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This article is provided by by BRC Associate Member, Womble Bond Dickinson.

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The Government published the Employment Rights Bill (ERB) on 10 October 2024 and described it as "the biggest upgrade to rights at work for a generation".

Since then retailers have learned they will face significant increased costs through the changes to employers' National Insurance contributions announced in the Budget, as well as next year's national minimum wage increases.

In this article we look at some of the proposals in the ERB that will have the most impact on retailers.  For each proposal we look at what it is, what the impact will be and what retailers can do now to prepare.

Day 1 unfair dismissal rights

What:

  • All employees will have the right not to be unfairly dismissed from the start of their employment (rather than being subject to a two year qualifying period as they are under the current law).
  • However there will be an "initial period of employment", which will be between three and nine months (essentially a statutory probation period). 
  • During the initial period of employment, employers will be able to dismiss employees by following a light-touch process and there may be a modified compensation regime (unless the reason for dismissal is redundancy, in which case a full fair procedure will be required).

Impact:

  • Retailers will no longer be protected from bad hiring decisions by being able to dismiss with limited risk during the first two years of employment.
  • However, in practice, retailers still need to consider the risks of discrimination claims under the current law.

Preparation:

  • Many of the proposals are subject to consultation, including what the lighter touch dismissal process will look like, the length of the initial period of employment and the modified compensation regime.  Additionally, we do not expect this change to come into effect until Autumn 2026.
  • However, there are steps retailers can take to plan.  A key one would be to respond to the consultation when published or feed into the BRC's response.
  • Retailers should also look at their recruitment processes.  Can anything be done to make them more robust?
  • Finally, retailers should review their probation and performance management processes (or introduce probation periods if they don't currently utilise them).  If you can get better at managing probation now then that will help when the changes come in.

Third party harassment

What:

  • Retailers will be liable for acts of harassment related to a protected characteristic carried out by third parties (eg customers).
  • Retailers will not be liable if they can show they have taken all reasonable steps to prevent acts of harassment occurring.

Impact:

  • Sadly, abuse of retail staff is all too common so there is a significant risk that retailers could be exposed to liability for third party harassment claims.

Preparation:

  • The EHRC's technical guidance on the duty to prevent sexual harassment already recommends that businesses should take reasonable steps to prevent sexual harassment by third parties.
  • Retailers should read that guidance and start implementing it now.  If you have introduced measures to comply with the sexual harassment duty, then monitoring how they are working should help prepare for the new law.
  • Don't wait until the new law comes into effect: the earlier you put measures in place the more effective they will be.

Zero hours contracts

What:

  • Retailers will still be able to hire workers on zero hours contracts. 
  • However, after a defined reference period (potentially 12 weeks) they will be obliged to offer a contract with guaranteed hours based on when the worker has been working.
  • Workers will be able to refuse the offer and remain working on a zero hours basis.
  • The right will also apply to workers with guaranteed minimum hours (an anti avoidance measure).

Impact:

  • This will be significant for retailers with substantial seasonal fluctuations in demand.
  • In practice, zero hours contracts may only work on a short fixed term basis.

Preparation:

  • If you make significant use of zero hours contracts, respond to relevant consultations to ensure your views are heard.
  • Consider how this change will impact your business and what the alternatives are.  Could you operate using fixed term contracts for seasonal demand?

Collective consultation

What:

  • The assessment of when you are proposing sufficient redundancies to be obliged to consult collectively will be looked at on a business-wide rather than site-by-site basis.

Impact:

  • You will no longer be able to treat individual stores as separate establishments. 
  • Collective consultation will be required whenever you are proposing 20 or more redundancies across your whole business in a 90 day period.

Preparation:

  • Think about what systems you may need to ensure a central team is aware of all redundancy proposals across your business.

Summary

In addition to the proposals mentioned above the Government is proposing to enhance flexible working rights, increase time limits for bringing employment claims to six months and outlaw 'fire and rehire' except in circumstances of severe financial distress.

Overall, the ERB will have a significant impact on retailers.  Costs are likely to increase and you could face more claims.  However, with improved recruitment and performance management processes and clever business planning you may be able to mitigate some of the risks.

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