What impact will the Employment Rights Bill have on the hospitality sector?

Background

The Employment Rights Bill (the Bill) - championed as "the biggest upgrade to workers' rights in a generation" - introduces 28 individual employment law reforms.

The key changes of relevance to the hospitality sector include the implementation of "day one" rights, including unfair dismissal protection, and the end of zero-hour contracts.

Day one right to unfair dismissal protection

Currently, employees are protected from ordinary unfair dismissal if they have at least two years' qualifying continuous service. The Bill removes the need for this qualifying period, granting employees the right from day one, subject to a statutory 'initial period of employment' (IPE).

During the IPE, the standard of reasonableness for dismissals is modified where the reason, or principal reason, for the dismissal is related to the employee's conduct or capability, a statutory restriction, or some other substantial reason.

The Government plans to consult on the duration of the IPE, although an amendment paper to the Bill published on 27 November 2024 proposes a period of between three and nine months.

Regulations are still required to detail the steps that employers must take during the IPE, although the Government has stated that this is likely to involve "a lighter-touch process" to enable employers to dismiss an employee who is not right for the job.

Through the IPE, the Government is seeking to establish a balance between allowing businesses to properly assess an employee's suitability for a role, while at the same time also seeking to give reassurance to employees (and unions) that they will have rights from the first day of employment.

Goodbye to zero hours

One of the major reforms for the hospitality industry, which often relies on casual workers, seeks to address the 'one-sided flexibility' of zero or low hours contracts. The clear aim of this reform is to ensure that all workers have the right to enjoy the benefit of a contract that reflects the hours which they regularly work, providing them with greater economic certainty and stability.  The reform seeks to balance competing interests between business (and some workers) who value the benefit of flexibility against the risk of exploitation of those in more vulnerable and precarious employment.

Under new proposals, workers who meet certain criteria will be offered guaranteed hours in line with the number of hours regularly worked after the end of each reference period - if this is what they want. Workers will also have the right to reasonable notice of shift changes, with employers required to pay them compensation for any shifts cancelled at short notice.

The exact nature of these obligations will be subject to further debate, and once agreed, will be fixed by secondary legislation. 

Agency workers are for now, but subject to further Government reflection, excluded from these proposals.  As a result, hospitality businesses may be tempted to make greater use of agency workers which leaves a potential gap in protections. There may be further legislation on how the new rules will apply to the different forms of casual working across the sector.  Even in the absence of such legal safeguards, unions may seek to secure comparable protections with agency employers through the machinery of collective agreements and collective bargaining.

Key takeaways

These reforms are not expected to come into force until at least 2026. However, the changes will reshape workforce models and practices that underpin the operational structures of the hospitality and leisure sectors.

The reforms, as accepted by the Government's own impact assessments, will necessarily lead to an increase in the associated costs, direct and indirect, in engaging workers.  There is likely to be a net financial burden placed upon hospitality and leisure providers.

At the same time, the reforms may, for many organisations, act as catalysts for reviewing and reforming workforce models and practices.  For example, in respect of the new unfair dismissal protections, the sector is likely to engage in a more detailed analysis of the skills, experience, and expertise necessary for a given role, recognising that stepping back from the decision to engage someone will be harder. How the sector chooses to approach this particular reform may speak to how it wishes to define its culture: businesses may embrace the challenge, seeking to embed and align their recruitment processes even more closely to their diversity, equity and inclusion (DEI) strategies.

We expect the reforms contained in the Bill to evolve and alter over the coming months so, as well as familiarising themselves with the details of the Bill, employers will also need to keep a watchful eye on the progress of the Government's consultations and the wording of upcoming secondary legislation, which will implement the reforms.

For a more detailed discussion on these reforms, listen to this 30-minute Work Couch podcast: Employment Rights Bill: What employers need to know, with Patrick Brodie.

A version of this article was first published in CLH