Labour's plans to reshape employment

In October 2024, the UK government introduced The Employment Rights Bill 2024 (the Bill) into Parliament, the most significant piece of employment legislation in decades. In doing so, it met its deadline to introduce legislation within the first 100 days of government, aiming to implement around a third of the key pledges from Labour’s Plan to Make Work Pay. The Bill has since been described by Sir Keir Starmer as “The biggest upgrade to workers’ rights in a generation”.

The Bill includes 28 individual employment reforms, of which the most significant are:

• Making unfair dismissal a “day one” right, subject to a statutory probation period.
• Significantly restricting employers’ ability to make changes via “fire and rehire”.
• Expanding the scope of collective redundancy consultation.
• Reshaping industrial relations and creating new trade union rights.
• Complex new provisions for zero-hours and low hours workers.
• Strengthening harassment protections and pay equality.

The Bill raises many important questions for both employers and employees. Some parts of the Bill contain detailed provisions, while other sections give ministers the authority to propose regulations and confirm further details in the coming months.

Next steps 

The Bill is now in Committee stage in the House of Commons, with the Report Stage due to commence on 21 January 2025.

The UK government held four consultations on the Employment Rights Bill from October to December 2024, covering collective redundancies, industrial relations, zero hours contracts and Statutory Sick Pay. Changes may be made to the Bill as a result of responses to the consultation. Amendments have already been tabled as the Bill enters Committee stage in Parliament – notably the promised extension of time limits for employment tribunal claims from three to six months. Further consultations are expected early next year. This is an opportunity for employers and other stakeholders to share their views and suggest amendments to the Bill’s provisions and details within regulations.

Collective redundancy and fire and rehire:

The Bill would amend the law so that employers will have to consult collectively when they are proposing 20 or more redundancies within 90 days or less, even if the dismissals are not all at one establishment. The consultation on collective redundancy and fire and rehire asks for views on further measures to strengthen the remedies for a breach of the collective consultation requirements, intended to deter employers from “buying out” consultation rights:

• Increasing the maximum period of the protective award from 90 to 180 days’ gross pay per employee or removing the 90-day cap altogether.
• Making “interim relief” available to employees who bring claims for the protective award, allowing them to apply to court for their employment contract to continue pending a full hearing of their claim.
• Making interim relief available to employees who bring an unfair dismissal claim under the Bill’s fire and rehire provisions.

The consultation also mentions a new possibility of increasing the minimum consultation period when an employer is proposing to dismiss 100 or more employees - from 45 to 90 days.

If they go ahead, the proposals in this consultation may increase protections for employees but will reduce flexibility for employers. The introduction of interim relief would also increase the risks and uncertainties for employers. Although it has been rarely used by employees in automatic unfair dismissal cases, it might be a more attractive remedy in collective consultation and dismissal and re-engagement scenarios.

Industrial relations

The consultation on creating a modern framework for industrial relations covers two main areas: industrial action and the trade union recognition process. The proposals include:

• Extending the expiration date of a trade union’s legal mandate for industrial action from six to 12 months.
• Simplifying the requirements on trade unions to provide detailed worker information to employers in the ballot notice and the notice of industrial action.
• Amending the law which prevents unions from taking protected industrial action where there has been a “prior call” to take unofficial action to allow unions to ballot for official protected action where a prior call has taken place in an emergency.
• Preventing employers from altering the number of workers in a proposed bargaining unit once a trade union recognition application had been submitted and extending the protections from “unfair practices” by the employer during the recognition process.

Zero hours contracts

The consultation seeks views on how the new rights to a contract with a guaranteed number of hours and reasonable notice of shifts should apply to agency workers – for example, whether the responsibility should fall to the employment agency or to the end hirer. With reasonable notice of shifts, the UK government has decided that both the employment agency and the hirer have responsibility; the consultation is about how this would work in practice. A further consultation will be launched on the implementation of the zero hours contracts measures more generally.

Statutory Sick Pay (SSP)

The changes introduced in the Bill will mean that for some lower earners, including those earning below the lower earnings limit, their rate of SSP will be calculated as a percentage of their earnings instead of the flat weekly rate. The consultation asks for views on what this percentage should be.

Timeline for implementation

The UK government has stated that it may be autumn 2026 before the majority of the Bill’s changes comes into effect. This should mean that businesses have time to both input into the detail of those changes via the various consultations, and by starting to consider what changes they may need to their employment structures, policies and processes.

There are however some changes which may come into effect in 2025, alongside many further consultations on the Bill’s proposals. An indicative timeline is set out below:

Diversity and Inclusion Reporting Updates

The UK government has also pledged to introduce disability and ethnicity pay gap reporting for large employers (currently companies with 250 or more employees), building on the existing gender pay gap reporting regime. The amendments will be introduced in a draft Equality (Race and Disability) Bill due to be consulted on “in due course” and published during the current parliamentary session for pre-legislative scrutiny. The Bill also proposes extending the specific equal pay provisions of the Equality Act 2010, which currently only apply to discrimination based on sex, to both race and disability. No further detail of this proposal has yet been published, and we await the Bill’s publication in order to better assess the likely impact of this change.

Although some large employers already disclose disability and ethnicity pay gap information on a voluntary basis, and certain listed companies must include board diversity disclosures in their annual reports (on a “comply or explain” basis), the introduction of mandatory disability and ethnicity pay gap reporting is likely to require significant and careful preparation. Following the progress of the draft Bill and related consultation may help to provide clarity, and thought should be given to the challenge of how to collect and interpret the relevant data sooner rather than later.