Economic uncertainty is at levels not seen since the Covid-19 pandemic and the 2008 financial crisis. This, coupled with sweeping upcoming changes in employment law, means that employers need to be acutely aware of their legal position regarding their workforce.

The UK has been grappling with inflation, rising costs, geopolitical tensions and to add fuel to the fire, recent global tariffs imposed by the US are adding further complexity. Business and consumer confidence has been knocked by volatility in major stock indices. If tensions and uncertainty persist, this could manifest itself in worsening UK labour market conditions as businesses may need to adopt a risk-averse approach, leading to restructuring or even increased layoffs. Recent labour market trends suggest that unemployment rates remain steady in the UK however, uncertainty even extends to the data itself as its reliability has been questioned because of falling response rates to the Labour Force Survey meaning findings may not be representative of the population.

Understanding the underlying turbulence in the economy and the possible consequences is crucial for contextualising the key changes in employment law that will affect UK businesses going forwards as these changes will strengthen the protections for workers.

The Employment Rights Bill: Key Provisions

The Employment Rights Bill, introduced in October 2024, is still progressing and is under the scrutiny of the House of Lords, with most of its reforms expected to come into force from 2026.M

Here are some of the changes proposed within the Bill and how they may affect UK Employers:

  •  Fire and rehire restrictions: In July 2024 a Code of Practice was introduced following the P&O Ferries debacle to prevent similar events occurring. The Employment Rights Bill will further strengthen the rights of employees by making it automatically unfair to dismiss those that refuse to vary their contractual terms. There will however be a narrow exception for employers facing financial difficulties that undermine their business being able to continue as a going concern.

 

  • Redundancy: Currently, employers who are considering over 20 redundancies at one site must partake in a collective redundancy consultation by meeting with employee representatives. Non-compliance could mean protective awards of up to 90 days’ pay for each employee affected. The latest version of the Bill extends this provision, meaning that employers with various establishments will have to count redundancies together across those sites. For example, if ‘Company X’ has a site in Manchester and a site in London and is making 10 employees redundant from each site, these figures will combine to meet the 20-person threshold. It is worth noting that the corporate structure of the employer will affect compliance, as separate legal entities (as opposed to one entity with multiple sites) will not be counted together. Further details are still awaited regarding an additional threshold which may close this loophole and could involve calculating a percentage of employees affected. Furthermore, the Bill also intends to double the protective award from 90 days to 180 days, if an employer fails to consult collectively on the redundancies.

 

  • Unfair Dismissals: Previously, employees would have needed to have worked for 2 years before their unfair dismissal rights took effect. Although this remains the current position, the Bill is intending to tighten this by giving employees the right to not be unfairly dismissed from the first day of their employment. However, this provision has been softened as the Bill has progressed. Regulations defining an “initial period of employment” are still in the works and further clarity is expected to be released in due course.

 

  • Zero Hour Contracts: The Employment Rights Bill has set out new regulations requiring offers of guaranteed hours to qualifying workers and amendments have been made so that agency workers are also captured by these provisions. Final details are still being drafted regarding the reference period to which the guaranteed hours will be based on. Non-compliance from employers means that employees can seek remedies through an employment tribunal claim.

 

  • Employment Tribunal Claims: Currently, unfair dismissal and discrimination claims must be brought within a 3-month time limit. While claims for not receiving statutory redundancy pay and regarding equal pay have a 6-month time limit. The Bill will extend the time limit to 6 months for all claims. Businesses will therefore need to take account of this and be on guard for claims being brought much later than usual.

 

There are further changes proposed in the legislation including regulations on: flexible working, equal pay reporting, responsibilities to prevent sexual harassment, qualifying for parental leave and more. These widescale changes highlight the need for employers to review their current employment practices and adapt accordingly.

Navigating employment law amid economic uncertainty and legislative changes is challenging for UK employers. Employers must stay informed about the latest legislative changes and economic trends to effectively manage their workforce and ensure compliance with new regulations. Seeking legal advice can help employers navigate this evolving landscape and support their employees during these uncertain times.

Farleys Solicitors specialise in employment law & HR for businesses and employees. If you or your business requires HR & employment law advice and support in relation to any of the matters mentioned above, please contact us on 0845 287 0939 or contact us by email.