What retailers need to know about upcoming employment law changes
The Employment Rights Bill (the ‘Bill’) and the regulations which will follow it, will bring about significant transformation in employment law once they are fully in force over the next couple of years. Plus, there are other changes that come into force this year.
What impact will these have on retailers?
Unfair dismissal
The Bill will remove the two-year qualifying period and employees will be able to claim unfair dismissal from the first day of their employment. This means that the flexibility retailers are currently used to, which enables you to (more) easily dismiss an employee with less than two years service will disappear. To give employers time to consider whether their new recruit is all they were cracked up to be, the government will allow employers to go through a simplified procedure if they want to dismiss them during their probationary period.
Never Miss a Retail Update!How long this probationary period will be is still up in the air; the Government will launch consultations to seek views on this point and also to iron out other details, such as how exactly the simplified dismissal process will work. They’ve said they favour a nine-month probationary period.
This change will not come into force until at least Autumn 2026. But there are few things retailers should start thinking about now to prepare:
- As it will be more difficult to dismiss newer workers, you will need to hire the right person in the first place. You should review your recruitment processes to see if they need an overhaul, and put in place have a strong dismissal policy and procedure to reduce the risk of tribunal claims.
- Employees may change jobs more frequently given that they won’t have to wait as long to gain protections because of their length of service. You may, therefore, want to think about how you attract and retain good staff.
Zero-hour contracts
Another change in the Bill concerns zero-hour and low hours contracts which are widespread in the retail industry because they provide the flexibility needed to adapt to the inherent peaks and troughs in demand. The Bill will require retailers to:
- Offer ‘qualifying workers’ a guaranteed number of hours after the end of every reference period (not yet defined but anticipated to be 12 weeks) reflecting the number of hours they have worked during that period. A qualifying worker is someone working under a zero-hour contract or someone with a low number of guaranteed hours (not yet defined).
- Give staff reasonable notice of available shifts and reasonable notice if they want to make changes to shifts they’ve agreed to work. What is reasonable will depend on the circumstances, but there will be a minimum period of time which applies (not yet defined).
- Require retailers to make a payment to staff each time they change their shift at short notice.
These measures will increase the administrative burden on retailers. You will have to keep track of the number of hours each worker has completed during the reference period, offer them guaranteed hours when required, and issue a new contract if the the worker agrees. And you will have to keep doing this until the worker is working the minimum number of guaranteed hours.
There’s still a lot to be defined and sorted out in the Bill (and this won’t come into force any earlier than 2026). However, we recommend that you start to review how many workers you engage on zero hour or casual contracts and and assess the impact these changes could have on your organisation.
Redundancy – collective consultation
When employers propose to make 20 or more redundancies ‘at one establishment’ within a period of 90 days or less, they must collectively consult with a recognised union or employee representatives before they make anyone redundant. If they fail to do so, then employees can claim a protective award of up to 90 days.
The Bill removes the words ‘at one establishment’ which means that when you are working out if the collective consultation rules apply, you will need to count any proposed redundancies across all your premises.
Many retailers have several sites and will be impacted by this change which may come into force later this year.
Looking away now from the Bill, here are some other developments retailers need to know about.
Impact of the Autumn 2024 budget
The budget from last October may feel like a long time ago now, but its effects will be felt by businesses for some time to come. With the National Minimum Wage, National Living Wage, and employer National Insurance Contributions all set to increase in April 2025, it will mean increased costs.
In a survey by the British Retail Consortium, 52 Chief Financial Officers at leading retailers were asked how they would be responding to the increase in employers’ National Insurance Contributions:
- 67% will raise prices
- 56% will reduce number of hours/overtime
- 52% will reduce head office headcount
- 46% will reduce stores headcount
- 31% said that it will lead to further automation
Some retailers may look at changing employee terms and conditions of employment to save money on contractual terms such as sick pay or holiday entitlements that go well beyond the statutory minimum. But care is needed with this course of action, particularly if employees don’t agree to the changes and they are dismissed and re-engaged on the new terms.
Such ‘fire and rehire’ practices have received a lot of criticism over the last few years. Tesco were recently stopped by the Supreme Court when they tried to use this tactic to remove ‘retained pay’ from a group of employees – you can read more about this here.
Retailers need to follow the statutory Code of Practice on Dismissal and Re-engagement if they do intend to ‘fire and rehire’ which places a particular focus on consultation. And be aware that the Bill proposes to make it an automatically unfair dismissal to use ‘fire and rehire’ tactics, unless you can show you are in extreme financial difficulties and the change cannot reasonably be avoided.
Equal Pay
Over the last few years there have been a few high-profile equal pay claims against some of the larger retailers, many of which are still ongoing.
The case of Thandi and others v Next Retail Ltd and another saw 3,540 claimants win their equal pay claim. They were female shop-floor sales workers who alleged that they were paid less than the warehouse staff who were predominately male. The tribunal held that the claimants were carrying out work of equal value to the warehouse staff. Next argued that the difference in pay was not because of sex but for other reasons including market forces. However, the tribunal found that this did not justify the discriminatory effect of the pay difference, so the claimants won.
Asda, Tesco, and Morrisons all face similar claims which will continue to hit the headlines as they progress through the tribunal process.
These cases should spur other retailers, whatever their size, to review how their own staff are paid to check that they are also not at risk of future equal pay claims. done
