Last year, Britain took to the polls and elected its first Labour government in 14 years. Since entering 10 Downing Street, Labour have already made big splashes in the world of employer–employee relationships.
Labour has proposed wide-reaching changes with the Employment Rights Bill (ERB), an ambitious piece of legislation that aims to tackle unfair dismissal, hire and fire, zero hours contracts and much more.
But first: A quick note on bills
Before jumping into some of the changes, it’s important to pause for a second and consider ‘bills’ such as the ERB and how they come into effect.
Bills are, for the most part, how we make laws in England and Wales. Here’s how:
- Today, bills are almost always proposed by the House of Commons.
- The bill is read and debated three times.
- The bill gets passed to the House of Lords for three more rounds of reading.
- In between the second and third reading, there is a report stage that requires MPs to produce a report on the bill.
- After three rounds of reading and debate, there is a final stage for consideration before the bill receives Royal Assent and becomes law.
That mini civics lesson is important because before a bill turns into a law, there are checks and balances that the government has to go through.
Contrary to what’s printed in certain red top papers, governments can’t just change the law by making a speech on TV — they have to follow the right steps.
Some of the Labour party’s proposals will become law as soon as April 2025, and other changes will become law later this year.
However, some proposals might not take effect until 2026, and others might not actually become law ever.
We’re going to focus on three changes happening at different points in the lawmaking lifecycle. These changes are all hugely impactful — and they’re a great illustration of what happens when governments propose changes on this scale.
Change one: The rise in National Insurance
The rise in National Insurance will take effect from 1st April 2025.
There is no getting around it: this one is pretty huge. It affects all employers in the UK regardless of size, industry or formation date. If you employ someone, you’ll have to pay more national insurance.
As every good payroll administrator knows, National Insurance is paid relative to each employee — so figuring out increases is an imperfect science.
Small but well-compensated teams will pay more per employee but have a significantly reduced total bill. Larger, lower paid teams might see a relatively small increase in their per employee bill, but when this is multiplied by the whole team the impact could be severe.
The best general estimates place the cost at around £1,000 per employee for the average business in the UK. That’s a steep price that has, understandably, spooked some employers.
When faced with rising costs the knee jerk reaction is to cut or freeze hiring. But with changes like this, I think it’s important to take a wide lens view. Freezing or cutting hiring has the potential to seriously damage your business in the medium to long term and eventually, you’ll have to pay the higher rate NICs contributions regardless.
In reality, it’s better to:
- Focus on process improvement and cost efficiency across your whole business
- Find places where your HR processes can be more efficient
- Absorb short-term pain that will pay off in the middle to long term when you’re not scrambling to fill that urgent Senior PM role
Change 2: Updates to unfair dismissal provisions
One of the most significant parts of the ERB is the proposed changes to unfair dismissal provisions.
Right now, the ERB has only reached the report stage so changes won’t take effect until later this year at the earliest. But the potential impact is huge, and with wide support across the Labour party it’s likely these changes will become law in 2025.
Here’s where we are right now:
If an employee has worked continuously for two years then they have statutory protection from what is known as ‘unfair dismissal’. This is colloquially known as the ‘two year rule’.
Put simply, after two years an employer must follow a process in line with ACAS (Advisory, Conciliation and Arbitration Service) guidance and ultimately be able to demonstrate that a dismissal was not ‘unfair’. Dismissals will automatically be deemed ‘unfair’ if:
- An employee is dismissed because of a protected characteristic as set out in the Equality Act 2010 (eg, gender or sexuality)
- An employer cannot show that they followed proper process, for example by creating a performance plan or evidencing shortcomings.
This protection provides employees with more than two years service greater stability and security in their role.
Before reaching the two-year threshold, employees don’t have the same level of protection and are only protected in connection with the Equality Act 2010, and employers aren’t required to follow ACAS guidance on dismissal.
The proposed changes:
The proposed changes would abolish the two year rule and give employees protection from unfair dismissal from day one of their employment. This would add protection from unfair dismissal to the existing class of ‘day one’ rights, such as the right to statutory sick pay.
The impact for both employers and employees is huge. Employees would receive protection from unscrupulous employers. This would go a long way to helping prevent “hire and fire” practices.
On the other hand, it makes dismissing underperforming or disruptive employees much harder for well-meaning employers. Recruitment isn’t always easy — mistakes do happen in the hiring process and the government’s proposed changes will force employers to be even more certain during the hiring and screening process that they’ve made the right choice.
This makes comprehensive background checks even more important than ever. If you’re wondering where to start (or just need a refresher) check out our guide to background checks in the UK.
Change three: The right to switch off
As the world becomes increasingly connected, after-hours messages have never been easier. But you don’t always want to check your emails while you’re trying to put your kids to bed.
Like croissants and the word ‘foyer’, the right to switch off — or the right to disconnect as it is sometimes known — actually comes to us from France. It’s making its way through society and may one day even be enshrined as a true human right.
The Labour Party has chosen not to make the right to switch off a legislative proposal and is handling this through non-legislative means. They may, for example, introduce a statutory Code of Practice — a set of guidelines that outlines the best process to follow.
But even a Code of Practice is further than they’ve been willing to go with some other proposed changes, and I think this change will likely be closely monitored and may become law in 2026.
Currently, employees have no right not to be disturbed by emails, Slack messages or even phone calls outside of traditional working hours. Until as recently as 2020 this wasn’t really a hot topic.
We now live in a post-pandemic world where many traditional white collar workers have laptops for working remotely. This is useful, but it also means your staff are potentially always available.
Some employers provide contractual protection against this, others are simply just good at respecting boundaries. However, there are employers who take advantage and pester employees outside of traditional working hours.
My take? This change feels shortsighted.
In order to be effective, any protection must be able to draw a distinction between ‘sending’ and ‘receiving’ an email after hours. If you have employees who work best early in the morning, they probably don’t expect an instant reply at 7am.
We all know schedule send exists, but what if you’re dealing with a cross-border issue? A colleague or client might be waiting for a response in the USA ,which also brings UK based colleagues into the email chain. Without specific carve-outs for these, and numerous other valid exceptions, the right to switch off is likely to receive significant pushback from employers and employees across the board.
Final thoughts: Employment law updates 2025
While not the most exciting watercooler conversation, employment law has big implications for how you run your business, whether it’s the policies you write or the NI bill you have to pay.
In the case of several of these changes, solid background checking processes can help you ensure you’re hiring a qualified workforce in line with the most recent requirements.
To chat with a member of our team about how Zinc can support you in staying compliant and saving time, book a time to chat here.
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