The King's speech – key takeaways for employers

Employment Rights Bill

A new Employment Rights Bill is to be introduced to Parliament within the next 100 days, likely to come into force some time in 2025. The official briefing notes to the King's Speech 2024 provide more detail about what the Bill will include, which is largely consistent with Labour's manifesto:

• Employees will have rights not to be unfairly dismissed from day one of employment instead of after two years of service. The briefing notes do however promise to "ensure employers can operate probationary periods to assess new hires" so it's unclear how this 'day one' right will apply if an employee doesn't pass a lengthy probation period – this change could be introduced quickly via statutory instrument, or it may be included in the Bill.
• Mothers returning to work after maternity leave cannot lawfully be dismissed during the first six months after they return to work except in specific circumstances (a recent change gave them additional protection in some redundancy situations but it seems this will be extended to offer much wider protection).
• Statutory Sick Pay will be payable from the first day of sickness and low paid employees will now receive SSP.
• Parental leave rights will be available to employees from day one of employment rather than after c.6 months. 
• Flexible working will be the default from day one of employment and employers will be required to accommodate this "as far as is reasonable".
• 'Exploitative' zero-hour contracts that provide flexibility only for the employer will be banned.
• Trade union legislation will be updated "so it is fit for a modern economy", removing "unnecessary restrictions on trade union activity", with new provisions ensuring that workers have a reasonable right to access a union within workplaces. There is likely to be a general increase in private sector employees seeking official recognition from their employer of a trade union for collective bargaining purposes.
• 'Fire and rehire' and 'fire and replace' practices will be banned and the current Statutory Code of Practice (which only came into force this month) will be replaced.
• A new 'Fair Work Agency' will be established as a single enforcement body to "strengthen enforcement of workplace rights".
• A 'Fair Pay Agreement' will be established in the adult social care sector and the 'School Support Staff Negotiating Body' will be reinstated.

Equality (Race and Disability) Bill

• This Bill will codify a right to equal pay for ethnic minorities and individuals with disabilities, which implies that it will now be much easier for affected individuals to bring pay discrimination claims. Equal pay claims (concerning differential pay between the sexes) tend to be far more complex claims to run and defend than other discrimination claims.
• Employers with 250+ employees will now have to comply with mandatory reporting practices in respect of ethnicity and disability pay in a similar way to how they have to meet gender pay reporting obligations.  

What are the major implications for employers when these changes are introduced?

Probably the most significant change, as anticipated by Labour's manifesto, is the introduction of protection against unfair dismissal as a day one right. If passed, it will mean that employees no longer require two years of continuous service to file an Employment Tribunal claim that they have been dismissed for an unfair reason or following an unfair dismissal process. The previous Labour government set one year as the relevant service period, and the Tories increased this to two years. By potentially reducing this to 'day one' or following a probation period, this will increase the onus on employers to follow fair processes and ensure they can rely on a legally fair reason prior to dismissal. It will also likely entitle employees with less than two years of service to statutory redundancy pay and to protection under TUPE. In contradiction to Labour's aims, this change may encourage employers to dismiss employees earlier if they have even low-level concerns about performance/conduct while an employee is still on probation and/or to engage employees on fixed term contracts instead of permanent contracts.

The briefing notes imply that the government will introduce some sort of provision or Code of Practice to deal with probationary periods, which should allow employers to still assess new hires and decide they aren't suitable for the job without risking an unfair dismissal claim. However, there may be new rules limiting the reasons why an employer can decide probation hasn't been passed. We await guidance on what this will look like and ultimately case law to clarify the new guidance.

Making flexible working the 'default' and requiring employers to accommodate this "as far is reasonable" is also likely to greatly increase the number of flexible working requests and limit the ability of employers to reject these requests.

The Government is committed to introducing the Bills within the first 100 days, however it will likely take some time to pass through Parliament. The change to the unfair dismissal service provision could be brought in quickly via statutory instrument without an Act of Parliament, in advance of the new Employment Rights Bill. Our advice is that given the lack of clarity on timing, employers should consider now whether there are any employees with less than two years' service whom they may wish to dismiss in the near future before the current service requirement is changed. It may also be sensible to increase the length of probation periods in contracts for new starters, although the guidance on probation periods may put barriers on lengthy probation periods.

When we have clarity on the new legislation, we will recommend that clients review their policies and procedures considering the proposed changes, particularly in relation to probation periods, parental leave and flexible working. Employers with 250+ employees should consider whether they currently capture the appropriate data to be able to meet the new ethnic and disability pay reporting practices.

If you would like advice in relation to any of the above, or would like to discuss your current employment practices, policies or procedures, please contact Paul Reeves (paul.reeves@shlegal.com), Richard Freedman (richard.freedman@shlegal.com) or Anne Pritam (anne.pritam@shlegal.com) or your usual contact in our employment team.