Of the many changes set out in the Employment Rights Bill, the introduction of ‘day one’ rights for workers is a seismic shift in worker protections, making good on Labour’s commitment in its Plan to Make Work Pay manifesto. The removal of the qualifying period for ordinary unfair dismissal claims, which has applied for more than 50 years, is particularly significant. It means that employers who dismiss employees without following an appropriate process risk unfair dismissal claims, with employees having the right to bring these claims during the first two years of their employment.
In this Law-Now, we look in more detail at the changes under the Bill, published on 10 October 2024 within the Labour Government’s first 100 days of office, as they relate to (i) unfair dismissal, (ii) statutory sick pay, and (iii) statutory paternity, parental and bereavement leave, the likely impact of those changes on employers and how they can prepare for them.
Unfair Dismissal
The Bill removes the current two-year qualifying period for unfair dismissal claims which means that employees will have the right not to be unfairly dismissed from their first day of employment. The right will, however, be subject to an exception where the dismissal is for a certain reason and is made during an ‘initial period of employment’ (what is being called the statutory probationary period). The Government states in its Next Steps to Make Work Pay policy paper that a ‘lighter-touch and less onerous’ dismissal procedure will apply in these circumstances. Those reasons will be: (i) some other substantial reason relating to the employee; (ii) capability; (iii) conduct; or (iv) illegality. Importantly, redundancy is not included, and nor is a restructure/re-organisation affecting the business, and so an employee dismissed unfairly for these reasons would be able to bring a claim for unfair dismissal from day one of employment even while in their contractual or statutory probationary period. Note that the two-year qualifying period for a statutory redundancy payment currently remains in place. Other dismissals for ‘some other substantial reason’ will only be permitted where the reason relates to the employee, as opposed to the employer, which will be more restrictive than the current regime.
The Government has said it will consult on the details of this change including the length of the initial period of employment which is not set out in the Bill and how the dismissal process will interact with the Acas Code of Practice on disciplinary and grievance procedures. The Government’s Factsheet: Unfair Dismissal in the Employment Rights Bill proposes a nine-month period which is longer than the six month contractual probationary periods that usually apply in practice. In terms of the dismissal procedure that would apply during that period, the Government has indicated in its Next Steps paper that a ‘proportionate’ process will apply and as a starting point has suggested that it will consist of holding a meeting with the employee to explain the concerns about their performance (at which the employee could be accompanied by a colleague or trade union representative). Given the anticipated length of the initial period of employment, it might also be expected that an employer who wishes to dismiss for capability (poor performance) will be required to follow some kind of performance improvement process too.
In good news, employers will have a substantial period to prepare and adapt for the change which will not be introduced until Autumn 2026. The Government also intends to consult on the compensation regime for successful claims during the initial period of employment, with the potential scope for lower awards during this period.
We anticipate this may lead to an uptick in unfair dismissal claims although whether those claims may be simpler (focussing on unfair dismissal only as opposed to, say, discrimination and/or whistleblowing) will remain to be seen.
In order to prepare for the change, contractual amendments should not be required because the statutory provisions will run alongside contractual probationary periods. Employers may, however, decide to align their contractual probationary periods with the statutory period (once determined) going forward.
For now, employers should consider reviewing their recruitment procedures carefully to ensure they are appropriate and suitably robust in supporting them in finding candidates. Clarifying job descriptions, following up on reference requests and asking the right questions at interview will be important before offers of employment are made.
People managers should:
- be trained and supported in best practice of managing employees effectively during their probationary periods;
- be enabled to conduct suitable probationary reviews. This will include being clear with employees about the job expectations, setting goals, arranging check ins and providing regular feedback; and
- understand the importance of keeping clear and accurate records of an employee’s performance during the probationary period to mitigate the risk of legal claims if an employee’s employment is subsequently terminated for poor performance.
These enhanced procedures will inevitably involve additional time and cost and businesses may wish to consider allocating additional resource to HR and Legal functions to account for this.
Statutory Sick Pay
The Bill strengthens statutory sick pay (SSP) rights by removing (i) the lower earnings limit (currently £123 per week) and (ii) the three-day waiting period which will mean that an employee is eligible to be paid SSP from the first day of sickness absence. SSP is currently paid at a rate of £116.75 per week for a period of up to 28 weeks and is generally paid for entirely by employers.
The Government opened a consultation, Making Work Pay: Strengthening Statutory Sick Pay, on 21 October 2024 seeking views on the rate of SSP for those earning below the lower earnings limit. Many of those earning below the lower earnings limit also earn less than £116.75 per week and the Government considers that it would be inappropriate and unfair to pay them an SSP rate that exceeds their normal earnings. The consultation suggests that the fairest way to achieve the right balance is to pay a certain percentage of earnings up to the weekly rate. A range of 60% to 80% of earnings is proposed with the Government seeking to strike a balance between deterring absenteeism and supporting people to take time off work when they are unwell.
The changes will mean that more employees are eligible for SSP, and could lead to higher rates of short-term sickness absence particularly among low earners who are not currently entitled to SSP. The removal of the waiting period will also lead to additional costs for businesses. According to the Government’s impact assessment relating to this change, an estimated 70% of short-term sickness absences last for one to three days during which time employees are not currently eligible for SSP. Smaller employers or those operating in sectors with lower hours or lower paid workers who do not currently offer their employees contractual sick pay are likely to be most impacted by these changes.
Employers should consider reviewing their absence management procedures to ensure that they are fit for purpose and provide training to their people managers on managing short-term absences proactively and effectively. Employers offering contractual sick pay over and above the statutory rate should also consider reviewing the eligibility requirements that apply and whether any changes are required.
Family friendly rights
The Bill strengthens family friendly rights by making statutory paternity and parental leave day one rights. The current 26-week qualifying period of employment for paternity leave and the one-year qualifying period for parental leave will be removed. Employees will also be able to take paternity leave after a period of shared parental leave which is not allowed under the existing legislation. Statutory paternity leave is currently paid at a statutory weekly rate of £184.03 or 90% of average weekly earnings (whichever is lower). Parental leave is unpaid.
The Bill also broadens the right to statutory bereavement leave extending the existing right for parents to yet to be specified categories of employees, in recognition of the importance (following the coronavirus pandemic) of bereavement leave for all. Currently, bereavement leave is only available to parents who lose a child who is under 18 years old or have a stillbirth after 24 weeks of pregnancy.
Employers should assess the potential impact of these changes to their business and the increased cost of the SSP-related changes. Absence management policies and procedures should be reviewed to ensure they are fit for purpose and whether they need to be updated to reflect the changes. Training for people managers on any updated absence reporting procedures and proactive management of short term sickness absence will also be important.
Relevant policies and procedures should be amended to ensure that they reflect the other enhanced statutory rights and any notification requirements. Employers should also raise awareness of the enhanced rights among people managers who may require training on the handling of leave requests.
If you would like to discuss the potential impacts of any of these changes on your business operations and employees, please get in touch with your usual contact in the CMS Employment team. For information about the other changes outlined in the Bill, see our Law-Now Don’t leave today’s work for tomorrow? Employment Rights Bill published outlining employment related reform and look out for further articles in our Employment Rights Bill Deep Dive series.
This article was co-authored by Abbie Smith, a trainee solicitor in the CMS Employment team.
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