The Employment Rights Bill – will it be possible to have a flexible workforce in the future?

By Nicola Smyrl

Partner

04 December 2024

Insights News

The Employment Rights Bill (the Bill) was published in October 2024, setting out the Government’s plans to “make work pay”.  Whilst the proposed changes to employment law will affect all businesses, some proposals will have more impact on certain sectors than others.

Sectors which rely on a flexible workforce are likely to be particularly affected by the proposed new restrictions on the use of zero hours contracts.  This is likely to include businesses engaged in hospitality and health and social care, where fluctuations in demand are a normal aspect of the business, and reliance on a casual workforce is more common.

According to research by Statista, in 2024, 32.2 percent of the UK’s accommodation and food sector workforce were on a zero-hours contract, the highest of any industry.  Almost 15% of workers in the health and social care sector were engaged on a zero-hours contract.

What is going to change?

Specific details of how the new restrictions on the use of zero hours contract will work in practice are not yet available and remain subject to consultation. Whilst there will be no outright ban on the use of zero hours contracts, significant changes are expected including:

1. The requirement to offer guaranteed hours

Employers will be required to make an offer of guaranteed hours to a qualifying worker at the end of every reference period. The reference period is anticipated to be 12 weeks.  A qualifying worker will include workers engaged on a zero hours contract and those with a low number of guaranteed hours. 

What amounts to “low hours” is not yet clear.  Much of the commentary in this area suggests that anyone who is engaged to work fewer than 16 hours per week may be caught by the new rules, which could clearly have a significant impact on a wide variety of businesses, not just those who engage zero hours workers. This aspect of the rules remains subject to consultation.

Where an offer is made, the offer must reflect the hours worked during the reference period. 

There will be exceptions.  For example, any offer of guaranteed hours can be on a fixed term basis if this is reasonable, perhaps due to periods of high demand at certain times of the year.

A worker who is not offered guaranteed hours will be able to bring a claim in the employment tribunal.  A worker is not obliged to accept an offer, they can remain on a zero hours contract if they wish.  However, it does appear that in these circumstances, there will be an ongoing obligation to make an offer at the end of each subsequent reference period.  This is potentially an onerous obligation on employers which may lead to increased administration costs.

2. Rights to notice of shifts and changes

Employers will be required to provide reasonable notice of shifts and changes to shifts.  What amounts to reasonable notice will depend on the circumstances.  Employers will also be obliged to compensate staff where changes are made at short notice, calculated in a way that is proportionate to the change.

Impact of the changes

If your business has genuine fluctuations in staffing needs, responding to changes may become harder to manage.

If an offer of guaranteed hours is accepted, the worker is entitled to be offered that level of work, whether it is available or not. This takes effect as a permanent change to the contract. Short notice changes to working hours will also come at a cost under the new rules relating to notice of shifts and changes to shifts.

It is possible that employers will end up with too many staff and significant costs where shift changes are needed at the last minute.  Employers will need to plan carefully to avoid this from happening.

Employers will also need to consider the impact of other provisions in the Bill and how they interact with the new rules on zero hours contracts. 

Where an employer ends up with too many staff, redundancies may be needed. This will need to be carefully managed as the Bill also proposes that the right to claim unfair dismissal will apply from day one.  It is possible that the employer will need to follow a fair consultation and selection process in relation to employees who have only recently started and have worked on a casual basis.

Additionally, an employee will be considered automatically unfairly dismissed if the principal reason for dismissal is because they accept guaranteed hours. This would need to be carefully considered as part of any redundancy process.

Prepare now

The majority of the proposed changes set out in the Bill are not expected to come into force until 2026 – employers who rely on a casual or flexible workforce should start thinking about how the changes will affect their workforce and how they might be able to mitigate the impact. 

Consider:

1. Auditing the workforce to identify where you rely on zero hours workers.  Could this be addressed by having fewer workers with guaranteed hours?
2. Ascertain which workers would currently be entitled to an offer of guaranteed hours.  Do you have sufficient work so that it would not be an issue in practice?
3. Consider where you have fluctuations in demand and whether you might be able to address this with the use of a fixed term contract.  This is one exception which may be permitted under the new proposals.
4. Look at the processes for management of shifts, is there a better way to manage this to avoid last minute changes, which will have a cost in the future?
5. At present, the new rules do not apply to agency workers (although this may change).  Could genuine fluctuations be managed by relying on agency staff in addition to a stable workforce.

Taking steps now to assess how the changes will impact your business will mean that you are better prepared as and when further details of the changes become available.  Taylor Walton’s employment law team is able to assist you with navigating the proposals set out in the Employment Rights Bill and any other employment law issues.  We can be contacted here.

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Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.