October has been a significant month of news for employers. First, the long-awaited Employment Rights Bill was published on 10th October, and then the announcements were made in the Budget last week. You can’t have missed it, the rise in Employer’s National Insurance (NIC). From next year, an increase in costs and responsibilities for the employer may require thoughtful consideration and strategic planning.
Employment Rights Bill
The Employment Rights Bill, published on 10th October, promises the most significant reforms in a generation. Many of these changes fulfil the manifesto commitments of the Labour government.
The purpose of the Bill is to address “poor” working conditions and ensure that work pays. The aim is to improve productivity, which has been declining in the UK for some time. Consequently, these changes will lead to an increase in costs and responsibilities for you as an employer.
Let’s look at the top 7 changes from the Bill:
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Rights from Day One
The bill sets out the rights for employees to parental leave, statutory maternity pay (SMP) and statutory sick pay (SSP) from day one. As with the waiting periods, the lower earnings limit for SSP will be removed. The government is consulting on what it will replace it with, but those earning less than the current £123 per week will have a new rate.
Employees will also be protected from unfair dismissal from day one.
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Ban on Zero Hours Contract
If workers have a history of hours worked over a specific period, they are entitled to guaranteed working hours. Under this bill, employers will be required to offer contracts that guarantee work based on a reference period of twelve weeks.
- End of “fire” and “re-hire”
This happens when employees are fired and then re-hired under a new, more unattractive contract.
This practice will only be allowed in instances like corporate restructuring.
- Entitlement to flexible working
Employees can request flexible working when they start employment with you. You must have a very good business reason why they should not be given this flexibility. You should provide a written reply to any such requests.
- More support for new mothers and women going through the menopause
The bill will protect new mothers from redundancy whilst they are on maternity leave and for six months after.
Those employers with more than 250 employees, i.e. the larger employers must build a Menopause Action Plan. This is to support women in the workforce going through the menopause and allow them to make small adjustments.
- Right to switch off
The bill allows employees to have a better work-life balance by allowing them the right to switch off. Employers will no longer be able to assume it is okay to contact their employees outside of working hours.
For some small businesses, this is really hard because a little bit of out-of-hours work is expected to maintain customer satisfaction. This is particularly true with a small workforce.
- Mental health at work
The government has promised to review the current “health and safety” legislation to reflect mental health and make the legislation fit for the modern era.
They also want the new legislation to raise awareness of neurodiversity in the workplace.
There is a lot here, and it feels like a lot of changes are coming at the same time. You just need to break it into bitesize chunks and start by reviewing your current policies. Maybe talk to some experts.
The full details of the government’s employment rights bill can be found here.
Announcements in the Budget
The Chancellor announced a package of changes to employers’ Class 1 NICs that will apply from 6 April 2025:
- An increase in the employers’ NIC rate from 13.8% to 15%;
- A decrease in the threshold at which an employer starts to pay NICs on each employee’s salary (the ‘secondary threshold’) from £9,100 to £5,000;
- A widening of availability and an increase in the ‘employment allowance’ amount, which eligible employers can offset against their employers’ Class 1 NICs liability, from £5,000 to £10,500.
Aside from very small employers, this change will affect your wage bill. Additionally, the minimum wage is set to increase by 6.7% to £12.21 for those over 21, which will also impact you if you employ workers at the minimum wage rate.
You can find the full summary of the budget here.
Next Steps
All businesses, big and small, around the country, will be recalculating their expenses before next April. The wage costs will look a little different for most.
Our advice is to keep a close eye on your overheads. You understand the importance of a cash flow forecast and why you should track your cash closely. We are here to help you manage your cash flow and other finances. Please just reach out to your manager if you need help.
You also need to look at other ways you can look after your employees because, according to Harvard Business Review, money isn’t the only motivator for your team, so get creative.
As a result of the Employment Rights Bill, you should review all your policies and seek advice where necessary.
It’s best to speak with an employment lawyer who can provide the legal expertise you need. While we’re here to handle your payroll and tax concerns, we recognise that legal matters require specialised knowledge. We would happily connect you with the right professionals to ensure you receive the help you need.
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