Government unveils most significant reforms to employment rights in a generation

Today, Deputy Prime Minister Angela Rayner and Business Secretary Jonathan Reynolds unveiled the government’s Employment Rights Bill, a landmark piece of legislation which will have a significant impact on companies – both large and small – as well as employees themselves.

The Bill is widely seen as a core plank of Labour’s policy agenda and (just about) published within the promised first 100 days of government, as per its manifesto. Rayner and Reynolds have presented these reforms as showing the benefits of a ‘pro-business, pro-worker’ approach with the intention of “keeping people in work for longer, reducing recruitment costs for employers by increasing staff retention and helping the economy grow.”

That said, these measures will likely have a substantial impact on employers. In total the Bill will bring forward 28 individual employment reforms. These include the ending of ‘exploitative’ zero-hour contracts, the ending of ‘fire and rehire’ tactics, changing the law to ensure flexible working is the default for all (unless employers can prove that it is unreasonable). Statutory sick pay will also be strengthened, removing the lower earnings limit for all workers and cutting out the waiting period before claiming sick pay. There will be stronger protections for pregnant women and new mothers returning to work including protection from dismissal whilst pregnant. On the role of trade unions, the Bill will repeal the Minimum Service Levels (Strikes) Act put in place by the Conservatives.

The most contentious provision expected in the Bill - day one protection against unfair dismissal – has been somewhat watered down. In a last-minute concession to business, the government agreed to consider a probationary period of nine months instead of ‘day one’ protection (so employers will be able to dismiss new recruits after a warning of poor performance during this nine-month probation period).

With regards to enforcement, the Bill provides for the creation of a Fair Work Agency, which will enforce existing rights as well as those introduced by the new legislation. The funding, powers and remit also of this new agency will need to be determined and given that enforcement is likely to be one of most significant factors in the implementation, these questions will be key.

These measures will be consulted on. A series of consultations on the finer details are set to take place over the next year, and many of the proposed reforms will not come into effect until 2026. The contentious issues, such as probation and unfair dismissal, will not be in place be until Autumn 2026 at the earliest

In terms of reaction to the Bill, it is perhaps unsurprising that trade unions have largely welcomed it, while some business representatives have not. TUC General Secretary Paul Nowak said it is “time to write a positive new chapter for working people”, while the Federation of Small Businesses’ Policy and Advocacy Chair, Tina McKenzie, described the legislation as “a rushed job” that is “clumsy, chaotic and poorly planned”. Interestingly the CBI provided a very non-committal response, stating that “Politicians and businesses have a shared goal in wanting to raise living standards through higher levels of growth” but added that they want to “find the right landing zone and improve living standards by avoiding the unintended consequences that businesses have warned against.”

The upcoming consultations and secondary legislation will be key in defining the new rules for employers and there will be opportunities for businesses to engage. In terms of the broader question of whether the government can really deliver a ‘pro-business, pro-worker’ approach, today’s announcement is arguably the easy part. The far trickier task of driving sustained productivity growth in the economy so businesses can provide good jobs is one for the Chancellor to address in her upcoming Budget statement.