‘The Employment Rights Bill will hit retail harder than most’

The UK government’s Employment Rights Bill has been positioned as the “biggest boost to pay and productivity in the workplace in a generation”.

Its launch earlier this week has included a raft of employment law reforms, such as an extension of workers’ rights in relation to family leave; pay; working conditions; and greater protection in respect of sexual harassment and dismissal.

It is likely to necessitate a significant shift in employment practices with the retail industry among the most affected.

Increased costs

The removal of age-related national minimum wage rates and the introduction of changes such as a day-one right to maternity pay and the provision of sick pay from the first day of sickness absence will directly increase employment costs.

In the short term, employers in the retail sector may look to workforce reorganisations in an attempt to control employment costs and reconcile the wage bill for their businesses before these measures come into force and to help mitigate any price rises on the shop floor.

Short-term sickness absence policies and processes will need review and tightening to address the likely rise in ad hoc sick days that will arise following the extension to the right to receive statutory sick pay.

Dismissals

The introduction of day-one unfair dismissal rights is a major change and will inevitably drive more cautious recruitment and performance management practices. While the government is proposing a more light-touch dismissal process in a limited period at the start of employment − expected to be six or nine months – dismissing employees is set to get more difficult and expensive and we may see an uptick in the use of contractors and agency staff.

The day-one right to protection from unfair dismissal underpins Labour’s drive to increase workplace mobility and innovation. However, with greater movement between competing employers within retail, employers will need to address how to protect their sensitive business information.

While non-competition restraints have traditionally been used to protect client relationships and other trade connections, proposals were raised by the previous government to limit their enforceability. We wait to see whether Labour proposes any curtailments in the use of these provisions.

To address the risk of additional day-one rights increasing job mobility, employers will need to consider what loyalty incentives can be provided to control attrition, for example, through share incentive arrangements or retention bonuses.

Flexible working

Much focus has been placed on the proposed changes to flexible working giving employees greater determination over their working arrangements, yet what is proposed appears to be existing rights in a different wrapper.

For example, employees currently have a day-one right to request a flexible working arrangement which can only be refused on specific statutory grounds, and are already able within this right to request working arrangements such as compressed hours, part-time working or term-time working.

Labour’s emphasis appears to be premised on a flexible working arrangement being accepted unless it is not reasonably feasible – practically speaking this reflects the same grounds on which an employer can refuse a flexible working request under the current regime. This is likely to include retail staff on the shop floor, in warehouses or in logistics where physical presence is required.

Harassment

The new duty to prevent sexual harassment comes into force on October 26, which is timely given recent media attention in the retail sector. However, the bill already looks to extend this by expanding this to an obligation on employers to take “all” reasonable steps.

It will be more important than ever for retailers to carry out a risk assessment as recommended by the Equality and Human Rights Commission to address the risk of employees experiencing sexual harassment in the course of their employment, including from third parties, with retail staff being at greater risk where they are frequently coming into contact with customers.

Retailers will also be impacted by the proposed reintroduction of employer liability for third-party harassment against individual employees unless it can show that it has taken all reasonable steps to prevent the alleged conduct; this protection covers the wider range of protected characteristics.

Other considerations

While the Bill sets out proposals providing for guaranteed hours contracts for zero hours and “low hour” workers where they wish to be engaged on such terms, it is stated that this new right should not affect workers on full-time contracts who occasionally pick up overtime hours or those where work is genuinely temporary/seasonal.

Those who exercise their right to move to guaranteed hours contracts will as part of these arrangements be entitled to reasonable notice of any change in shifts or working time, with proportionate compensation for any shifts cancelled or curtailed at short notice.

Measures relating to when collective redundancy obligations are triggered will require employers proposing to make 20 or more redundancies in 90 days or less to consult across an organisation whether or not those identified at risk work at the same establishment. This will impact retail employers operating multiple premises and business operations.

‘Next steps’

This is just the first phase of the government’s proposed reforms; it has also published a ‘Next Steps’ document looking at future reforms including a ‘right to switch off’ out of hours, ending pay discrimination by expanding the Equality (Race and Disparity) Bill to make it mandatory for large employers to report their ethnicity and disability pay gap, and reviews into the parental leave and carers leave systems “to ensure they are delivering for employers, workers and their loved ones”.

The government has indicated that it will be consulting on several of the proposals and many of the proposed reforms will ultimately be implemented through secondary regulations. While there is no firm timeframe, the government has said it expects to begin consulting on these reforms in 2025 and anticipates that “the majority of reforms will take effect no earlier than 2026” with reforms of unfair dismissal taking effect “no sooner than autumn 2026”.