The Employment Rights Bill Explained: Understanding Employer Obligations and Risks

Introduced on 10 October 2024, the Employment Rights Bill marks a significant shift in UK
employment law under the Labour Government’s Make Work Pay agenda. With 28
proposed reforms, the Bill aims to ensure all jobs provide a baseline level of security and
protection for employees. Currently in its final stage before receiving Royal Assent, it is said
to have a profound impact for years to come. This article examines the current law and
proposed changes to unfair dismissals, workplace harassment, and the fire & rehire
practice, and considers whether the reforms are comprehensive enough.
Unfair Dismissal and Probationary Periods
Unfair dismissal is the practice where an employer terminates an employee’s contract
without a fair reason, or without following a fair procedure.
The Current Law
Employees are required to have at least two years of continuous
service to qualify for the right not to be unfairly dismissed.
The Proposed Law
Employees are entitled to claim unfair dismissal immediately upon
commencing employment.
Employers may operate a nine-month statutory probation period
(Initial Period of Employment), during which a modified unfair
dismissal test applies. During this time, dismissals can be granted if
the employer can prove the reason behind the dismissal was due to
either: (a) the employee’s conduct, capability, statutory restriction, or
some other substantial reason, provided they hold at least one
meeting and notice for up to three months is given.
Proposed Date: 2027
How it will Impact Employers in Practice
In granting employees the right to a day-one unfair dismissal claim,
the Bill may prove burdensome to employers due to the heightened
compliance standards. It is advised that employers:
1. Implement probation periods within new employee contracts.
2. Ensure effective monitoring of performance throughout their
course of employment.
3. Review all company disciplinary and dismissal policies.
4. Ensure managers are sufficiently trained to navigate any
conduct and performance issues.
5. Exercise caution during the recruitment process by
implementing stronger interviewing systems.
Restricting the Use of Fire & Rehire
“Fire & Rehire” is a practice where an employer dismisses an employee and then
re-engages them on often new and less favourable terms, such as reduced pay or altered
working hours. It is most often used when employees or trade unions reject the initial
proposed contractual changes.
The Current Law
Although contentious, fire & rehire remains lawful. In July 2024, the
Bill initially introduced a Statutory Code of Practice on Dismissal and
Re-engagement. Its purpose was to ensure all negotiations regarding
contracts were carried out in a way that fostered fairness and
transparency.
The Proposed Law
While the Bill does not ban this practice, it will be tightly regulated by
making it automatically unfair to dismiss an employee for refusing
amended contractual terms or to rehire them on less favourable
ones.
Similarly, dismissing an employee to replace them with agency
workers or self-employed contractors in an attempt to reduce costs
also constitutes unfair dismissal.
The only exception applies where the business is facing genuine
problems. The only exception applies where the business is facing
genuine financial difficulty, and the employer can show the changes
and amended contractual terms are essential and unavoidable to
prevent closure. There must be a threat to the business’s survival.
Proposed Date: October 2026
How it will Impact Employers in Practice
The Bill introduces less flexibility for employers to adapt contracts to
changing business needs. Because the standard is now much higher,
if employers still want to use the fire-and-rehire method, they will
have to prove that the business is genuinely in financial difficulty and
that the change was unavoidable.
Employers are required to engage in meaningful conversations with
their employees and to provide written reasons for any contractual
variations and changes. Employers must show that they have
considered alternatives before dismissing and re-engaging the
employees.
Promoting a Safer Workplace
Harassment, under the Equality Act 2010, is unwanted conduct in relation to a protected
characteristic that undermines one’s dignity, or creates an offensive environment. This
definition includes, but is not limited to, sexual harassment. In attempts to ensure a safer
working environment, the Bill imposes a stronger duty on employers to prevent all forms
of harassment during an employee’s course of employment.
Sexual Harassment at Work
The Current Law
Since 26 October 2024, employers have been under a legal
anticipatory duty to take “reasonable steps” to prevent sexual
harassment within the workplace. They must proactively identify
potential risks and address them before the issue arises.
The Proposed Law
The Bill seeks to expand and strengthen the current framework by
requiring employers to take “all reasonable steps” to prevent sexual
harassment and promote a safe, harassment-free workplace. This
marks a higher threshold for employers to meet.
Proposed Date: October 2026
How it will Impact Employers in Practice
Although government guidance is lacking on what “all reasonable
steps” entails, the Equality and Human Rights Commission (EHRC)
has issued updated guidance to help employers meet their
obligations under the October 2024 duty. Such practical steps
included:
1. Assessments: Carrying out risk assessments and staff surveys
to identify and mitigate potential issues before they arise.
2. Policy: Maintaining a clear and regularly updated harassment
policy to reinforce behavioural expectations of all staff.
3. Training: Provide tailored training for all staff to ensure they
are well aware of what constitutes harassment and how to file
a report.
4. Reporting: Establishing a safe and effective reporting system
where communication is encouraged and reports are
appropriately investigated and addressed.
Each business may have a slightly different interpretation of what
constitutes “all reasonable steps” depending on the business’s size,
sector, and available resources. Therefore, employers must take a
tailored and proportionate approach when reviewing and updating
their policies.
As the Bill seeks to expand on the current law, employers who have
already implemented “reasonable steps” to meet their obligations
under the October 2024 duty will be well-positioned to meet the Bill’s
new requirements. However, employers must ensure they regularly
review, strengthen, and broaden their anti-harassment measures
whilst monitoring new developments in case law and regulations.
Employee Protection from Third-Party Harassment
The Current Law
At present, employers are not liable for third-party harassment
directed at their employees during the course of their employment.
Third-party individuals include, but are not limited to, clients,
customers, suppliers, workplace visitors, and other members of the
public.
The Proposed Law
The Bill seeks to make employers directly liable for any form of
harassment made to an employee by a third-party individual during
their employment. The employer is judged by whether they have
demonstrated that they have taken “all reasonable steps” to prevent
the harassment.
Proposed Date: October 2026
How it will Impact Employers in Practice
Ahead of the Bill’s implementation, employers should follow the
EHRC guidelines, listed above, which will form part of the basis of
what “reasonable steps” employers must take to prevent third-party
harassment.
Steps taken must be proportionate to both the workplace and any
associated risks posed to employees. What works within retail
settings may not be suitable for corporate offices, so policies must be
tailored accordingly. These steps include:
1. Implementing tailored anti-harassment clauses in contracts
with each contractor, supplier, and customer.
2. Requesting third parties’ harassment prevention policies
when staff are based externally.
3. Proactively considering the risks of third-party harassment
beyond the workplace, where employees may be vulnerable,
such as at external training events.
Closing Remarks
I strongly agree with the reform governing unfair dismissal as it promotes more job
security and protection for employees, especially those in vulnerable positions. However it
also presents considerable challenges for employers. Businesses may face more litigation
from former employees who were employed on a short-term basis. Employers will need to
carry out significant administrative and compliance changes, which can be burdensome
for small businesses who lack the resources. In addition, employers may become cautious
and hesitant when recruiting, possibly favouring candidates who are less likely to
challenge a dismissal.
Whilst I support implementing anti-harassment measures in the workplace, I disagree
with the reform’s lack of clear guidance for businesses. The Bill states employers must
take “all reasonable steps”, but what is meant by “all” is left ambiguous. This risks
inconsistent interpretations throughout businesses and sectors. Moreover, industries such
as retail and hospitality face a higher risk of third-party harassment, as employees
frequently interact with customers. Although third-party behaviour is more challenging to
control, the government has not provided any guidance to support these industries.
Our team at Kalra Legal Group is here to help navigate you and your business through
these developments. If you’d like to discuss the impact of the Employment Rights Bill on
your business, please get in touch with us at [email protected] or 0330 221 0684.