The Employment Rights Bill: What does it mean for employers in the North East and Cumbria?
The Government’s Employment Rights Bill (Bill), published on 10 October, promises “the biggest upgrade of workers’ rights in a generation”. It will be the largest set of reforms to employment law in the last 20 years.
We have been speaking with employers in the North East and Cumbria about the proposals (including via the CIPD branch in Cumbria). A common theme is concern over increased administrative burden and cost pressures on businesses, particularly when coupled with the upcoming increases to national insurance contributions and national minimum wage rates in April. This is echoed in recent comments made by McVitie’s parent company that it is getting “harder to understand” the case for investing in the UK. A recent survey by the CBI showed 62% of businesses believe the labour market will become a less attractive place to invest over the next 5 years.
With the exception of a few changes (such as repealing industrial action regulation), most of the changes will not take effect until 2026. However, while further details are awaited, employers now have an opportunity to shape the legislation via consultation and put themselves in the strongest position to prepare for the upcoming changes.
So, what are the key proposed changes and what impact will they have on your organisation in the North East and Cumbria?
“Day 1” unfair dismissal rights
What is the proposed change?
The biggest shake-up for many employers will be unfair dismissal rights, which will not come into effect any sooner than Autumn 2026. Currently, employees generally need to be employed for 2 years before they qualify for unfair dismissal rights. This qualifying period will be removed, but employers will be able to apply a “light touch” dismissal procedure within a statutory probationary period (with the Government indicating it prefers a 9-month period). This would not be the shortest qualifying period in history – it was 6 months in 1974.
Importantly, current indications are that the light touch dismissal procedure won’t apply where employees are dismissed for “some other substantial reason” relating to the employer (such as a restructure) and to redundancy dismissals. Employees will have unfair dismissal rights from day 1 in a redundancy scenario and employers will need to ensure the redundancy is genuine and they follow a fair process. The Bill doesn’t change the need for employees to have been employed for 2 years before they are entitled to a statutory redundancy payment.
There are significant details to be worked through, including the length of the statutory probation period, what “light touch” process employers will need to follow and how this will interact with existing obligations under the Acas Code of Practice on Disciplinary and Grievance Procedures. A consultation will follow on the compensation regime for successful claims during the probation period. This could enable Tribunals to award less than the current full compensatory damages of up to a year’s pay or £115,115 (whichever is less), in addition to a basic award.
What impact could this have?
The stated intention of the Bill is to support “more people to stay in work” by creating more flexible, secure and family-friendly work. For some employers who struggle with skills shortages, increased job security may increase applicants in areas where geography and other factors make recruitment difficult, for example in rural parts of Cumbria, Northumberland and County Durham.
This will likely change the risk profile in the management of employees in recruitment and from day 1 of employment and may dissuade employers from making permanent hires. Employers will want to ensure their initial appointments are right, investing in thorough and robust recruitment processes to sift out any concerns before an employment offer is made. This could include strengthening pre-employment screening, following up on references and enquiring about unexplained gaps in employment.
The Government estimates the change will mean an additional 9 million workers will have unfair dismissal rights. The risk remains that even with a carefully managed statutory probation period, employers will see an increased likelihood of claims of unfair dismissal levied against them. This remains a concern for employers we have spoken to locally.
What can you do now?
For now, employers should consider gathering data to understand the makeup of their workforces and how many employees have less than 2 years of service. Employers who invest in their recruitment, probation and training processes to ensure new joiners are the best fit will be better placed to weather the storm. This includes training up managers in tackling difficult conversations with employees early rather than letting issues drift and complying with the final regime.
Ending “one-sided flexibility”
Security and predictability of work is a key focus and the Government has stated it is committed to ending “one-sided flexibility and exploitative contracts”. Key measures in this area include:
Fire and rehire
Following the high-publicity P&O Ferries dismissals, the Government have stopped short of banning fire and rehire altogether, but they have seriously limited its scope. Firing employees and re-hiring them on new, less favourable terms will be automatically unfair unless an employer is in a “financial crisis” threatening its viability and the need to change contract terms is unavoidable. This sets a very high bar and it is proposed employers won’t be able to use fire and rehire for positive and legitimate business changes (for example, changing from a 7-day to 5-day per week shift pattern).
Employers will always need an ability to make changes and it will be interesting to see what comes from consultation. Otherwise, redundancy may be the only approach available, which can’t be the Government’s intention. Carefully considering strategy around seeking employee consent to changes via mutual agreement will become even more important.
Collective consultation
Employers with multiple bases across the North East, Cumbria and the rest of the UK will need to assess whether redundancy proposals might lead to 20 or more staff being dismissed across different sites in a 90 day period. Currently, the collective consultation regime only kicks in where there are collective redundancies proposed at one “establishment” (i.e. a local site). The Bill proposes to remove this requirement, so the collective redundancy threshold will be calculated across a business rather than at a single establishment. Employers we have spoken to have raised concerns over practical difficulties notifying the Secretary of State of redundancies, due to constantly evolving numbers across a business. However, we understand from the CBI that the Government seems keen to avoid the changes placing employers in a perpetual state of collective consultation. It also remains to be seen how consulting with different employee groups across disparate sites (for unconnected redundancy reasons) will work in practice.
Employers are encouraged to seek employment law advice at an early stage to consider strategy around changing terms and conditions and large redundancy exercises across different sites carefully.
Zero or low hours contracts
The Government states that zero hours contracts are widely used by 1 million people according to ONS data from August 2024. The Bill in its current form contains a complicated regime which may render the management of zero hours contracts unworkable. This will be unwelcome to many businesses in the North East and Cumbria who rely on flexible workers.
Zero hours/low hours workers (scope to be defined) will have the right to be offered regular hours reflecting the hours they have worked in a 12-week reference period. They will also have the right to reasonable notice of and changes to shifts, and a right to payment for cancelled, moved or curtailed shifts. While workers may choose to remain on zero hours contracts, these changes will result in increased costs and administration for employers. We’ve learned from Cumbrian employers that this may be unworkable where they have a bank of healthcare workers (who often have other jobs and are reliant on flexibility), as it is difficult to predict fluctuations in patient need and therefore working hours for zero hours workers.
If you routinely engage casual workers, does your organisation have the capability to audit workers’ working patterns and trends? If so, once further details on the changes are confirmed, it may be worth considering whether changes can be made to workforce composition. For example, North East and Cumbrian employers who have seasonal fluctuations in demand (such as the agriculture and hospitality sectors) may consider whether fixed-term contracts may be more appropriate (although it remains to be seen how those contracts will interact with day 1 unfair dismissal rights).
Statutory sick pay
Statutory sick pay will be paid to all employees regardless of their weekly earnings and from the first sick day rather than the fourth consecutive sick day, which could lead to increased sickness absence levels and further costs for employers. This will be a concern for many employers in the North East and Cumbria, in particular SMEs for whom we have noted an increase in requests for advice on managing sickness absence. Employers should review sickness absence policies, including in relation to short-term sickness absence which will need to be more actively managed to avoid potential discrimination claims.
Flexible working
The Government made bold claims about making flexible working the default, but the changes in the Bill are more modest. Employers will need to consult with employees and explain why they consider it reasonable to refuse a flexible working request based on the existing statutory grounds. Employers will still have broad discretion as long as they properly consider and can reasonably justify and evidence their decision, but employers may wish to risk assess their current flexible working strategy.
Parent protections
More employees will be entitled to paternity leave and unpaid parental leave, as these will become day 1 rights. It is notable this doesn’t extend to shared parental leave (the service requirement of 26 weeks remains), hopefully, because a review into its unworkable nature is imminent. The Government has indicated it intends to make it unlawful to dismiss new mothers within 6 months of their return to work except in specific circumstances, and further details are awaited.
Trade unions
There are too many proposed changes to summarise in this article, but the headline message is that trade union powers are being strengthened. For example, employers will have a duty to inform all employees of their right to join a union, trade union representatives will have new rights and protections (including right of access to the employer’s premises) and there will be lower requirements for union recognition.
Non-unionised employers in the North East and Cumbria should be aware of the likelihood that more sectors may receive an increase in union recognition requests and consider reviewing strategies, including assessing existing employee relations.
More pressure on employers and tribunals?
Particularly if the final legislation is not sufficiently practical and clear, it is likely an unintended consequence of the Bill will be increased overall management time and cost for employers. In the North East and Cumbria, we anticipate this will be felt most by small businesses and charities and those who rely heavily on casual workers.
Employers will be familiar with the significant delays in the Employment Tribunal system (we are routinely seeing hearings listed for 2026). It seems likely that strengthened worker protections and procedural claims (for example breach of the light touch unfair dismissal procedure) will increase the burden on already creaking-at-the-seams Tribunal and Acas early conciliation services. The Government estimates that zero hours reforms will increase claims dealt with by Tribunals and Acas by 15%.
This will be compounded by the subsequent amendment proposed to the Bill to increase time limits to bring claims in the Employment Tribunal from 3 to 6 months. This would create more uncertainty for employers to wait to see whether a claim will be brought and the time delay may negatively impact witness evidence where memories fade or witnesses leave employment.
What next?
There is still a way to go before the Bill becomes actual law. The devil will be in the details, so staying up to date on developments throughout 2025 will be crucial. The Government needs to finalise the wording of the Bill, consult on missing details and pass further legislation. The Bill is now in the Report Stage in the House of Commons.
A number of consultations were held in 2024 and further consultations are expected in 2025, including on the “light touch” unfair dismissal process. Employers are encouraged to take part in the consultation process to make their voices heard and help shape the legislation. Otherwise, employers in the North East and Cumbria should start to carefully consider how they will plan for and respond to the changes and the resulting increased regulatory burden.
The Bill is not the last word on employment law changes. The Government’s policy paper Next Steps to Make Work Pay sets out a commitment to future policy reforms such as mandating the reporting of ethnicity and disability pay gap data for large employers, removing national minimum wage age bands, and taking forward the “right to switch off” through a statutory Code of Practice. Watch this space…
If you would like advice on how to prepare your organisation for the upcoming changes in the Employment Rights Bill or for any employment or immigration law advice, please reach out to our employment team.