An exploration of key aspects of the Employment Rights Bill which will impact living sector employers; day 1 right to claim unfair dismissal, changes to the use of zero hour contracts and the extension of the duty to protect employees from harassment.

Employment Rights Bill – A Shake Up for the Living Sector

The Employment Rights Bill (“ERB”) is poised to introduce significant change to the UK’s workforce. During a time where the living sector is grappling with labour shortages, compliance challenges and fluctuating project demands, construction companies, housebuilders and developers should be prepared to embrace both the challenges and the opportunities that arises from the proposals.

Key Provisions of the ERB

The ERB will be the single most impactful legislative change for employment law since the introduction of the Employment Rights Act 1996. It proposes to make 28 reforms in total. We have picked the top three which we think will have the most significant impact on the living sector:

• Day one protections against unfair dismissal.
• Changes to the way employers use zero hours contracts and agency workers.
• Protection against third party harassment.

The current bill is a draft. While the substance of the bill is unlikely to change, the Government has committed to consultation and it is anticipated that the draft will be refined before it comes into force. There are no fixed timescales for that process. Some of the consultations are underway, and early indications are that key provisions will not come into force until 2026. Whether that is acceptable to trade union and employee groups remains to be seen, and we suspect will be a feature of consultation responses.

Unfair dismissal protection from day 1

This has been the headline grabber of the ERB. The bill proposes to remove the two-year qualifying period for unfair dismissal protection meaning that any employee will be able to bring a claim from their first day of employment. The government currently proposes to implement a statutory probationary period, during which time employees will be able to be dismissed for defined reasons and without following a fulsome process.  We expect that the duration of the  statutory probation period will be 9 months, however this is subject to consultation.

This will fundamentally change the way that employers deal with employment issues for those with less than two years’ service. Construction companies, developers and housebuilders operating under significant pressure to meet strict completion deadlines and quotas, with the threat of significant financial penalties for non-compliance, need to maintain a high-performing workforce and will have to be alert to these changes and what they mean for their employment  practices. 

The proposals in the ERB will complicate the process of swiftly dismissing underperforming employees who could jeopardise the conclusion work. While we expect to see a condensed process required for those in their statutory probation period, we are going to see the end of the practice of straightforward short service dismissals. Employers will need to be more diligent in tracking employee performance, providing clear feedback, and adhering to a structured performance improvement plan before considering dismissal for underperformers. Line managers will have to be encouraged to tackle problems early, rather than letting issues drift. It is likely to change recruitment practices, as prevention is better than cure. Employers may be less likely to take a chance on employees and will want to bolster recruitment exercises to flush out any potential problems prior to employment commencing. Failure to do so could expose employers to legal challenges, further straining resources and potentially delaying projects.

Zero hour contracts: the crackdown commences

Labour had initially alluded to banning zero-hour contracts. Although the bill does not do so in as many words, it creates a complicated regime which we think will effectively render zero hours contracts unworkable.  Although subject to further consultation the ERB proposes to place the following obligations on employers:

• To offer guaranteed hours that reflects the hours that qualifying workers regularly work over a reference period; anticipated to be 12 weeks.
• Provide reasonable notice of shifts.
• Provide compensation for cancelled, moved or curtailed shifts.

These obligations will apply to both zero hours contracts and ‘low hours’ contracts. A consultation has also commenced to explore extending these provisions to agency workers. We anticipate that they will be, acting as a replacement to the former Government’s repealed Workers Protection legislation. This was due to come into force in autumn 2024 and would have given qualifying agency workers the ability, among other things, to request a contract of employment from their hiring employer.

Many living sector employers rely on the flexibility of agency workers and zero hours workers to adjust to fluctuating project requirements. However, the proposed changes will place significant constraints on employers. This could make short-term and low hours contracts less attractive, potentially leading to shift towards hiring more permanent employees to avoid the administrative burdens associated with these proposals.

Tackling workplace harassment

26 October 2024 saw the introduction of a duty to take reasonable steps to prevent the sexual harassment of employees during their employment. The ERB proposes to take this further, making it an obligation to take ‘all reasonable steps’ as well as re- introducing protections against third-party harassment. If introduced, this will see employers liable for harassment of their employees by third parties, such as clients, subcontractors, or suppliers, on grounds of all of the protected characteristics listed in the Equality Act 2010. 

This will have significant implications for housebuilders and developers, where multiple stakeholders frequently interact on-site. Under the new proposals, if a worker experiences harassment from a subcontractor or another third party based on a protected characteristic such as their disability, race or sex, their employer could be liable. Given the limited control employers may have over those that their employees come into contact with when on site, the introduction of this obligation will come with its own challenges.

This provision may require more selective vetting within the construction and development supply chain, including choosing subcontractors that can demonstrate that they align with company policies on harassment and conduct. Contract terms will have to be reviewed to ensure that contractors and subcontractors are held accountable for their employees' behaviour on-site, and so will have to be considered at the commencement of any procurement exercise.

Getting ready

As we have said at the outset, the bill is in draft form and so we have some time before any of the proposed changes come into force.

Some proactive steps that living sector employers may wish to consider in the meantime are:

• In addition to ensuring compliance with the changes to the law on sexual harassment which came into force last month, employers should look at culture generally and identify any risk areas that exist and that may be impacted by the extension of liability to third parties. It goes without saying that preventing all forms of harassment in the workplace is good practice, whether or not we see further legislative change.
• Think about recruitment practices. Are there things that can be done to bolster the recruitment process to ensure that those joining are the best fit, and less likely to cause issue down the line? This will stand employers in good stead for any impending change, and also work towards reducing problematic hires.
• Audit use of zero hours/”low hours” contracts and agency staff. The theme of the proposed changes is that it will be harder to utilise such contracts, and so employers can get ahead of this by looking at the way staff are engaged and thinking about whether any pre-emptive changes can be made workforce composition.
• Finally, watch this space. More change is coming and we will continue to provide updates and guidance on what employers in the living sector can expect from 2025 and beyond.