The much-anticipated Employment Rights Bill was published on 10 October 2024. Staffing companies will be impacted by the employment reforms this Bill introduces both as employers and as suppliers of temporary resource. Aspects of particular interest to staffing companies as suppliers of temporary resource include:
- The removal of the qualifying period for unfair dismissal
- Prevention of exploitative practices associated with zero hours contracts
- Notice of shift changes and compensation for cancellation of shifts
- Changes to statutory sick pay
- The establishment of a new enforcement body, the Fair Work Agency
Removal of the qualifying period for unfair dismissal
The current qualifying period of two years' continuous employment for ordinary unfair dismissal rights will be removed. This significant change to employment protection rights will come into force in Autumn 2026 at the earliest. The government will consult on introducing a new statutory probationary period, which is anticipated to be nine months. However, it is unlikely that this will provide an easy route to dismissal. There will probably be a potentially complicated, prescribed process which employers will have to follow in order to dismiss an employee during the statutory probationary period.
Although not a welcome prospect for staffing companies as employers, the introduction of a statutory probationary period could be positive for them as suppliers of temporary resource. Employers who want to avoid the problems of reversing out of bad hiring decisions may turn to staffing companies to supply resource on a trial basis. They might use temporary assignments as a means of establishing the suitability of staff and take good hires temp to perm. Compliant temp to perm fee clauses in contracts with end user clients will become even more important if temp to perm hires increase as a result of the introduction of a statutory probationary period.
Prevention of exploitative practices associated with zero hours contracts
Zero hours contracts, under which the employer has no obligation to provide work, are regarded by employee representative bodies as a means of exploiting vulnerable, low-income workers giving them no job security or guaranteed income. On the other hand, particularly during times of economic recession and instability, businesses welcome the flexibility provided by engaging workers on zero hours contracts. This flexibility suits many individuals as well as the businesses which engage them.
Instead of imposing an outright ban on zero hours contracts as expected by some commentators, the Employment Rights Bill takes a more measured approach to preventing the exploitative practices associated with these types of contracts. Workers on zero hours contracts, or contracts with a low number of guaranteed hours, will automatically have the right to a more stable contract that reflects their actual working hours. These hours will be calculated as an average of the hours worked over a reference period, anticipated to be twelve weeks. The worker will have time to consider the offer and does not have to accept it. Some workers want the flexibility of working under a zero hours contract, for example, so that they can work around other commitments such as childcare or studying. These workers will be able to decline the guaranteed hours offered and remain on their existing zero or low hours contract if that is their preference. A worker who is dismissed or suffers detriment because they have made a request for guaranteed hours will be able to bring claims against their employer.
The Government has issued a consultation on zero hours contracts specifically for the recruitment services sector. This consultation on the application of zero hours contracts measures to agency workers poses questions on how the new measures could work in practice for agency workers. However, whilst the Government recognises that new rights under the Employment Rights Bill might apply in different ways for agency workers, it seems not to understand properly how the recruitment services sector operates. For example, the consultation poses the question as to who should have responsibility for offering guaranteed hours, whether it should be the staffing company or the end user client. Both these options are fraught with difficulties and risk. How can a staffing company guarantee hours when it is its end user clients who dictate the number of hours offered? How can an end user client guarantee hours when they need the flexibility of hiring agency workers as an on/off resource? What about when there is an umbrella company in the supply chain?
The consultation goes on to suggest that it might not be viable for end user clients to offer guaranteed hours unless they engage the agency worker directly. For end user clients, this would defeat the object of hiring workers via staffing companies. The consultation then queries whether the end user client should pay the staffing company a temp to perm fee or opt for hiring the agency worker for an extended period in these circumstances. Fortunately, the consultation asks for explanations of other factors specific to agency workers that need to be taken into account in applying the new right to guaranteed hours to them.
The consultation closes on 2 December 2024.
Notice of shift changes and compensation for cancellation of shifts
In another measure designed to prevent potentially exploitative practices, the Bill introduces provisions that ensure workers receive reasonable notice of shifts and shift changes, as well as compensation for shifts that are cancelled or curtailed at short notice. What is reasonable will probably be determined by the sector and the nature of the work. This will give workers safeguards against sudden changes to their work schedules, providing protection if they turn down last minute shift offers or if shifts previously booked are cancelled or shortened.
The consultation on the application of zero hours contracts measures to agency workers also covers this measure. It would be rare that changes to shifts are made by anyone other than the end user client, and yet the consultation asks whether the staffing company should be responsible for paying any short notice cancellation or curtailment payments to an agency worker and whether the staffing company should be able to recoup this cost from the end user client.
Changes to statutory sick pay (SSP)
SSP will undergo changes which are significant for the recruitment services sector. SSP will be paid from the first day of sickness absence instead of from day 4. More workers will have access to sick pay when off work sick because of the removal of the minimum earnings threshold. In addition, instead of being paid at a flat rate, SSP will be based on a, yet to be determined, percentage of usual pay.
Establishment of a new enforcement body, the Fair Work Agency
A single enforcement body, the Fair Work Agency, will be established. This new watchdog will have the power to inspect workplaces and bring action against companies which breach workers' rights. It replaces several different bodies with responsibility for policing a number of regulatory obligations. The Fair Work Agency's responsibilities will include policing Modern Slavery Act obligations, holiday pay, statutory sick pay and payment of the National Minimum Wage, as well as compliance with the recruitment industry regulatory regime and matters currently under the remit of the Gangmasters and Labour Abuse Authority.
Staffing companies will be keen to find out whether the Fair Work Agency will have a more 'aggressive' approach to compliance than the current recruitment industry regulator, the Employment Agency Standards Inspectorate, which aims to help staffing companies with compliance rather than take immediate action against those in breach of the recruitment industry regulatory regime.
Status
Notably absent from the Employment Rights Bill was anything about the creation of a single employment status, removing the distinction between employees and workers. Not knowing exactly how the reforms will affect their workforce creates significant uncertainty for businesses planning ahead for these extensive reforms, as well as for their workforces.
Next steps
Businesses have time to prepare for the reforms. Whilst consultation on some of the reforms has already started, the Government expects to begin consulting on the majority of the reforms in 2025. Most reforms in the Bill will take effect no earlier than 2026. In addition, the Government has said, "Where more time is needed for businesses to prepare for change, this will be taken into consideration". Staffing companies planning ahead will definitely welcome clarification on worker status, who will be covered by the reforms and how.
You can read our more extensive analysis of the Employment Rights Bill at this link: Employment Rights Bill Hub