Peter Finding: Changes as a result of the Employment Rights Bill

After much fanfare, with the common thread that the prevailing employer and employee dynamic is in need of change, the new government’s Employment Rights Bill has been published. If passed in its current form, it will constitute the biggest shake-up of fundamental employment protections in England and Wales for over a decade. The reforms will require advance planning by HR and benefits professionals ahead of the bill coming into effect.

In terms of both its impact on the wider economy, and day-to-day HR practices, the most significant reform is likely to be the removal of the two-year wait employees currently have before obtaining protection from unfair dismissal.

The government is consulting on the details of a mechanism to enable employers to more easily justify dismissals made in the first few months of employment, with the government’s Next Steps document suggesting a nine-month period. Based on the bill’s current form, this would provide a slimmed-down procedure for dismissals in that period. But employees will still be able to claim unfair dismissal from their first day of employment, it is only the tests for the fairness of that dismissal which will be different.

There will almost certainly be a significant increase in employment tribunal claims. This will put pressure on the employment tribunal system, which already is over-burdened, and employers, which will have to justify why it was reasonable to dismiss an individual after what might, after all, be a very short period of time.

It is generally accepted that tougher dismissal laws lead to a downturn in hiring. It will be interesting to see how the government balances potential tensions in its management of the wider economy in the context of this increase in worker protection.

Numerous recent controversies surrounding large employers’ use of a fire-and-rehire strategy, when unable to make workforce-wide changes to employment terms by agreement, led to the bill’s other key reform: making unilateral contract variations explicitly a ground for automatic unfair dismissal. Crucially, on the current drafting, this will not just affect major industrial relations disputes. Any variation to an employment contract, which is not agreed by the employee, would trigger automatic unfair dismissal. While there are statutory defences, this potentially has very widespread consequences, affecting the smallest employers as much as the industrial giants.

Now is the time for business leaders to address their organisation’s employee relations strategy ahead of these major reforms taking effect, expected in 2026, before it is harder, and more costly, to do so.

Peter Finding is an international employment lawyer at Pierson Ferdinand UK.

“Peter Finding: Changes as a result of the Employment Rights Bill,” Employee Benefits (November 20, 2024).