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The Employment Rights Bill, introduced by the UK government on 10th October 2024, brings sweeping changes to employment laws across the country. Described as the largest upgrade to workers’ rights in a generation, this bill aims to modernise employment practices and ensure that workers receive stronger protections. It tackles key issues like exploitative zero-hours contracts, fire and rehire tactics, and guarantees essential employment rights from day one.

For contractors and recruitment agencies, these changes are particularly significant. The bill introduces new obligations for employers, meaning agencies must adapt their operations and ensure compliance with the new standards. Let’s explore the key elements of this bill and how they will affect contractors and recruitment agencies.

Key Changes Introduced by the Bill

1. Basic Rights from Day One
One of the most transformative aspects of the Employment Rights Bill is the introduction of essential protections from the very first day of employment. Previously, workers had to wait to qualify for many rights, such as protection from unfair dismissal. Under the new law, these rights will be provided from day one.

Some of the key rights include:

• Protection from unfair dismissal: Workers will now be protected against unfair dismissal as soon as they start employment. This is a significant change from previous legislation, where this protection typically only applied after two years.
• Statutory sick pay: The bill also strengthens statutory sick pay by removing the lower earnings limit and the waiting period, meaning more workers will be eligible, and they can receive it sooner.
• Parental and bereavement leave: Workers will be entitled to parental leave, paternity leave, and bereavement leave from their first day on the job. 

Impact on contractors: For contractors employed through umbrella companies, many of these rights will apply, especially where they are considered employees. Those who are self-employed or working through their own limited companies may not see immediate changes, but umbrella-employed contractors will benefit from stronger day-one protections, including the right to sick pay and leave.

Impact on recruitment agencies: Recruitment agencies must adjust their practices to ensure that contractors and other workers are granted these rights from day one. This means revising contracts, ensuring that terms of employment are clear, and providing accurate information about these new protections. Agencies working with contractors through umbrella companies will need to coordinate with payroll providers to ensure that all legal obligations are met.

2. Ending Exploitative Zero-Hours Contracts

The Employment Rights Bill places a significant focus on zero-hours contracts, which have been a contentious issue for years. Under these contracts, workers often face uncertainty regarding their working hours and income. The new law introduces the right for workers on zero-hours contracts, who work regular hours over a set period, to be offered a guaranteed-hours contract.

Specifically, after a 12-week reference period, workers will have the right to a contract that guarantees their typical working hours. This ensures more financial stability and reduces the unpredictability that zero-hours contracts often create.

For contractors: Contractors engaged on zero-hours contracts who regularly work the same hours will now be entitled to a more predictable schedule. This change offers contractors greater financial security and stability in their working arrangements.

For recruitment agencies: Agencies that rely on zero-hours contracts will need to adapt to this change by offering guaranteed-hours contracts to workers who meet the criteria. This will require agencies to closely track the hours worked by contractors and ensure that they comply with the new rules. Agencies may also need to rethink their reliance on zero-hours contracts and shift towards more structured employment arrangements where possible.

3. Banning Fire and Rehire Practices

The fire and rehire practice, where workers are dismissed and then rehired under worse terms, has been targeted by the new legislation. This practice has often been used by employers to impose less favourable conditions on workers, such as lower pay or fewer benefits, after forcing them to leave their positions temporarily.

Under the Employment Rights Bill, fire and rehire will be banned, ensuring that workers cannot be forced into accepting inferior terms through this tactic.

For contractors: While fire and rehire practices primarily affect permanent employees, some contractors, particularly those on fixed-term contracts or employed through umbrella companies, may also benefit from the added protections against unfair treatment. Contractors who return to work after a break can now expect fairer rehiring terms.

For recruitment agencies: Agencies must ensure that they do not engage in fire and rehire practices. If agencies frequently rehire workers, they must ensure that any changes to terms of employment are agreed upon fairly and not imposed through forced dismissals. This will require agencies to reassess how they negotiate contract renewals and changes in working conditions.

4. Flexible Working as the Default
One of the most forward-looking changes introduced by the bill is the right to flexible working from day one of employment. Under the new law, flexible working will become the default option where practical. This aims to make workplaces more adaptable to workers' needs, improving work-life balance and ensuring that employees can request flexible arrangements early on.

For contractors: Many contractors already benefit from flexibility in their roles, especially those working through personal service companies or on freelance projects. However, contractors employed through umbrella companies or agencies may now find it easier to request flexible working arrangements, which can be particularly beneficial for those juggling multiple projects or personal commitments.

For recruitment agencies: Agencies placing contractors and temporary workers will need to accommodate requests for flexible working where possible. This may involve collaborating with clients to ensure that flexible working arrangements are available and practical for the roles being filled. Agencies will also need to communicate these options clearly to contractors at the start of their engagements.

5. Establishing a Fair Work Agency

A key structural change introduced by the bill is the creation of a Fair Work Agency. This agency will bring together existing enforcement bodies and will have the authority to enforce employment rights, such as holiday pay, statutory sick pay, and protections against unfair dismissal. It will also provide guidance to employers and recruitment agencies on how to comply with the new legal requirements.

The Fair Work Agency will play a pivotal role in ensuring that workers receive their full entitlements and that employers are adhering to the new standards.

For contractors: Contractors, particularly those employed through umbrella companies, will now have access to a centralised body to report issues like unpaid holiday pay or unfair treatment. The creation of the Fair Work Agency provides a clearer avenue for addressing disputes and ensuring that employment rights are respected.

For recruitment agencies: Agencies must be fully compliant with the regulations enforced by the Fair Work Agency. This includes ensuring that all workers receive their full entitlements and that employment contracts are in line with the new legal requirements. The agency’s enforcement powers mean that non-compliance could result in penalties, making it essential for agencies to stay updated on the latest rules.

Conclusion

The Employment Rights Bill introduces some of the most far-reaching changes to UK employment law in recent memory. By providing day-one rights such as statutory sick pay, parental leave, and protection against unfair dismissal, the bill ensures that workers, including contractors employed through umbrella companies, receive stronger protections. The banning of exploitative zero-hours contracts and fire and rehire tactics adds further security for workers, while the introduction of flexible working rights reflects the evolving nature of modern workplaces.

For contractors, particularly those working through recruitment agencies, the bill offers greater stability and more predictable working conditions. For recruitment agencies, this legislation requires significant operational changes. Agencies must review their contracts, ensure compliance with the new rights, and work closely with clients and payroll providers to meet the bill's standards.

With the establishment of the Fair Work Agency, the enforcement of these rights will be more robust than ever. Both contractors and recruitment agencies must stay informed and adapt to the new legal landscape to ensure that they meet their obligations and protect their interests in the rapidly changing employment environment.