As we settle into the new year and look ahead to what’s on the horizon in 2025, the UK is continuing to adjust to the change of government following Autumn 2024’s general election and reacting to the new reforms, regulations and laws of the new Labour leadership.
Amongst the changes anticipated to make a significant impact in 2025 and beyond are in the realm of Employment Law, with a new Employment Rights Bill – unveiled on October 10th 2024 – and ‘Make Work Pay’ strategy created to upgrade workers’ rights, make pay fairer for all and improve working conditions.
A report recently published by Impellam Group, who hosted a webinar with industry experts from DWF – global integrated legal and business service providers – to discuss these new reforms, outlines the potential implications of Labour’s approach to Employment Law.
Key Reforms and Their Implications
Impellam’s report outlines 13 key reforms, changes and plans that were discussed with DWF’s Employment Law Partner Jon Keeble and Employment Law Director Nigel Crebbin.
According to Keeble and Crebbin, given that many of the proposed changes are anticipated to be implemented between 2025 and 2027, it is vital to prepare at pace – taking stock, assessing risks and seeking assistance wherever required – whilst remaining calm, making informed decisions and adapting appropriately.
Ahead of their implementations, we have summarised the reforms, what to expect from them, and how employers can react below, based on the expert insights from Impellam and DWF.
Unfair Dismissal
This is one of the cornerstone reforms of Labour’s new approach to Employment Law. They have proposed:
- Removal of the Two-Year Qualifying Period - This will mean that employees will be protected from unfair dismissal from day one of their employment.
- Consultation on Statutory Probation Periods - A nine-month probation period has been proposed to balance the assessment of new hires while providing immediate rights. During this period, the steps required for fair dismissal will be lighter than after probation.
In response to these proposals, employers need to consider whether their recruitment and onboarding processes are robust enough to minimise risk of unfair dismissal claims and review their progress reporting and improvement plans to make use of the ‘lighter touch’ obligations.
Zero-Hour Contracts
The use of zero-hour contracts has soared in recent years, to the extent that many have considered their use as ‘potentially exploitive’. Labour says their proposals have been designed to reduce such exploitation:
- Right to Guaranteed Hours - The reform will enable workers to convert zero-hour contracts to ones with guaranteed hours based on their average hours over a reference period. This seeks to provide more job security, whilst still allowing for working flexibility.
- Reasonable Notice for Shift Changes - Employers will be required to provide reasonable notice for shift changes, however the definition of “reasonable” is still under consultation due to debate over what it means for individuals in different circumstances. This may also extend to agency workers.
Key considerations for employers include reviewing their current use of zero-hour contracts and how it may impact their employment model, and implementing robust procedures to ensure reasonable notice can be provided to shift workers.
Fire and Rehire Practices
Currently, there are few limitations on employers firing employees and then rehiring them under new conditions – and not rehiring those who refuse to agree to the new terms proposed. There simply needs to be sound reasons for dismissal, and fair reasonable procedures followed for terminating employment.
The new legislation will significantly restrict existing ‘fire and rehire’ practices:
- Statutory Code of Practice for Dismissal and Re-Engagement - A new statutory Code of Practice on Dismissal and Re-engagement came into force in July 2024. Employers must demonstrate that firing and rehiring was unavoidable, otherwise they could be liable for unfair dismissal. Forced contract changes will become rarer as a result, and employees will be engaged in negotiation to reach agreements on flexibility.
Employers will find that changing terms and conditions will become harder, and there will be increased risk when doing so. It is vital that they consider amending template contracts and clauses and leaning on employee engagement to get this right.
Collective Redundancy Consultation
Labour’s new Employment Law Bill removes the current threshold that requires collective consultation with trade unions or employee representatives to take place only when 20 or more redundancies are proposed to take place over 90 days in a ‘single establishment’.
The reference to ‘single establishment’ is to be removed, which will have a significant impact on large employers with multiple working premises in particular:
- Removal of the Single Establishment Requirement - Collective consultation will apply across an entire organisation, not just single establishments, increasing the number of situations requiring consultation. The government is considering increasing the compensation cap for companies that fail to comply with collective redundancy consultation obligations from 90 to 180 days or removing it entirely.
This is one of the most important legislation updates for employers to be aware of, as it signals a major change to collective consultation law. Therefore, it is vital to take this into account when potentially restructuring.
Statutory Sick Pay (SSP)
The reforms have considered ways to make Statutory Sick Pay fairer, and more readily available, to all workers, regardless of employment status, contracts and terms which may have previously altered an employer’s SSP entitlement.
- Removal of Lower Earnings Limit - Under the new, more straightforward sick pay regulations and guidance, SSP will be available to all employees regardless of weekly earnings.
- Immediate SSP Entitlement - Employees will be entitled to SSP from the first day of sickness absence, rather than from their fourth day of confirmed sickness.
In response, employers will need to review and update their policies and budget for potential increases in SSP payments. It may pay to consider ways to help reduce sickness in the workplace too, such as introducing initiatives to reduce stress and improve mental health. This has benefits beyond employee wellness too, potentially boosting EVP and customer retention.
Trade Unions
The introduction of the new bill will signal the end of certain legislations introduced during the terms of previous administrations, such as the ‘Anti-Union Legislation’ and its associated Strikes (Minimum Service Levels) Act 2023.
Under Labour leadership, it’s anticipated that there will be a step change regarding unions; plans are afoot to ensure they have a bigger role in employee rights and representation.
- Increased Union Activity - The repeal of anti-union legislation will be supported by new requirements for employers to provide written statements of the right to join a union. Trade unions will also have mandatory access to workplaces upon submitting an ‘access request’ and agreeing terms on what they can access, when and how often.
In response to growing union influence, employers should consider how they will respond to these access requests and set out policies to ensure compliance with the new obligations. It is also an opportunity to reconsider the role they want to have in the future in respect of working with unions.
Outsourcing
Changes made through the Procurement Act 2023 could lead to regulations being introduced which require that new contractual provisions are included in relevant public sector outsourcing contracts.
The aim is to avoid public sector suppliers having two-tier workforces, with different employment terms for employees who have transferred from the public sector and those employees who have not.
- Equal Employment Terms - New regulations will require that employers ensure all employees, including those transferred from the public sector, have equally beneficial employment terms, not merely similar or ‘better than before’.
With this change likely to have significant cost implications for employers taking on public sector contracts, companies should start considering the potential for increased costs when taking on public sector workers.
Fair Work Agency
It is anticipated that, by 2026 at the latest, a new Fair Work Agency will be established and given the responsibility to ensure all employees are given fair, and equal rights and opportunities within the workplace, regardless of their role.
- Establishment of a Fair Work Agency - This agency will protect employee rights and enforce compliance, particularly regarding holiday pay and sick pay. Procedures are likely to be similar to those applied to the national minimum wage enforcement, so fines and even prosecution could come into play too.
Whilst the introduction of the agency won’t be immediate, employers should already start to consider and react to the potential increased risk of enforcement action and start to plan accordingly, reviewing how they comply to legislation and regulation. It is worth noting that the agency will have access to historical records too, so any actions before the agency is established could come back to haunt any company that has disputes outstanding.
Additional Family-Based Protections
The Labour government has outlined a commitment to providing additional ‘family-based’ protections and types of leave that will be given when an employee is dealing with personal issues beyond illnesses. As such, the new reforms have included changes and additions including:
- Bereavement Leave - There will be a new statutory right to bereavement leave beyond the current parental bereavement leave.
- Paternity and Parental Leave - Similar to other employee rights, the right to paternity and parental leave will be given to all employees from day one of the employment.
- Protections for Pregnant Women and New Mothers - Stronger protections from dismissal while pregnant or on maternity leave will be created, as well as for a period after returning to work (this is likely to be 6 months).
As is the case for many of these new legislations, employers must already start considering what actions they may need to take to ensure these new rights and protections are adhered to, reviewing and amending existing policies and procedures where appropriate.
Gender Pay Gap
Whilst work has been done to narrow the gender pay gap in recent years, Labour’s new legislation and laws have put a spotlight on what else there is to do, and how much there is to do too.
There are already reporting requirements on gender pay gaps for organisations of over 250 employees, but employers will soon have to go further in their reporting and action taking.
- Mandatory Action Plans - Employers will be required to develop and publish plans to reduce gender pay gaps within their business and wider industry. Additionally, they must strive to provide more support to women during the menopause.
These regulations will likely be implemented in 2026, but as they are vital to achieving more equitable and diverse workforces, it will pay for employers to consider actions as soon as possible. This includes developing and putting in place equality action plans; addressing gender pay gaps; and assessing how female employers are being supported.
Flexible Working
A renewed focus on flexible working will drive a motion to promote a better work-life balance for employees and make clearer the flexible working policies and processes of all employers, to ensure that both sides of the working relationship understand their needs and expectations.
- Default Position - Flexible working will become the default, with employers required to show that refusals are reasonable. Without specific grounds to do otherwise, employers must permit an employee to work flexibly.
Policies and processes will need to define what is and is not reasonable refusal of flexible working, and employers must adhere to them – fairly and consistently. In preparation, employers need to take responsibility for considering what ‘reasonable’ is and planning accordingly.
New Worker Protection Measures
There will be a continued emphasis on safeguarding employees from sexual harassment, with specific and more rigorous obligations on employers to help protect their people from harassment – including from third parties such as customers or passengers.
Employers will need to address any harassment and take action against it; failure to do so could result in a 25% increase in compensation for employees who successfully bring harassment claims.
- Sexual Harassment - Employers must take reasonable steps to prevent sexual harassment; this includes conducting risk assessments and supporting affected employees. They must also demonstrate that they are doing everything reasonably possible to prevent harassment and act when promptly when incidents occur.
Whilst people-facing employees are most at risk of harassment, employers’ obligations apply to all employees, regardless of their role or working location. Safeguarding must be front and centre of all risk assessments, company-wide, and reviews of processes put in place to prevent – and react to – incidents must take place regularly and thoroughly.
Future Prospects and Consultations
In addition to these 13 key changes being implemented in the short to medium term, the Labour government has outlined further plans for employment law reform in the coming years, including:
- Right to Switch Off - There will be regulations introduced to prohibit employers from contacting employees outside working hours, as part of a drive to create a better work-life balance for all.
- Ethnicity and Disability Pay Gap Reporting - Mandatory reporting to address pay disparities will be introduced, with the aim of identifying ways of narrowing pay gaps.
- Reform to Employment Status - Providing greater clarity on employment status and removing the intermediate category of ‘worker’.
In Summary
Labour’s legislative changes signify a shift towards what will hopefully become more inclusive, equitable, and safe work environments.
Whilst these reforms aim to benefit employees, they have the potential to improve the way businesses operate and perform too and futureproof them as the working world – and the people within it – constantly change.
Now, and going forward into a brighter future, companies must stay informed and prepared to adapt their policies and practices to comply with the evolving landscape of employment law.
