Human Capital

What do changes in employment law mean for you and your business?

This week’s post is both the last for 2024 (normal service will resume in January!) and also the last in our series partnering with Howard Kennedy, the London-based full service law firm.

I’m delighted to close this series with another ‘in conversation’ discussion with one of HK’s legal experts - this time with Lydia Christie, Head of Retail and Leisure for the firm and an expert on employment law.

The last few months have seen a raft of employment cost increases hit our sector, including rises to the National Living Wage and to employer’s NI contributions, but has also seen proposed by the new Government some of the most far-reaching changes to employment law we’ve seen for decades, all of which again will have big impacts on our sectors. Timely, then, to be able to get the expert view on what it all means.

IS: There has been a lot of coverage of the new Employment Rights Bill, but what is it likely to mean for consumer businesses?

LC: The first thing to say is that the bill is subject to consultation which will continue for most of 2025, so the real impacts will be in 2026 and beyond. I think, though, that there are likely to be 2 big areas of impact for consumer businesses - firstly on contract hours and contract flexibility, and secondly the consequences of the removal of the 2-year threshold for ordinary unfair dismissal claims.

Taking the contract piece first, the provisions in the draft legislation are complex and will evolve through consultation. There are particularly complicated provisions about Zero Hours contracts. From my experience with clients, fewer employers are using contracts with no minimum specified hours at all but the use of zero hours contracts has been widespread in the sector and it is these types of contracts with no or with a low guaranteed number of hours that this legislation will impact .

In essence they will require employers who have employees on low-hours contracts to offer a higher number of guaranteed hours if that is what the employee has regularly worked over a specified period of time. That has an impact on a business if, for example, it has a workforce who usually work relatively few hours but whose work ramps up during peak trading periods - if the legislation works as currently written it would require the employer to continue offering those hours after peak trading is over, which would obviously be a problem.

More generally, the provisions in the bill will have knock-on implications for how businesses manage shifts and rosters. For example, staff will need to be given reasonable notice of shifts or cancellation, curtailment or movement of shifts and will be entitled to payment of reasonable compensation for cancellation, curtailment or movement of shifts. This means a change to the current practice of sending workers home if there isn’t work for them to do and means many hospitality businesses, in particular, will need to think carefully about how they manage their weekly rotas. One way to think about it is that at the moment the real cost of flexibility in shift work is borne by the employee, who faces uncertainty about their hours and earnings. The new law will shift that cost to employers, who will therefore need to figure out how to manage it. At a societal level that may be a shift we are comfortable with, but at the level of individual businesses it will need careful thought.

With regard to the changes to the unfair dismissal provisions, it is again worth pointing out that the bill is still subject to consultation so it is hard to be definitive about how it will all work until we have the detailed regulations. What seems clear, though, is that the current threshold of 2 years of service required before ordinary unfair dismissal protection kicks in will go, and employees will have unfair dismissal protection from day 1. There will be specific rules and a modified test of fairness and process that will apply for the probation period and for which we are waiting for more details to be published.

The implications here on businesses are clear - they will need to put more time and effort into the hiring process to try to avoid issues later on and will need to be much more attentive to how they manage the probation process because once someone is passed that threshold the modified test and rules will not apply.

It is also worth pointing out, however, that the current potentially lawful reasons to dismiss stay unchanged in this legislation, as do the additional protections offered to workers based on protected characteristics.

IS: Thanks, that’s a lot to consider. The other big news in employment law right now is the equal pay case that has just been found against Next - I know a lot of other businesses are wondering what that means for them?

LC: Yes - in summary, whilst it has long been clear that men and women doing the same work should be paid the same, the finding against Next relates to another principle of equal pay law that requires men and women doing ‘work rated as equivalent’ or ‘work of equal value’ to receive equal pay - in this case equating a largely-male warehouse workforce and a largely-female store workforce.

The implications for any business is that they will need to be careful in how they benchmark roles and decide on salaries to avoid similar findings against them.

IS: But how should they do that? How do you decide whether one group of employees is doing work ‘equivalent to’ another?

LC: That’s the $64k question. These are complex comparisons that have resulted in complex legal arguments. This usually requires input from external independent experts to assess roles and pay/grading structures, although that will obviously come with a cost. Where businesses have a difference in contractual terms, including pay, they will need to be able to show that the difference is due to a material factor that is not based on sex. The key thing will be to show that the business has considered the issue and actively engaged with it.

IS: Everything we’ve covered so far has been complex, scary and potentially costly for businesses. Let’s finish on the positive side - you work with a lot of retail and leisure businesses on employment issues - what marks out those who are great employers?

LC: That’s a great place to finish. I talk to lots of businesses now who are paying much more attention to the support they offer their colleagues across the business - whether that’s on mental health, financial assistance, or the creation of more inclusive and supportive work spaces.

Others are working hard on the positive side of some of what we’ve talked about already - creating more flexible shift patterns that suit the needs of groups of colleagues, for example.

Taken together, all of this can be thought of as working on the ‘benefits” side of the employer offer, rather than the basic pay side, but when done well it is much more than that - it is about creating a working environment that people want to be part of.

IS: that’s a great message to end on - thanks for your time and advice, Lydia.

And for all you Moving Tribes readers, thanks for your company during 2024 and I wish you excellent trading for this coming peak season and a lovely Christmas - see you in 2025.

P.S.

I’ve been delighted over these last few months to be working with the excellent team at Howard Kennedy for this series of posts - they are a full-service legal team with a lot of experience of the kinds of issues consumer businesses often face, so do look them up if you need to. If the issues we’ve discussed today have struck a chord, then Lydia can be found on the HK website or on Linkedin.