Employment Rights Bill and Labour’s first Budget in 14 years: Key updates for Employers and Employees – October 2024 Newsletter

Employment Rights Bill

On October 10, 2024, the Labour government published its long-awaited Employment Rights Bill, marking what they call “the biggest upgrade to workers’ rights in a generation.” With 28 employment-focused provisions spanning over 150 pages, the Bill reflects Labour’s ambitious plan to overhaul employment law and elevate worker protections. The government anticipates consultations in 2025 and a phased rollout of these reforms, likely starting in 2026, signalling that these changes will shape employment law discussions well into the coming years.

Key Reforms in the Employment Rights Bill

• Day-One right for Unfair Dismissal:

The Bill proposes that employees gain the right to claim unfair dismissal immediately upon starting employment. Currently, a two-year qualifying period is required. The Bill also introduces a statutory probationary period, with further consultations planned for 2025.

• Fire and Rehire Protections:

The Bill will make it automatically unfair to dismiss employees solely to rehire them on amended terms. Exceptions apply only when employers face significant financial hardship and have exhausted all other options.

• Sexual Harassment Prevention:

New obligations on employers require “all reasonable steps” to prevent sexual harassment, including liability for third-party harassment. Additionally, disclosures of sexual harassment will now qualify for whistleblower protection.

• Zero-Hours Contracts Reform:

Employers must offer regular hours to zero-hours workers who consistently work more than their contracted hours. They will also need to provide reasonable shift notice and pay compensation for last-minute shift cancellations.

• Flexible Working Rights:

Employers may only refuse flexible working requests on “reasonable” grounds and must provide clear explanations for refusals, a shift aimed at bolstering flexibility in the workplace.

• Enhanced Union and Worker Rights:

Labour intends to reverse prior restrictions on union activities, granting unions increased workplace access. The Bill also mandates transparent information on union membership rights within employment contracts.

• Statutory Sick Pay (SSP) Enhancements:

Removing the earnings threshold, SSP will be available from the first day of illness, granting all employees immediate access to paid sick leave.

• Improved Parental and Paternity Leave:

The Bill transforms paternity and parental leave into day-one rights, removing the existing service length requirements for eligibility.

These proposed changes amongst many others underline Labour’s aim to reshape the UK’s employment landscape, highlighting their effort in creating a robust support system for workers at all stages of employment. Watch this space as the Bill progresses and consultations begin.

Labour’s first Budget in 14 years – Key Updates and What it means for Employment Law

Yesterday afternoon, Chancellor Rachel Reeves delivered Labour’s first Budget since 2010, aiming to support the UK workforce and address economic challenges. Here’s a breakdown of key employment-related measures from the Budget:

Tax Rises and Spending Cuts: £40 Billion in Fiscal Adjustments

The Budget outlines a significant shift in fiscal policy, with planned tax increases and spending reductions amounting to £40 billion. Reeves emphasized that these adjustments are essential for improving public finances, ensuring economic resilience, and investing in critical sectors without increasing borrowing in the long term. Cuts will prioritize reducing inefficiencies in government spending while safeguarding vital services and support for working families.

Inflation Predictions

The Office for Budget Responsibility (OBR) provided updated inflation forecasts alongside the Budget. The forecast shows an average Consumer Price Index (CPI) inflation rate of 2.5% in 2024, gradually declining to 2.0% by 2029. This long-term goal aims to stabilise household costs, easing pressures on both workers and employers and enhancing purchasing power over the coming years.

Carer’s Allowance

To support carers, the Budget increases Carer’s Allowance from £81.90 per week to the equivalent of 16 hours at the National Living Wage, which will allow carers to earn more while receiving the benefit. Carers can now earn over £10,000 annually while still retaining their allowance, improving financial stability for those providing essential caregiving support.

Spending on the State Pension

In response to rising living costs, the Budget boosts state pension funding by 4.1% for 2025-26, translating into an additional £470 annually for over 12 million pensioners. This adjustment ensures that retirees receive more substantial support, aligning pensions with inflation and safeguarding the financial wellbeing of the UK’s older population.

Employee Taxes: Freeze on NI, VAT, and Income Tax Continues until 2028

Labour confirmed it will not increase National Insurance (NI), VAT, or income tax for employees during this parliamentary term, honouring its commitment to protect workers’ incomes. However, the freeze on these taxes will conclude in 2028, allowing for potential tax adjustments based on economic conditions at that time. This stability rule aims to strike a balance between protecting take-home pay and allowing the government fiscal flexibility in the future.

Capital Gains Tax (CGT) Increase

In a bid to address income inequality, the Budget raises Capital Gains Tax. The lower CGT rate on profits from asset sales will increase from 10% to 18%, and the higher rate from 20% to 24%, starting from the 2025-26 tax year. This change, which maintains current rates on residential property gains, targets wealthier investors while sparing homeowners and encouraging long-term investments in the housing market.

Fairer Worker Protections

The Budget includes strong language on Labour’s pledge to protect workers from unfair dismissal and workplace bullying, especially for vulnerable groups, like those returning from parental leave. By committing to these protections, the government aims to create safer, more equitable workplaces, bolstering employees’ rights across the board and supporting employers in fostering respectful environments.

“Get Britain Working” Initiative

To combat unemployment, the “Get Britain Working” initiative will launch a series of programs designed to help unemployed individuals reintegrate into the workforce. This plan includes reskilling programs, incentives for employers to hire long-term unemployed workers, and support systems for jobseekers facing challenges in returning to employment. By reducing the strain on the benefits system, Labour hopes to foster economic participation and secure a broader, more sustainable workforce.

Closing Remarks

Each of these measures reflects Labour’s commitment to addressing economic challenges while supporting the UK’s workforce. For employers and employees alike, these changes will shape the employment landscape over the coming years, laying the groundwork for a more resilient and equitable economy.

By Suraj Purohit.
Trainee Solicitor at Kalra Legal Group.
30/10/2024.