Government launches consultations on new employment rights under the Employment Rights Bill

The Government has launched four consultations on planned new workplace rights and protections set out in the Employment Rights Bill. We explain what they cover, and what more this tells us about the Government’s plans – including significant new collective redundancy proposals.

The collective redundancy plans include doubling the maximum compensation award for failures to collectively consult from 90 to 180 days’ pay per affected employee or removing the cap on compensation altogether. And plans to consider doubling the minimum consultation period when an employer is proposing to dismiss 100 or more employees from 45 to 90 days.

The consultations, which run until early December 2024, seek views on the Employment Rights Bill’s (the Bill’s) measures relating to:

• a new right to a guaranteed hours contract for zero or low hours workers
• collective redundancy consultation and ‘fire and rehire’ practices
• trade union legislation, and
• Statutory Sick Pay.

The Government acknowledges that responses to the consultations may result in amendments being made to the Bill during its passage through Parliament.

We explain below what these consultations cover, and more about the significant further plans for workplace reforms that these consultations herald.

Collective redundancy consultation and ‘fire and rehire’

This consultation seeks views on the Government’s plans to strengthen collective redundancy protections for employees and end the practice of ‘fire and rehire’ and ‘fire and replace’ as a lawful way to change employees’ contractual terms.

Collective redundancy consultation

Changes to when the duty to consult collectively arises

Under the current law, businesses must collectively consult when they propose to make 20 or more employees redundant at any one establishment (or site) within a period of 90 days or fewer. This applies in both redundancy and fire and rehire scenarios. But employers don’t have to consult collectively when they dismiss fewer than 20 people at each site, even if they’re dismissing more than 20 overall.

The Bill will change this so that collective consultation is required whenever an employer proposes to make 20 or more redundancies, regardless of whether they are employed at one site or not.

The plans could lead to significant practical difficulties for larger employers in terms of how collective consultation should be carried out in circumstances where there may be separate redundancy exercises happening in different locations across the country, which may not all begin at the same time. Indeed, some dismissals may have already taken place by the time the duty to consult collectively is triggered.

Increasing the penalty for failing to collectively consult

The Government also plans to increase the penalty (known as the ‘protective award’) that can be awarded by Tribunals where employers fail to meet their obligations to consult collectively.

The ‘Making Work Pay: Consultation on strengthening remedies against abuse of rules on collective redundancy and fire and rehire’ consultation seeks views on the plans.

The two options under consideration are to double the maximum protective award from 90 to 180 days’ pay per affected employee or to remove the cap on the protective award entirely. The second option would leave it up to Employment Tribunals to decide the penalty the employer should face and could result in even larger compensation awards.

The Government proposes to spare insolvent firms from the risk of such higher awards because the Insolvency Service would bear the cost of that.

These are already costly claims for employers, and this change would greatly increase the risks and costs for employers at a time when compliance will be more difficult to achieve due to the other proposed changes discussed above.

Doubling the length of the consultation period

The Government will also seek views on strengthening the collective redundancy framework in 2025, including doubling the minimum consultation period when an employer is proposing to dismiss 100 or more employees from 45 to 90 days.  Businesses would at least know what to expect if this change is made because the minimum period was 90 days until 2013.

Interim relief

The consultation also seeks views on whether interim relief should be available to employees who bring claims for a protective award in collective redundancy cases and those claiming unfair dismissal in ‘fire and rehire’ and ‘fire and replace’ scenarios.

Interim relief is where the Tribunal on receipt of a claim orders the employer to either re-instate or re-engage the employee until the full hearing of the case; or, if the employer is unwilling to re-employ them, to continue to pay the employee their salary and benefits until the full hearing.

These are all significant proposals which would add to the risks and costs faced by employers.

Full details of this consultation, which remains open until 4 December, can be accessed here.

Statutory Sick Pay

Currently, Statutory Sick Pay (SSP) is payable from day 4 of sickness absence, and employees need to earn at least £123 a week to qualify for it. The Bill will scrap the waiting period so SSP will be payable from the first day of absence and remove the lower earnings limit.

This means SSP will be payable to all employees regardless of their earnings, but the proposal is that SSP should be payable at a lower rate for the lowest paid workers to avoid a situation where they receive more in sick pay than their normal earnings. This rate would be calculated as a percentage of their earnings instead of the flat weekly SSP rate (currently £116.75).

A consultation seeks views on what that percentage that should be.

The consultation paper outlines some illustrative examples that set out the broad costs for employers and potential impact on low earners of different percentage rates. They range from 60% of earnings, which modelling suggests would not leave employees worse off, to 80% of earnings.

These proposals will obviously result in employers facing a bigger SSP bill than they currently do.  But the bigger concern may be higher levels of short-term absence.

Full details of this consultation, which remains open until 4 December, can be accessed here.

Zero and low hours contracts

The Government plans for workers on zero or low guaranteed hours contracts, who regularly work more hours than their contracts indicate, to have new rights to:

• guaranteed hours with a contract that reflects the number of hours regularly worked over a reference period (expected to be 12-weeks)
• reasonable notice of any changes in shift with proportionate compensation for any shifts cancelled or curtailed at short notice.

The provisions covering this in the Bill are complex and likely to place a significant burden on businesses which use zero and low hours workers.  They will affect employers of all sizes across a wide range of sectors.  Much of the detail remains to be set out in regulations.

The Government also intends to extend these protections to agency workers and has started a consultation seeking views on how this should work in practice including:

• Whether agency workers should be offered guaranteed hours by the employment agency, or by the end hirer. There is however a recognition that each option presents some difficulties:
  • The employment agency typically has little control over demand, since demand for hours is largely dictated by end hirers, so requiring employment agencies to guarantee hours would be an additional and prohibitive business risk for them. This could be particularly difficult for small agencies.
  • Conversely, if a requirement was placed on the end hirer, this might change the nature of the relationship between the agency worker and end hirer to one where the hirer runs the risk of being deemed to be the agency worker’s employer.
• Whether end hirers should be required to pay ‘temp-to-perm’ fees or use an extended hire period if they are required to offer guaranteed hours to an agency worker.
• Whether the responsibility for providing an agency worker with reasonable notice of shifts should rest with both the employment agency and the end hirer, and liability apportioned between them by Employment Tribunals as they see fit where reasonable notice is not given.
• Whether employment agencies should be responsible for the cancellation payments to agency workers where a shift is cancelled or curtailed at short notice
• Whether employment agencies should then be allowed to recover cancellation payments from the end hirer if the end hirer was responsible for the shift cancellation - the Government’s preference being that this should be left to contract rather than legislation.

According to the consultation paper, there are around 1 million agency workers in the UK, of whom 140,000 are on zero hours contracts (and presumably many more are on low hours contracts).

Full details of this consultation, which remains open until 2 December, and how to respond can be found here.

Trade unions and industrial relations

The Government plans significant reforms which will make it easier for unions to gain recognition and take strike action and give them greater rights of access to workplaces. Employers will also be required to inform workers of their right to join a trade union alongside the written statements of employment particulars that employers are required to provide to new joiners.

Additionally, the Government will repeal the Minimum Service Levels legislation introduced by the previous Government and have said that employment businesses will continue to be prohibited from providing agency workers to cover the duties normally performed by a worker who is taking part in a strike or other industrial action.

These significant reforms will obviously hand much greater power to unions. This is against a backdrop where the UK lost more days to strike action in both 2022 and 2023 than in any other years since 1989.

The Government seeks views on various aspects of the plans and plans to consult on further measures to reform trade union law once the Bill has received Royal Assent.

Full details of this consultation, which remains open until 2 December, and how to respond can be found here.

You can find out more about the proposals in the Employment Rights Bill here.