What does the Employment Rights Bill mean for small businesses?

The Employment Rights Bill, introduced to Parliament in October last year, is causing concern and creating conversation for both workers and businesses.

The bill is currently in front of the House of Lords, after which it will return to the Commons for consideration of the amendments made in the Lords – and might bounce back and forth a number of times.

There's been a fair amount of debate over the bill, as it contains a number of provisions which will drastically affect employers, large and small. For example, it makes it harder for employers to refuse flexible working requests, with rejections required to be ‘reasonable’, and employers responsible for showing that this is the case.

Paternity leave and unpaid parental leave will become a right from day one of employment, with the current qualifying periods being removed. Meanwhile, zero-hour and low-hour workers will gain the right to be offered a contract reflecting regular hours if their hours regularly exceed the zero or minimum hours over a 12-week reference period. They'll also be given the right to receive advance notice of shifts and compensation for cancellations.
    
Statutory Sick Pay (SSP) will be made available to all workers from day one, with no waiting period and no earnings threshold. It will be set at 80 per cent of average earnings for workers who earn below the statutory rate of SSP, affecting up to 1.3 million employees.
   
Meanwhile, the National Minimum Wage (NMW) and National Living Wage (NLW) are expected to go up again in April next year. The Government is also planning to phase out the rate for 18 to 20-year-olds altogether, so that the same rate will eventually apply to all workers aged 18 or over.

And employers will be required to keep records documenting their compliance with the rules on statutory holiday entitlement and pay for at least six years.

Unions are concerned about some of the amendments made by the Lords, including turning the proposed legal requirement for employers to offer guaranteed-hours contracts into a much weaker ‘right to request’, allowing employers to avoid paying compensation for cancelled shifts if two days’ notice is given, and scrapping the new day-one right to protection from unfair dismissal. 

“We very much welcome that peers passed the historic Employment Rights Bill without a vote, but remain deeply concerned that it will return to the House of Commons with amendments that undermine the Government’s efforts to make work pay and jobs more secure," says Usdaw General Secretary Joanne Thomas.

However, there are big worries for businesses too.

According to the Federation of Small Businesses (FSB), more than nine in ten small employers are seriously concerned about the bill, with government figures indicating that it will increase their costs by £5 billion a year.

Plans to expand unfair dismissal from day one will make small employers more reluctant to recruit, it warns, and fearful of opening themselves up to vexatious claims.

“It’s a lot for small employers to take in – from changes to Statutory Sick Pay, unfair dismissal, and how zero hours contracts work – and they don’t have HR teams to help them navigate the complex changes," says FSB Policy Chair Tina McKenzie.

"The less risk small employers can afford to take, the fewer second chances, fresh starts, and first jobs they’ll be able to offer."

This fear is borne out by research from the British Retail Consortium (BRC) earlier this year, which found that more than half of retail HR directors believe the bill will reduce hiring and job flexibility, and seven in ten saying they expect it to have a negative impact on their business.

The biggest concern is the proposal to establish rights to guaranteed hours, which, says the BRC, risks making it much more difficult to offer people part-time jobs. 

"Those in charge of retail hiring are clear – unless amended, the Bill will make it even harder to keep and create jobs and reduce the flexibility that defines many existing retail roles," says BRC chief executive Helen Dickinson. "This matters: local, flexible retail jobs are an important stepping stone for those entering or returning to the workforce."

Many of the Lords’ amendments reflect businesses' concerns – but Number 10 has said that Labour MPs will be ordered to vote against them. It remains to be seen exactly what form the final bill will take.

"There is much here to welcome as sensible moves that will help ensure that employment works for both the business and the individual, including the nine-month statutory probation period and the promise of a light touch approach, as well as simplifying rules on collective consultation," says Jane Gratton, deputy director of public policy at the British Chambers of Commerce (BCC). 

"But businesses remain cautious, and it is important to continue ensuring the bill strikes the right balance."

Speak to us today via the button below to ensure you have adequate coverage through this changing employment landscape.