New employment rules to impact employers

On top of the projected increase in the National Minimum Wage, the government is also proposing major changes to employment law.

A new Employment Rights Bill has been launched which will, among other things, end zero-hour contracts and fire and rehire practices, while also establishing bereavement and parental leave rights from day one of employment.

The existing two-year qualifying period for protections from unfair dismissal will be removed, to give workers these rights from day one in a new employment.

In addition, there will be a consultation on a new statutory probation period to allow employers to assess a new employee's suitability for a role.

UPDATE: the government has issued a factsheet providing an over view of the new Bill.

Employment reforms

The Employment Rights Bill reportedly proposes 28 employment reforms, including:

ending zero hours contracts
ending fire and rehire practices
establishing day one rights for paternity, parental and bereavement leave
reforming statutory sick pay to remove the lower earnings limit and the waiting period for entitlement.

It is also proposed that flexible working be the default position where practical.

Larger employers will also have to create action plans for addressing any gender pay gaps and supporting employees through the menopause. Protections from dismissal will be reformed for pregnant women and new mothers.

It is also proposed that a new Fair Work Agency will attempt to consolidate existing labour enforcement bodies to enforce rights on such matters as holiday pay, as well as provide support and guidance for employers.

A level playing field?

The legislation is meant to level the playing field so that employers and employees have greater clarity over their relationship with each other and to ensure that "good employers aren’t undercut by bad ones".

To this end, the government wants to end what it sees as exploitative zero hours contracts, even though they are actually popular with a percentage of workers who like their flexibility.

The Bill will provide such workers with the right to a guaranteed hours contract if they work regular hours over a defined period, giving them more security of earnings, whilst allowing people to remain on zero hours contracts if that is their choice.

Beyond the Bill

The government has also published a Next Steps document that outlines reforms it will look to implement in the future.

Subject to consultations, this includes:

A Right to Switch Off, preventing employees from being contacted out of hours, except in exceptional circumstances.
Expanding the Equality (Race and Disparity) Bill to make it mandatory for large employers to report their ethnicity and disability pay gap.
Moving towards a single status of worker and transition towards a simpler two-part framework for employment status.
Reviewing parental leave and carers leave systems.

The National Living Wage is also likely to be extended to 18-20 year olds. It is also rumoured that the government will in the forthcoming Budget increase the Employers' NI contribution.

Commentary

The above reforms were trailed before the recent election, but have been watered down following lobbying by business groups and employers. Nevertheless, these proposed reforms, along with increases to the National Minimum Wage and possible rise in Employers' NICs, will add significantly to the administrative costs of employers.

A major concern is the proposed move towards legislating for employment status, which is currently based on many years of case law and causes uncertainty for businesses. Whilst making the law clearer will be welcomed by some, there will undoubtedly be problems of interpretation in real-world situations.

One effect of these new rules could be that employers will attempt to find other ways to engage workers off payroll, which in itself may create friction with the IR35 off-payroll rules.

Looking forward, employers are going to need a greater awareness of these new employment rules, and the risks of non-compliance. They will need to have an ongoing strategy in place to ensure compliance.

And on that note, the draft Bill still needs to be debated in Parliament and so further detail on the above proposals is still needed. However, it is important for businesses to consider how the proposals will impact them and start making changes now.

Finally, it is important that businesses keep up to date with further proposed changes outlined in the Government’s Next Steps document.