‘We are committed, like the government is, to growth and to employ more people,’ says Nigel Paterson, general counsel at Currys. ‘But we think that essentially this is an overcorrection in quite a few aspects, where they are penalising everyone for the sins of a few.’
Paterson’s view sums up the concerns of many partners and in-house counsel, who caution that the government’s flagship Employment Rights Bill could have ‘unintended consequences’ for UK business.
Last week, the House of Lords pushed for amendments to the bill, particularly on the changes to unfair dismissal rights, zero-hours contracts, and trade union legislation, pushing the negotiations into parliamentary ‘ping-pong’ between the Lords and the Commons.
The government touts the bill as ‘the biggest upgrade to employment rights in a generation’, and its own impact assessment costs the impact on businesses out at £5bn.
Its scope is vast. Amendments have exceeded 300 pages, and the reforms address everything from unfair dismissal rights and zero-hour contracts to the the gender pay gap, collective redundancy rights, sick pay, and the enforcement of employment rights.
Unfair dismissal rights
One of the more contentious aspects of the bill is the introduction of day-one unfair dismissal rights. Currently, employees need to serve a minimum of two years at their employer before they can claim unfair dismissal. The introduction of an ‘initial period’ of employment, where a light-touch dismissal process applies, is still being pushed by the Lords, who claim that giving employees day-one rights will inhibit hiring.
Partners Colin Leckey from Lewis Silkin and Andrea Finn from Simmons & Simmons agree that this is one of the most significant changes.
Finn (pictured right), who is ranked as a leading partner in the Legal 500 Employers rankings, explains: ‘The change in unfair dismissal rights shifts the balance of protection in the workplace in a fundamental way. In practical terms, what that means is employers will need to be much more thoughtful about their recruitment processes, because they will have much less flexibility to say we made a bad decision.’
Leckey agrees that the changes will be ‘hugely impactful’, while Paterson comments: ‘The issue is, if you make it more expensive to dismiss people, the decision to take them on board in the first place is a more difficult one to make.’
Zero-hours contracts
The Commons has proposed the introduction of the right to guaranteed hours for workers on zero-and low-hours contracts. The changes will mean that any worker who exceeds the minimum hours set out in their contract during a certain reference period will have the right to further hours.
Currys’ Paterson (pictured right) explains that for a retailer, this aspect of the Bill will cause the most difficulties.
‘The government hasn’t yet defined what constitutes a low-hours contract,’ he says. ‘But essentially, an employer will be required to offer anyone on a low-hours contract an enhanced hours contract.’
This, he explains, is a particular issue for companies in the retail sector, where seasonal work often means that employees are working much longer hours over certain holiday periods. Paterson comments: ‘This is a real problem; it destroys our flexibility.’
Trade union legislation
Under several reforms to the trade union legislation, the government has proposed to repeal the Strikes (Minimum Service Levels) Act 2023, strengthen trade unions’ right of access in the workplace, as well as introduce a duty for employers to inform their workers of the right to join a trade union.
For an employment law head at a large global organisation, who asked to remain anonymous, for a unionised company like his, these changes are set to have the biggest impact.
‘I understand why the government has implemented the changes, but essentially, all of the controls that allow businesses to protect themselves or at least prepare for industrial action have been taken away. That gives very powerful weapons to the trade unions, in terms of collective bargaining recognition but also wage negotiation.’
What’s missing?
Lewis Silkin’s Leckey (pictured right) agrees that while the bill represents a huge change, the biggest issue for employees’ rights is the overwhelmed Employment Tribunal.
‘The biggest problem we have at the moment is that the Employment Tribunal system is in absolute chaos. Unless you properly fund and reform the Employment Tribunal system, that chaos is going to continue, and that is completely unaddressed by this bill.’
He continues: ‘The changes are a reflection of the agenda of the party that’s in power, rather than necessarily something that goes directly to tackling the most fundamental employment issues of the age.’
This sentiment was echoed by the anonymous employment law head, who cut to the point: ‘Without fixing that underlying mechanism for employees to go along and actually get justice, then it doesn’t really matter what rights you give them.’
Responses
‘It is becoming much more expensive in the UK to employ people, and for a government with a growth agenda, this bill is somewhat counter to that,’ says Paterson, although he concedes, ‘I think that it is an upgrade if you’re in a job. Whether it will help grow the economy and bring more people into employment, I think the jury will be out on that.’
The employment law head took a much stronger tone, ‘I think it’s absolutely crazy from a government that says they want to do is prioritise growth but have not really come up with any kind of pro-growth policies, despite their own assessments being that this Employment Bill is going to have a 5 billion negative impact on GDP.’
However, Simmons & Simmons’ Finn strikes a more optimistic tone. ‘It’s evolution rather than revolution’, she says. ‘Ultimately, the legislation is intended to give employees protection. What one wants to do is change behaviour and change processes, rather than having employees rely on enforcement. The best case is that employers look at this and go ‘we need to change our process’.’
However, she questions, ‘Does it, on the one hand, increase protection, but on the other hand, make it more difficult to get a job?’
The factors behind Hong Kong’s rise
‘Any active players in the market at present are being selective in terms of deals they’re taking on because there’s a real demand out there,’ Emsley says, ‘and only so much capacity in the market.’ This naturally raises the question of whether firms are looking to expand. Emsley believes that many firms will be looking to recruit, but acknowledges the challenges: ‘Deal flow has ramped up so quickly that inevitably there are only so many people in the market who can do this work – it’s quite specialised,’ he adds.
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