UK Businesses Worried About Employment Rights Changes

Upcoming changes to the Employment Rights Bill have left some UK businesses nervous as to how it might affect their operations. The government outlined plans in the autumn budget to rejig the Employment Rights Bill to provide greater securities for employees, but after other sweeping changes, some wonder if the measures could see businesses suffering even further.

What are the main concerns?

Many of the changes are difficult to argue with. Giving workers a right to unpaid bereavement leave, for example, will have little opposition. Some, amendments, however, are more controversial than others.

The main point of contention seems to be the instating of unfair dismissal rights from day one of employment.

Traditionally, firms have hired new recruits on a probationary basis that potentially led to a permanent contract after a few months. This gave businesses a chance to see new hires in action and gauge whether they fit into the existing team and company culture.

While this is welcome for workers looking for more assurances when moving from a secure job to a new role elsewhere, it simultaneously provides less security for employers.

We’ve all heard horror stories of new hires that dazzled during an interview only to be nightmare employees once they got the job. Although such instances only make up a fraction of recruitment stories, it does make hiring new staff more of a gamble.

Will this cause businesses to play it “too safe”?

The Institute of Chartered Accountants in England and Wales (ICAEW) collected the opinions of 380 of its members and found that there was a concern that “businesses will start playing it too safe, choosing a ‘safe pair of hands’ over bold, innovative talent that could drive real change”.

They also revealed that their survey showed a 73% majority of participants anticipate that the new bill will increase employment costs, with 53% admitting that it will probably reduce their plans to make any new hires.

What are the other main changes?

• The end of zero-hours contracts. Employees will be given rights to guaranteed hours, reasonable notice of shifts and payment for short-notice cancellation of shifts.
• No more firing and rehiring. Dismissals for failing to agree to a change in contract are automatically unfair unless the employer has no other choice
• Removal of the two-year qualifying period for unfair dismissal claims. These start from day one.
• Removal of lower earnings limit and waiting period for statutory sick pay. Employees will be entitled from the first day of sickness rather than after four days.
• Maternity and paternity pay will be available from day one of employment.
• A right to unpaid bereavement leave.
• A right to ask for flexible working arrangements from day one of employment.

When will these changes come in?

One of the frustrations surrounding these changes is the lack of a set date that these changes will come into force. While some of the measures are said to be set to become law sometime in summer 2025, many won’t take place until the following year. The removal of the two-year qualifying period before an employee can make an unfair dismissal claim, for example, is not expected until August 2026.

How much will the changes cost businesses?

The widely-reported figure by many outlets is £5bn. However, this is the top-end estimate provided by the government themselves. The bottom-end estimate is just over £1bn. They claim that the costs are “likely to be under 0.4% of our national wage bill and could even be as low as 0.1%”.

Companies will have to keep “fingers crossed”

Senior Client Manager at Forbes Burton, Ben Westoby opined that “although the new Employment Rights Bill has proven controversial to a degree, I can’t help but think that it would’ve caused less of a stir if it hadn’t directly followed the increases to National Insurance contributions and minimum wage.

“UK businesses are feeling pretty bruised right now, and the prospect of being lumbered with a nightmare employee is another worry that directors can ill afford to manage. The changes may well be fine for the vast majority of hires, but companies will be keeping their fingers crossed that they don’t pick up an ill-suited employee that they’re stuck with.”

Even more rounds of interviews?

You’d be forgiven for thinking that relatively few employees are let go of in their probationary period, but an article published by The Telegraph revealed that research puts the figure to around one in five.

With a fifth of all new hires doomed to fail then, it’s likely that we will see far more stringent interviewing processes adopted.  With so much at stake, several rounds of interviews, psychometric tests, and even work trials may well become the norm in the near future.

Worried how upcoming changes could affect your business?

We’ve helped thousands of businesses to navigate difficult changes. Whether it’s through restructuring, consulting, or even sale, we can find the right solution to ensure your business doesn’t suffer.

Speak to a specialist adviser now on 0800 060 8446, or email advice@forbesburton.com for an entirely free consultation to see how we can help.