Employment Law Reforms: What you need to know

Read the update on this following the Government's October 2024 announcement here >

With a new Labour government now firmly in place, employers across England, Wales and Scotland should expect several employment law reforms to affect everyday business decisions and operations.

The government set out its intended reforms in Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People manifesto and it promises plenty of updated and new legislation - with a focus on strengthening workers’ rights. That said, it’s fair to say that some of the proposed changes are both numerous and vary in significance. In fact, it’s expected to be the biggest overhaul in employment law in the last 14 years, which means businesses will need to be ready to ring in the necessary changes. But what are they?

Let's explore some of the major proposed employment law changes and, most importantly, what they mean for you and your organisation.

Unfair dismissal - a day one right

The government has promised to give employees protection from - and the chance to claim - unfair dismissal from their first day in a new role, applying to all employees as soon as they are hired. This will represent a massive shift for employment law, as current protection from unfair dismissal currently starts after two years of continuous employment. This means employers can only terminate an employee's employment lawfully after identifying a fair reason and by following a fair process. This will make it more difficult and potentially more expensive to dismiss recently recruited employees.

While this change is seemingly good for employees, it is likely to have the knock on effect of causing businesses to recruit with greater scrutiny and caution, while implementing more formal and extended probationary periods and contracts of employment. This is to ensure that they all reflect appropriate probation periods of the correct length with timely, regular reviews to ensure an employee is performing as expected.

Labour have stated they will ensure probation periods can be used to fully review new hires and it will be important to train managers to ensure they are both holding and recording the outcome of review meetings during the probation period. This will provide documented evidence of discussions should they need to be used later as part of a dismissal process before the probation is passed.

The new rules might also result in a certain wariness when it comes to hiring across different demographics. For example, an employer might favour an application from a more seasoned professional than a new graduate who is embarking on their career pathway and whose working background and ethos is yet to be fully formed and established.

It will likely be necessary for a recently recruited but underperforming employee to be put on a performance improvement plan prior to termination, to ensure that the dismissal has followed a fair process. It is possible that, to work around this change, businesses may decide to initially hire employees on short, fixed-term contracts, and then transition to a permanent contract after a period of six months. Overall, employers will need to recruit more carefully so as to avoid facing a greater number of unfair dismissal claims.

In the longer term, a likely increase in unfair dismissal claims may also be compounded by Labour’s proposal to raise - from three months after dismissal to six months - the limitation period for bringing employment tribunal claims. This will give employees who are unsure about bringing a claim more time to consider their options, and also allow disgruntled employees to build stronger initial claims with their lawyers prior to submission.

Terminations are therefore likely to be more expensive and time consuming as the number of employment tribunal claims - which tend to be lengthy in process and are already experiencing back logs - could well increase as workers are given more power to contest a dismissal they deem to be unfair.

Right to flexible working - a day one right

The right to request flexible working became a day one right in April of this year following a long fought battle by multiple campaigners, and many organisations have responded by bringing their policies into line.

Labour has now stated that flexible working will be the default arrangement for all workers - except where it is not ‘reasonably feasible’ - from the first day of employment. Not only can employees make the request from day one, they can also make two flexible working requests per year (compared to the previous limit of one request every 12 months), and will not be required to explain or justify their reasoning.

‘Flexible working' can refer to working patterns or hours, including part time, flexi-time, term time, compressed hours and adjusting start and finish times, as well as location; for example, working from home, and enables workers to spend more time on their home life and rely less on childcare, while encouraging a new demographic of people into the workplace, for example those that have had a career pause to take on more full-time parenting duties.

Employers will need to consider how this default day one right affects their business practices and how they can adapt to meet the requirements of this change.

There are a number of examples of how the term flexible working can be applied, which can be found in the ACAS Code of Practice on requests for flexible working, and it is likely that job hunters will search for roles expecting these arrangements to be met by default. The Employment Rights Act 1996 sets out eight genuine business reasons for why a current flexible working request may be rejected.

It remains to be seen whether some - or indeed all - of these would be considered as suitable reasons under Labour’s proposals. If so, it may be possible for organisations to outline in job applications where and why a specific flexible working arrangement is considered ‘reasonably unfeasible’ to prevent any misunderstanding going forward.

Right to switch off

The Government has said it will introduce the 'right to disconnect' to promote healthier working practices, meaning that companies won't be allowed to instruct workers outside of their contracted hours. In turn employees will have rights not to routinely perform work outside their normal working hours and not to be penalised for refusing to do so.

Looking to more flexible European models such as France - where this policy originated - for inspiration, it plans to give workers and employers the opportunity to collaborate on the development of policies or contractual terms that benefit both parties.

Primarily, the right to switch off recognises the changes in working practices arising from the pandemic, with many working beyond office hours by logging in remotely and monitoring and responding to emails.

Labour argues this has led to a blurring of the distinction between work and family life and the Prime Minister has said that he will not work beyond 6pm on a Friday so that he can spend time with his family. Labour says it recognises the need for workers to switch off and not turn homes into 24/7 offices, which lower morale and engagement. Its ambition is for workers and employers to have ‘constructive conversations’ that benefit both parties.

The working from home movement has, without doubt, paved the way for a more flexible way of working. While there has been a recent push to get many people back into offices, it’s not a practice that looks set to disappear any time soon.

Many of those who utilise this way of working are happy to work outside of traditional office hours to ensure they achieve a healthy work/life balance. Others may feel pressured to maintain a constant online presence and it is these individuals Labour wishes to protect.

While it’s good practice to set reasonable boundaries of this nature, they can be tricky to properly implement, especially when it comes to shift work and those working zero hours contracts in the gig economy.

Conversations around this matter will require an underpinning cultural shift in organisations where presenteeism is expected and people worry about what their employer might think if they fail to respond promptly - rightly or wrongly - to an out of hours email.

Organisations already using flexible ways of working successfully probably won’t require huge cultural changes. However, their policies will need to be updated to reflect this new right. Those who haven’t yet embraced flexible working will need not only to update their policies but also to consider their working cultures to provide room for this default way of working.

Statutory sick pay - a day one right

Labour will remove the three-day waiting period so that statutory sick pay (SSP) must be paid from day one of sickness, which will increase employers' costs but does, in turn, boost employee rights.

The government has not confirmed if it will increase the rate of SSP, which remains relatively low at £116.75 per week. However, it does plan to remove the lower earnings limit (LEL) on statutory sick pay, as well as the current three-day waiting period required to be entitled to statutory sick pay. LEL is traditionally applied to qualified earnings, indicating that - moving forwards - auto enrolment pension contributions will be made from the first pound of earnings.

Absence policies will need to be updated in line with these proposals and some organisations may be concerned about sickness rates as a result of the removal of the waiting period. Short term absence reporting will be key in the months following the change to assess any difference in reported sickness rates.

What happens next?

Any forthcoming legislation is expected to be put before Parliament within the first 100 days of Labour entry into government with respect to many of these proposals. The finer details of these changes should soon become clear by October 25, but Labour has committed to extensive consultation with businesses, organisations and trade unions on many of its key proposals before legislation is passed. Above all, new policies will need to be introduced to inform employees of their rights as well.

The journey from introduction to Royal Assent and the implementation of an act can be a lengthy one. While some proposals will require secondary legislative change rather than the implementation of a new act, all changes need to be passed through both houses in Parliament, which can take time.

However, Labour has a large majority so it may be able to move through the various stages relatively quickly. Therefore, while there won’t necessarily be any drastic changes in day-to-day policies and procedures in the next couple of months, all organisations should be ready to adapt quickly and effectively to ensure they’re up to date and ready for what’s coming.

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