Labour publishes Employment Rights Bill, but ‘kicks can of contractor issues down the road’

Labour on Thursday unveiled its Employment Rights Bill.

It is being hailed as a “strong move towards safeguarding the dignity of workers” (John Grant of law firm WJM).

But it is also being branded a “rushed job, clumsy and poorly planned” (Tina McKenzie of the FSB).

‘Make Work Pay’

Not in dispute is the bill’s large size -- over 150 pages, containing 28 employment measures, most of which won’t take effect until 2026.

Also agreed is that Labour has kept its word, given the bill’s Oct 10th tabling was on day 97 of the 100 days it set itself to “Make Work Pay”.

Or it’s “sort of” kept its word, said both law firm Chartergates and Keith Rosser of recruitment giant Reed, as the bill is just a framework to hopefully make work pay.

‘Likely trigger an increase in flexible and umbrella company staff’

It contains a day-one right to unfair dismissal -- down from today’s two-year qualifying period, and so cueing up big costs for employers.

It also contains a related, statutory probation period, so employers will get a window (likely nine months) to first let go of underperforming recruits.

“That’s likely to [trigger] an increase in the use of the flexible workforce and probably umbrella workers,” says lawyer Rebecca Seeley Harris.

This implication is among the closest umbrella contractors and umbrella companies will likely tease out of the bill.

‘Guaranteed hours, reasonable notice, on zero-hour contracts’

In fact, despite new “guaranteed hours” and “reasonable notice” rights on Zero-Hour Contracts (ZHCs), a single provision affecting umbrellas isn’t in the bill.

The Fair Work Agency (FWA) which Labour has rechristened the Single Enforcement Body to be, is mentioned twice in a “Next Steps” document.

Yet as the two mentions are, in effect, just reminders that the FWA hasn’t been dropped, a plan to transfer the new ZHC provisions to agency workers looks more impactful.

‘Right to payment for cancelled, moved and curtailed shifts’

These new rights for ZHC workers (and in turn, then, agency staff) extend to a “right to payment for cancelled, moved and curtailed shifts.”

The Fair Work Agency is key here, as it will be a “single organisation” where all workers can “go for help,” said deputy prime minister Angela Rayner.

While it still has no launch date or remit, the FWA will also take “tough action on the minority who deliberately flout” the law.

This type of Fair Work Agency is more like the body which the previous Tory government mooted to regulate umbrella companies.

‘Nothing on umbrella regulation or IR35’

But the Employment Rights Bill won’t disappoint only those contractors using umbrella companies, hints Qdos’s Seb Maley.

“There’s a lot of talk [by this government] about banning exploitative working practices,” the IR35 contract review expert began on Thursday afternoon.

“But as it stands, [the Employment Rights Bill says] nothing on regulating the umbrella industry, addressing IR35 or banning zero-rights employment.

“These are glaring omissions that will leave many flexible workers feeling largely ignored.”

‘Off-Payroll Working rules not addressed, despite still being totally illogical’

Maley adds that avoidance schemes posing as umbrellas continue to “lure in” the “unsuspecting,” at often great HMRC-cost to the user.

“Meanwhile, the rollout of IR35 reform has meant that many contractors are placed inside IR35,” continued the review expert.

“[In that situation, those individuals] pay tax as employees but don’t receive any rights in return. It’s totally illogical.”

‘Consult on a simpler status framework’

The Employment Rights Bill contains no provisions on Off-Payroll Working, IR35 or employment status.

It fell to a press notice on .gov to mention Single Worker Status, albeit in terms which may be seen as flaky, even non-committal.

It promises that “a move” towards a single status of worker, and a “transition towards a simpler two-part framework for employment status,” will be made.

A timeline is again not provided but the ‘Next Steps’ document reassures that a formal consultation on a SWS will run but similarly, without giving a date or detail.

It only says: “We will consult on a simpler framework that differentiates between workers and the genuinely self-employed, ensuring that all workers know their rights and have the comfort of protection at work.”

‘Single Worker Status not a 100-day issue for Labour’

But Chartergates says the government didn’t promise anything on Single Worker Status (SWS), so it’s unjust to be disappointed.

“Despite many outlets deeming the [bill’s] silence on… [SWS] to be significant, it was never an issue for the Labour’s first 100 days,” wrote the law firm, in an update on Saturday.

“And [SWS was] always [going to be an issue]…that would take some time to institute.”

‘Highly complex to move to Single Worker Status’

The Association of Professional Staffing Companies said on Friday that the plan to move to SWS was “a highly complex challenge”.

Following the Employment Rights Bill’s publication, APSCo added: “The devil will be in the detail that we expect to be published over the period between the 2026 roll-out”.

APSCo said it backs the bill’s aim to support people into work as part of a “pro-business, pro-worker” stance -- as Labour puts it.

‘Day-one rights may hinder hiring’

But APSCo director Tania Bowers fears the introduction of day-one rights might “hinder hiring” -- and she hopes SWS won’t hinder contractors.

“The unique diversity of the labour market with the value delivered by professional contracting must be retained and encouraged.” 

Sounding burnt by the experience of the Off-Payroll Working (OPW) rules, Bowers continued:

“It’s important that over-legislating doesn’t disadvantage those who choose maximum flexibility in their working patterns.

“Or those that don’t want or need protection such as highly skilled contractors.” 

‘Aligning employment rights with the tax system makes sense’

With APSCo and others eager for the Single Worker Status consultation, it’ll be an “interesting” 2025, according to Seeley Harris.

“Aligning employment rights with the tax system makes sense,” added the lawyer, boss at ReLegal Consulting.

“But will the repercussions be, to push more people into umbrellas which [by then could] still [be] an unregulated sector?”

‘Self-employed protections, like a written contract right’

The government says the consultation on Single Worker Status will explore strengthening “protections” for the self-employed.

The consultation will table a “right to [a] written contract; extending blacklisting protections and extending health and safety protections.”

The government also said it was ‘protecting the self-employed and small businesses’ from late payment by introducing the Fair Payment Code.

But the FPC won’t be unveiled this year, will only be voluntary, and will result in the cancellation of the Prompt Payment Code.

‘Review IR35 rules’

On October 4th in the House of Commons, Daisy Cooper MP spoke up in search of more tangible support for one-person businesses.

“To ask the chancellor of the exchequer, if she will review IR35 rules,” the Lib Dem said at Treasury’s Questions, only to be told by HMT’s James Murray:

“The government keeps all tax policy under review to identify potential improvements.”

‘Outdated labour market frameworks’

In a ministerial foreword to the Employment Rights Bill, the deputy PM could have been mistaken for referring to IR35, however.

“New trends and technologies are putting strains on the UK’s outdated labour market frameworks,” Rayner wrote.

“These strains have been recognised but not addressed by successive governments.”

The deputy PM continued: “The world of work needs an urgent upgrade to keep pace with a modern economy and help drive growth and living standards.”

Despite her comments about ‘urgency,’ Rayner then said a “Get Britain Working” paper with potential solutions was merely “incoming” -- a bit like both the government’s much-promised Industrial Strategy (“forthcoming”) and the Employment Rights Bill measures.

‘All that is certain is the uncertainty’

Employment law expert Roger Sinclair, founder of egos Ltd, summed up last night to ContractorUK:

“All that is certain to me is that there is uncertainty -- and will be for some years -- as to which of these proposals will end up being implemented, and when. 

“There is much that many in the contractor sector had hoped for that, at least at first sight, seems to me to have been kicked down the road.”

‘Employment Rights Bill publication is Labour sticking to its promise’

Likewise specialising in employment law, Chartergates tried to explain why the contractor sector’s issues, like IR35, Single Worker Status, and umbrella regulation, have been put off.

“To an extent, the publication of the bill…represents Labour sticking to their promise -- just about -- of employment legislation within 100 days,” the firm said.

“Labour still intends to consult with various parties on much of the detail. 

“In fact, the legislation is also lacking a date when it will come into force but…we’re potentially looking at summer to October next year for the bill to become law and 2026 for changes to start coming into force.”

‘Direction of travel’

Chartergates added that the bill does provide some “additional detail on the direction of travel.”

Parasol compliance director Chris Bloor said: “Hopefully, [the bill is] able to give the recruitment industry and UK Plc as a whole, some certainty as to the direction of travel.

“And allow businesses to start planning accordingly.”

‘Make flexible working the default’

The government acknowledged on Thursday that it knows that a corner needs to be turned.

“Getting the labour market moving again is essential to economic growth,” the business department conceded.

“As part of the bill, we’ll introduce new measures to help make the workplace more compatible with people’s lives. This includes making flexible working the default where practical.”

‘Not the full picture’

But recruitment market experts seem underwhelmed.

“Today’s launch provides a little more detail, but still not the full picture,” said Reed’s Mr Rosser, a screening specialist.

“With hiring levels down since the general election, and concern among many employers driving alternatives to hiring permanent staff in the UK, the key question now is whether today’s detail…will help get the UK hiring again.”

‘Arrowhead’

Fresh from reporting IT contractor demand to be at a four-year low, the Recruitment & Employment Confederation (REC) moved to find a positive.

The REC said the bill was like an “arrowhead,” hailing it as the most significant government direction on the labour market since covid.  

But REC’s Neil Carberry also told his online followers that it was a “challenge” to give the Employment Rights Bill either a simple “thumbs-up” or “thumbs down.”

‘It’s brass tacks-time now’

“Businesses want a strong floor of well-enforced rights -- but changes that damage employment opportunities…must be avoided,” cautioned Mr Carberry, the REC’s CEO.

“Credit where it’s due -- the government has engaged effectively with businesses and unions on this.

“But it’s brass tacks-time now. What does it mean to dismiss someone in the new statutory probation period?” he asked.

“Can it be as complex as [doing so] after the current two-year period? How will ZHC workers want to be protected? [Unfortunately], there are a thousand questions like this.”

‘Framework bill’

The Employment Rights Bill is, then, “very much” a “framework bill,” says NumberMill founder Louise Rayner.

“While a few important changes impacting businesses have been outlined, most decisions will come after further consultation,” said Rayner.

“Many of the critical specifics will only be confirmed once secondary legislation is drafted.”

‘Removes qualifying period for maternity leave’

But the bill allowing the qualifying period for maternity leave to be removed while making sick pay accessible from day one, is “a strong move towards safeguarding the dignity of workers,” says WJM’s Mr Grant.

“[With this bill the government is] creating a fairer, more inclusive workforce where no one is left behind due to illness or family responsibilities,” he says.

“The measures to limit exploitative zero-hours contracts will also provide greater security to employees, ensuring that regular work means regular rights. This is a strong move towards safeguarding the dignity of workers and promoting workplace equality.”

‘Clumsy, chaotic, poorly planned’

The Federation of Small Businesses (FSB) probably couldn't disagree more.

“This legislation is a rushed job, clumsy, chaotic and poorly planned.

“Dropping 28 new measures onto small business employers all at once leaves them scrambling to make sense of it all.

“Beyond warm words, it lacks any real pro-growth element and will increase economic inactivity, seriously jeopardising the government’s own 80% employment target,” it said.

‘Troubling signal’

The federation’s Ms Mckenzie further condemned: “There are already 65,000 fewer payroll jobs since Labour took power.

“And [with this bill], the new government is sending out a troubling signal to businesses and investors.

“Plans to give day-one unfair dismissal rights to new employees will add to the risks associated with hiring people. That increased risk will inevitably deter small employers from taking on new people, for fear of facing an employment tribunal simply because a new recruit turns out to be unsuited to the role. That’s bad for jobs, and a barrier to growth and investment.”

The FSB’s policy chair, McKenzie said chancellor Rachel Reeves has an opportunity on October 30th at Autumn Budget 2024, following Thursday’s “hastily cobbled-together” act of parliament.