign up to our newsletter or contact us:
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