A lot has happened over the past month in relation to the Employment Rights Bill ("the Bill"). The 3 March saw the Business and Trade Committee publish its report on the Bill, then over 4 and 5 March we saw responses to five consultations published and an updated, 222-page-long, amendment paper. The following week the Bill completed its third reading in the House of Commons and now moves on to the House of Lords. What does all this mean on a practical level?
Business and Trade Committee Report
The Make Work Pay: Employment Rights Bill report followed on from a call for evidence made in October 2024 when the Bill was published. It makes a number of recommendations on individual rights, collective rights, international labour standards and labour market enforcement. Amongst other things, it highlights a need for more clarity in certain areas to prevent Parliament being "at risk of signing a regulatory blank cheque for the Secretary of State without knowing the full impact it will have on workers and businesses". It also suggests that the government prioritises its review of employment status to avoid companies adopting a self-employment model to sidestep measures set out in the Bill and recommends a review of the Modern Slavery Act 2015 to improve transparency.
Consultation Responses
Statutory Sick Pay
Following confirmation that the lower earnings limit for eligibility for Statutory Sick Pay ("SSP") would be abolished, the UK government confirmed that, for some lower earning employees, SSP would be calculated based on a percentage of their weekly pay rather than the statutory flat weekly rate. A consultation on what that percentage should be was opened in October 2024 shortly after the Bill was published. In the government response: Making Work Pay: Strengthening Statutory Sick Pay published on 4 March, it was confirmed that the percentage rate to be used will be 80% of normal weekly earnings, where that amount is less than the statutory flat rate.
Application of Zero-Hours Contracts Measures to Agency Workers
The headlines in the response to this consultation are that:
- Responsibility for offering guaranteed hours to agency workers will usually lie with the end hirer.
- Responsibility for providing reasonable notice of shifts will lie with both the end hirer and the agency.
- Responsibility for paying compensation for short notice cancellation, curtailment or movement of shifts will lie with the employment agency.
There is more to it than just those headlines and we have covered this and the related proposed amendments in more detail here.
Collective Redundancy and Fire and Rehire
The outcome of this consultation will be important to any employers who may need to consider redundancies or changing terms and conditions in the future. The government response to the consultation on strengthening remedies against abuse of rules on collective redundancy and fire and rehire confirms that the maximum amount of the protective award for failure to collectively consult is to be doubled from 90 days' pay to 180 days' pay per affected employee. These awards are not subject to a statutory cap. Taken in combination with the recent power given to employment tribunals to uplift protective awards by up to 25% where employers have not complied with the Statutory Code of Practice on Dismissal and Re-Engagement ("the Code") this has the potential to result in very significant awards being made. Employment tribunals will retain the ability to exercise their discretion as to what level of award is just and equitable having regard to the seriousness of the employer's conduct and any other mitigating factors. Further guidance for employers on how to meet collective redundancy obligations is to be issued in due course to help avoid inadvertent breaches.
The UK government has decided not to introduce a new right to interim relief in collective consultation or fire and rehire situations. Compliance with the Code will be monitored and further remedies may be considered to improve compliance, if needed.
Creating a Modern Framework for Industrial Relations
The government response to the consultation on creating a modern framework for industrial relations is, not surprisingly given the number of issues that views were sought upon, a lengthy document that will result in a number of amendments to the Bill. This covers trade union rights of access to the workplace, simplification of industrial action notices, changes to industrial action thresholds and notice to employers, as well as changes to the recognition process. It also confirms that further consultation will be undertaken after the Bill receives Royal Assent and that a review of the right of access penalty system will take place at a "suitable time". We look at these and other related issues in more detail here.
Umbrella Companies
The consultation on tackling non-compliance with employment rights and tax by umbrella companies was issued by the Conservative government in 2023, sought views on defining umbrella companies which could then be subject to regulation. In broad terms, an umbrella company employs and pays a worker but does not source work for them. Instead, the worker arranges temporary work either via an employment agency or directly with a client. The worker is invoiced by the umbrella company for their services. In the Umbrella Company Consultation: Government Response the UK government has confirmed their intention to amend the Bill to provide a statutory definition of umbrella company and ensure workers can access employment rights and protections comparable to those they would have had if taken on directly by a recruitment agency. Umbrella companies will be brought within the definition of employment businesses meaning they will be regulated by the Employment Agency Standards Inspectorate (and subsequently the Fair Work Agency). Changes related to tax compliance, shifting responsibility for PAYE and NICs away from umbrella companies to employment agencies, will be made under separate legislation expected to take effect in April 2026.
What's next?
It seems likely that the the Bill will receive Royal Assent in July 2025. That will result in the immediate repeal of the Strikes (Minimum Service Levels) Act 2023 and the repeal of much of the Trade Union Act 2016 two months later. It remains to be seen what, if any, other provisions will be brought into effect before the end of 2025 with the UK government having previously stated that most provisions will not take effect until 2026.
