There have been key developments in employment law, including the Employment Rights Bill, introduced in October 2024, the Get Britain Working white paper, and the Regulatory Policy Committee’s (RPC) report on government impact assessments, both published in November 2024. A major concern for employers is the increase in national insurance contributions (NIC), solely borne by businesses. Small firms, in particular, warn that raising the cost of each employee, exacerbated by a lower NI earnings threshold, could deter hiring and reduce additional benefits.
The RPC has also criticised the government’s cost assumptions, particularly regarding plans to replace zero-hours contracts with guaranteed hours. While acknowledging added administrative costs for workforce planning, the RPC noted alternative proposals, such as predictable terms legislation, were not adequately considered. This raises broader questions about the effectiveness of the proposed reforms.
The government proposes stricter requirements before flexible working requests can be refused. The RPC concludes that there is, in fact, little evidence that employers are rejecting requests unreasonably. The introduction of any new legislation requires administrative and system changes and advice, and these all add to employer costs, thus reducing the pot available for salary reviews and other benefit increases.
The same applies to the proposal that employers provide workers with reasonable notice of shifts and pay compensation for late changes. The government’s own report acknowledges that its estimates of the costs, running into millions, may be too low. It also notes that about two-thirds of the anticipated cost to employers is expected to be in administrative costs, adding to employer overheads and leaving little money to improve employee terms.
The government proposes to remove the lower earnings limit and the waiting period for qualification for statutory sick pay. This will result in a material benefit only for the very lowest-paid employees. Statutory sick pay is currently capped at £123 per week and there appears to be no proposal for a material increase. While this is clearly better than nothing, it is in no way sufficient to make a real difference to those who suddenly find themselves unable to work by reason of illness.
At present, paternity and unpaid parental leave require 26 and 52 weeks’ service, respectively. Extension of this right to all joiners is likely to be popular with employees, though perhaps rather less so with employers given potential disruption.
The Employment Rights Bill has surprisingly little to say on the subject of employee benefits more generally. There is, for example, no proposal to increase mandatory contributions to stakeholder pension schemes, a measure which would undoubtedly benefit both employees and the Treasury in the long term. Current rates of contribution are unlikely to provide meaningful retirement benefits for many employees and it is disappointing to see a failure to address this, given the successful role out of auto-enrolment obligations.
Yvonne Gallagher is a partner at Harbottle and Lewis
