Tech businesses with attractive salaries and perks are often quick to hire and fire as economic cycles change but that is likely to change following the government’s new Employment Rights Bill.
By
Asten Hawkes, Senior Associate, Employment Law team, BDB Pitmans
Published: 01 Nov 2024
Much has been speculated since the Labour Party first published its manifesto with groundbreaking legal changes pledged but without detail as to what this would mean for employers. So, what does the Bill say, how do we prepare for it and when?
Perhaps the most striking of the reforms is that unfair dismissal will become a day one right. This will change the landscape of the employment relationship, as employers (save in very particular circumstances) presently do not need to worry about employees complaining of unfair dismissal until they have been with their employer for two years. The current position gives employers time to assess whether an employee is the right fit for the business.
In the busy IT industry where specialist knowledge is key, employee turnover can be high and project work can facilitate the need for short-term contracts. However, the Bill, which will likely come into force in 2026, will mean that employers need to be much more careful in their recruitment process, as ending employment thereafter without a fair reason and fair process is likely to leave employers in hot water.
This will mean the employment market will become a tougher place, with businesses less keen to recruit new, untested talent. Employers may also look for AI solutions to undertake basic business functions where possible, to reduce overall headcount needs, all in the hope of avoiding costly tribunal claims.
There will be a consultation on a new statutory probation period (which is likely to be nine months), but, as yet there is no indication as to what this will mean for the new day one right. We would hope that it means it is more difficult for an employee to bring an unfair dismissal claim during their probation period, to restore some of the flexibility of the current system.
In the interim, it is sensible to refine hiring processes and ensure those interviewing prospective candidates are well-armed with the knowledge they need to identify the best candidates. Businesses should consider introducing further stages into hiring processes (such as more interviews and skills tests) to mitigate the risks of hiring someone ultimately unsuitable. Sensible employers will start looking at this, and the talent of their current workforce, at an early stage rather than waiting for the new law to come into force.
IT businesses which engage a flexible workforce with zero hours or flexible shift workers will also be in for a surprise. The changes proposed are complex, but in essence, if a worker has a zero-hours contract, employers will soon be obliged to offer them a guaranteed hours contract, reflecting the number of hours they worked during a particular reference period.
For shift workers, there will also be a right to reasonable notice of a shift, and for any changes to or cancellation of the same. ‘Reasonable’ notice is likely to be equal in length to the shift itself. To prepare, employers should consider how reliant they are on zero-hours or flexible workers, and whether to restructure these arrangements at this early stage. Where employers operate shift and project style work, refining the system for tracking and notifying shifts will be key – finding technical solutions to manage this, or ensuring managers are well trained in this area is essential.
Flexible working
Further change is also coming to flexible working.
This has been a hot topic for some time, with changes introduced only a few months ago. However, the Bill states that employers must be very clear in their reasoning for refusing any flexible working request and why they consider it to be unreasonable. This places a greater onus on employers to consider which of the eight reasons for refusal readily applies and whether they can in fact justify it when working flexibly has become an expectation for the lion’s share of the workforce.
This will be even more prevalent in the IT industry, where technology means it can already be difficult to justify why employees are not able to work remotely or flexibly. As such, though advance preparation is not necessarily needed for this change, employers should start to think about how they assess current requests, how this is documented and whether requests that they may in the past have considered inconvenient can actually be accommodated.
Ultimately, when coupling this with the difficulties in hiring new employees caused by the other changes, allowing a slightly more flexible working pattern for existing and tested employees may be considered a lesser evil for businesses.
Public sector contracts
An area of particular concern for the IT sector will be the reinstatement of the two-tier code for public sector contracts. This aims to prevent the emergence of a two-tier workforce, often as a consequence of the current rules where the terms and conditions of ex-public sector workers are protected when they transfer to the private sector, meaning they can be on more favourable terms than their private sector counterparts.
The effect of the changes will be that any transferring ex-public sector employees should be treated no less favourably by the supplier than they were at the contracting authority, but crucially, the existing workers at the supplier who will be performing similar roles to the transferring workers must be treated no less favourably than their ex-public sector colleagues.
As such, in most circumstances, this could lead to the supplier having to offer enhanced terms and conditions (most likely pay and benefits) for all of their staff working on the transferred public-sector contract.
A final key change is the reform of the collective redundancy process.
For IT businesses where staff may be working at multiple locations, it may be a surprise to note that the new system will mean that where there are 20 or more redundancies in a particular reference period, even if in different offices or geographical locations, they are all tallied together, rather than being treated as different establishments. The legal requirements for collective consultation are much more onerous than a normal redundancy consultation and employers often seek to avoid hitting the twenty mark where possible.
Businesses should again be looking ahead to their current and future needs. If redundancies are likely in the next 18 months, it is sensible to look at this sooner rather than later, and planning much further ahead for redundancies after the Bill comes into force, to avoid a lot of management time and risk with a collective process.
Though a raft of other changes is on the cards, for which we await further detail, including reform of the statutory sick pay system, protection from third-party harassment and increased rights to paternity, parental and bereavement leave, the focus for many employers will be on the impact of the reforms on the stability of their workforce.
Now is the time to review current processes, contracts, employment arrangements and the overall business model. If left until the Bill becomes law, IT businesses will face increased difficulty in making what may by then be necessary changes.
Asten Hawkes is a Senior Associate in the Employment Law team at BDB Pitmans.
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