Supporting businesses through the new UK Employment Rights Bill

As the UK government moves forward with the Employment Rights Bill, businesses face a pivotal moment in adapting to new regulations that will reshape the employment landscape.

The Employment Rights Bill, published on 10 October, 2024, introduces significant reforms aimed at enhancing workers' rights while balancing the needs of businesses to remain agile and competitive. The Bill is expected to pass Parliament this summer and to receive Royal Assent shortly after. The Act will result in some immediate impacts for employers, with some measures taking effect as early as summer or autumn 2025. However, other measures included in the Act will require regulations in order to take effect (the Government has already acknowledged that many of the reforms will not come into force before 2026).

Key provisions include:

Removal of the two-year qualifying period for claiming unfair dismissal and for certain leave entitlements
Dismissal and reengagement (so-called “fire and rehire”) will be deemed automatically unfair unless justified by financial difficulties
Workers on zero hours contracts will be entitled to guaranteed hours based on regular work patterns
Enhanced rights for unions, including informing employees of their right to join, access to workplaces, reduced thresholds for industrial action, and simplified ballot processes
Removal of the three-day waiting period for statutory sick pay
An obligation to enhanced protection from sexual harassment at work
Employers can only refuse flexible work requests based on specific business reasons; additional protections for those returning from shared parental or adoption leave
An obligation for employers to define equality action plans to address gender pay gaps
A duty for employers to take ‘all’ reasonable steps to avoid third party harassment in the course of employment
Enhanced redundancy rights (collective redundancy changes).
Enhanced protections against dismissal for pregnant women and new mothers

The Plan to Make Work Pay, published alongside the Bill highlights further changes that are additional to the issues included in the Bill. These are expected to be in relation to additional pay gap reporting, TUPE consultation rights, employment categories, the right to switch off, enhanced family rights and minimum pay standards.

At Mercer, we understand the complexities and challenges that come with implementing these changes and we can ensure that your business is positioned to thrive in this evolving environment.

We are dedicated to helping businesses navigate the implications of the UK Employment Rights Act with practical advice and actionable solutions.

Implications for employers

Employers will need to enhance their workforce planning by leveraging advanced technologies, data-driven strategies, and innovative approaches. The use of predictive analytics and AI-powered tools enable accurate forecasting of future workforce needs and skill gaps. Integrated platforms like Workday and SAP SuccessFactors, or other HRIS platforms, help align talent strategies with business goals, and scenario planning prepares organisations for uncertainty. A shift by employers to incorporate skill-based planning and hybrid work models will emphasise flexibility and adaptability, and workforce planning that incorporates diversity, equity and inclusion (DEI) objectives and sustainability goals will enhance organisational diversity and long-term resilience. Other approaches include employee-centric strategies, such as personalised development paths, and the deployment of gig and contingent workers help meet evolving business demands efficiently.

Employers will need to enhance their hiring and assessment practices by adopting data-driven recruitment strategies and leveraging technology. Many organisations use applicant tracking systems to streamline the recruitment process and improve the candidate experience. Employers are increasingly implementing skills-based assessments and structured interviews to reduce bias and focus on candidates’ capabilities. Additionally, the use of artificial intelligence in screening CVs and the use of initial assessments is increasing and present some challenges that employers should address. Companies are also prioritising DEI initiatives to as to ensure consideration of a broader range of candidates. The use of continuous feedback and iterative improvements in hiring processes further contribute to more effective recruitment outcomes.

Employers can expect minimum pay levels to increase, with a Government objective of closing the gap with living wage levels. In line with Government objectives, raised standards of employment should result in greater work stability and support economic growth. Organisations that pay a living wage often report enhanced employee satisfaction, better retention and increased overall productivity. Organisations that will be particularly concerned by these changes will be those employing large numbers of employees on minimum and low wage levels, such as in the retail, hospitality, care and voluntary sectors. However, beyond the additional costs, there are challenges that could require employers to rethink their pay structures as the pay for employees on lower grades become compressed.

Pay transparency has dramatically improved over the last few years — partly as a response to legal obligations, and partly in recognition that improved clarity leads to better understanding and employee appreciation of pay. And this trend is set to continue. However, inconsistencies in actual pay levels continue to pose a barrier to pay transparency and improvements will depend on employers making fairer pay decisions. This will require employers to adopt a holistic approach to pay management that starts with establishing clear principles that will guide compensation decisions; a robust framework that outlines how pay is determined, including factors such as experience, performance and market benchmarks; strong governance and advocacy from line managers and HR partners; and regular reviews of pay structures to ensure fairness and equity. Fairness only comes when employers are clear about their message, and ensure that their employees’ experience tallies with the message.

Organisations will have to clarify definitions of ‘fair pay’ and ‘total rewards’. However, there is no objective definition of fairness, so organisations will need to determine principles that align with their culture and priorities, and ensure their structures and processes deliver on the commitment they make. In the case of total rewards, organisations need to understand the drivers of each reward programme (base pay, incentives, recognition, benefits, allowances) to ensure they differentiate between programmes that reward the contributions they value (such as, performance, competence, progression, behaviours and values).To ensure optimisation of investment in their people, employers must balance the needs of their organisation, the expectations of their employees, market trends and costs.

Employers will need to think differently about how they engage with employees, such as using surveys and focus groups to better understand their priorities, preferences and needs. Active encouragement of open communication helps fosters a culture in which employees are comfortable sharing their thoughts and the availability of anonymous channels for feedback can further enhance honesty. Employers should analyse employee engagement data to identify trends and areas for improvement. By prioritising employee input and demonstrating a commitment to addressing their needs, organisations can create a more supportive and responsive workplace environment.

The ever-changing world of work requires employers to evolve their employee proposition in order to attract and retain employees. Employers are increasingly focused on developing compelling employment propositions that prioritise flexibility, career development, and employee well-being to attract and retain talent. By offering hybrid and remote working options, alongside flexible hours, organisations can cater to the diverse needs of a modern workforce seeking work-life balance. Enhanced benefits packages that include mental health support, wellness programmes and professional development opportunities further support an appealing work environment. Additionally, a strong emphasis on diversity and inclusion, coupled with innovative reward systems, such as performance-based incentives and recognition programmes, help foster a supportive workplace culture. To optimise the impact of compensation strategies, employers should leverage data analytics to assess current reward structures and align them with employee preferences and market trends to ensure their offer remains competitive and relevant.

A clear communication strategy is essential for UK companies navigating the changes brought by the Employment Rights Bill. By providing regular updates and tailored training, businesses can ensure employees understand the implications. This proactive approach not only eases concerns but also fosters a supportive environment, helping everyone adapt to the new regulations with confidence.

Employers may need to develop new people management practices that prioritise a culture of trust and accountability and embrace remote and flexible working. Implementing regular check-ins and feedback sessions can help maintain employee engagement and performance. Investment in digital collaboration tools that facilitate communication and teamwork will help support all team members, including less experienced employees. Mentorship programmes can pair seasoned staff with newer colleagues, and foster knowledge transfer and professional development. Additionally, training on remote work best practices can further enhance team effectiveness.

Employers should develop inclusive employment practices by implementing comprehensive diversity, equity and inclusion training for all staff that promote awareness and understanding of different backgrounds. Recruitment processes should be designed to attract a diverse range of candidates, and post on diverse job boards and use inclusive language in job descriptions. Employers should establish clear policies that support equal opportunities and address discrimination. The establishment of employee resource groups can provide support and a sense of community for underrepresented groups. Regular review of pay equity and career progression opportunities will help ensure fairness, and the development of an inclusive culture that values diverse perspectives will enhance employee engagement and overall performance.

The adoption of hybrid work models and remote arrangements support work flexibility and enable employees to choose their work environment and utilise technology for seamless communication and collaboration. This shift is complemented by the increased reliance on gig and freelance workers for short-term projects, allowing for agile resource allocation and skill mobility. Concurrently, organisations could optimise roles and processes through automation and jobs restructured by automating routine tasks would enable employees to focus on higher-value activities. The provision of training and development opportunities for both permanent and flexible workers ensure that employee teams are equipped with the necessary skills to boost employee satisfaction and enhance organisational responsiveness to changing market demands.

Employers should consider developing a holistic model of workplace flexibility that integrates various elements — namely, where, when and how work is performed. This could include remote and hybrid working options and flexible working hours to accommodate employees’ preferences. Employers should also assess the nature of tasks and consider alternative ways of delivering work to boost productivity and encourage a results-oriented culture that values outcomes more than processes. Additionally, improved collaboration among diverse teams can leverage different skill sets. By embracing flexible resourcing and a comprehensive approach, organisations can become more adaptable and resilient, better equipped to respond to changing demands.

The Government’s proposals to enhance trade union rights are based on the premise that industrial relations are at an all-time low, with industrial action at an all-time high. By bringing employers and unions/employee representatives closer together they expect that a better basis for determining employment conditions will evolve. In Mercer, we expect to see two broad responses by organisations: those employers who see this as a better basis for progressing employee terms (including pay), and those who prefer to strengthen their direct engagement with employees. For the former organisations, it will be important to develop a constructive and open relationship, define boundaries, embrace a cooperative stance and address issues collaboratively. For the latter organisations, they likely will need to explore new approaches to employee listening and collaborative working.

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Supporting businesses through the new UK Employment Rights Bill

As the UK government moves forward with the Employment Rights Bill, businesses face a pivotal moment in adapting to new regulations that will reshape the employment landscape.

Key provisions include:

Pulse survey: Awareness, support and readiness analysis

Implications for employers

Better workforce planning

Improved hiring processes

Raised levels of low pay

Improved pay transparency

Alternative reward principles

Improved employee engagement

Enhanced employee experience

Effective communication

New people management practices

Improved DEI frameworks

Alternative work flexibilities

New ‘adaptive working’ models

Enhanced trade union rights

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