Introduction

The Law Society of Scotland is the professional body for over 13,000 Scottish solicitors. We are a regulator that sets and enforces standards for the solicitor profession which helps people in need and supports business in Scotland, the UK and overseas. We support solicitors and drive change to ensure Scotland has a strong, successful and diverse legal profession. We represent our members and wider society when speaking out on human rights and the rule of law. We also seek to influence changes to legislation and the operation of our justice system as part of our work towards a fairer and more just society.

Our Employment Law sub-committee welcomes the opportunity to consider and respond to the UK Government’s Call for Evidence on the Employment Rights Bill.[1] The sub-committee has the following comments to put forward for consideration.

Protecting Workers

Does the Employment Rights Bill adequately safeguard the workers it seeks to protect?

The Employment Rights Bill (ERB) clearly seeks to strengthen protections for workers.
Providing the right to claim unfair dismissal from Day 1 of employment will provide additional protections for workers with less than two years of continuous service. This is tempered by the use of the initial period of employment which we understand is proposed to be set at nine months which would allow an employer to fairly dismiss an employee for the reasons of conduct, capability, breach of a statutory duty or SOSR relating to the employee, after following a “lighter touch” procedure. It is understood that it is envisaged that this process would at least involve a meeting with the employee to explain the issues. More information on the requirements of this lighter touch procedure would need to be provided to allow a fuller assessment of the safeguards provided by the ERB. However, it is appreciated that in its current form the ERB aims to balance protecting workers with allowing businesses the flexibility to assess new employees.
The proposals regarding Statutory Sick Pay will protect employees by enabling them to take time off work due to sickness knowing that they will not be required to wait several days to be entitled to payment.
The proposals relating to notice of shift changes and cancellations should provide workers with more certainty relating to their hours of employment.
Making parental leave (current length of service requirement of one year) and paternity leave (current length of service requirement of six months) day one rights are positive from the perspective of gender equality, since they incentivise a transition from the traditional male breadwinner, female carer model to the dual breadwinner and carer model, i.e. where parents, spouses, civil partners or partners share household, domestic, caring and nurturing chores more equally. The proposal that any refusal by an employer of a statutory request for flexible working on one of the specified grounds needs to be ‘reasonable’ will also strengthen protections for employees combining work with care responsibilities whilst ensuring employers can, acting reasonably, still refuse flexible working requests on business grounds. There is much more to do from an equality and flexible working angle e.g although the ERB proposes to create higher hurdle for employers to refuse flexible working requests via the proposed “reasonableness” requirement, neither the ERB nor the Employment Relations (Flexible Working) Act 2023 go far enough to create positive longer-term certainty for the employee. Currently, flexible working protection is limited to a day one right to “request” flexible working rather than a right to “have” flexible working which does reflect the modern workforce and does not go far enough to support employees with protected characteristics to remain in the workplace on a flexible basis. The proposal to require employers to take ‘all reasonable steps’ to discharge their duty under s40A of the Equality Act 2010 and introduce employer liability for third-party harassment will offer workers greater protection in relation to harassment in the workplace.

Are there weaknesses or loopholes in the Bill that could be exploited or have unintended consequences?

Regarding offers of guaranteed hours for qualifying employees, we feel that further information needs to be provided regarding further calculation periods. The current draft of the ERB provides for the first 12 weeks of employment to be used. There is a risk that unscrupulous employers may not offer employees work during this period to negate this right.

Are there areas of employment law not covered by the Bill that weaken workers’ protections?

The ERB does not currently cover the proposed simplification of employment status. This is an area that has attracted a high level of litigation in recent years and it would likely be beneficial to individuals to have a simplified system of worker status.

Can the measures in the Bill be adequately enforced? What are the barriers to setting up a Single Enforcement Body (Fair Work Agency) and how can these challenges be overcome?

Enforcement of the measures is likely to take place predominantly in the Employment Tribunal system. This is a system which we are aware is currently facing a backlog of cases. The introduction of the Day 1 unfair dismissal right we believe is likely to lead to a high number of claims that would not otherwise be capable of being brought under the current legal framework. The additional level of claims is likely to cause further delays in the system. This would cause uncertainty for businesses and leave workers waiting a significant amount of time for a remedy. There is a risk that this wait time could discourage workers from seeking to enforce the rights granted to them under the Bill.

Will the proposed trade union reforms improve working relationships between workers and businesses, and hence, productivity and enable voice at work?

Allowing trade unions access to the workplace to meet with, represent, recruit and organise workers should hopefully help to engage members with their trade union and foster a stronger voice for trade unions in the workplace.
At present in order to successfully ballot for industrial action trade unions must receive votes in favour of industrial action from at least 50% of those entitled to vote in the ballot. We understand the ERB proposed to change this so that only a majority of those that vote is required. This could result in important decisions being taken by a very small proportion of the overall workforce. An unintended consequence could be that employers are given more incentive to de-recognise trade unions, which would undermine the aims of the proposed reforms.

Impact on businesses

What impact will the areas covered by the Employment Rights Bill have on small, medium and large businesses?

We believe that the impact will differ by industry, although it is likely that smaller businesses will be impacted more than larger businesses in general. Further, some proposals will impact employers operating in certain sectors more than others: for example, the proposal to introduce employer liability for third party harassment may particularly impact those employers working in the hospitality sector or those engaging with contractors. The proposals in the Bill are likely to lead to a greatly increased administrative burden on businesses, in addition to extra costs. For those businesses which exist with a finite budget (such as those charities in Health and Social Care which rely on fixed government contracts), this is likely to have a considerable impact. Smaller, more niche charities are likely to be hit hardest by this. For those businesses which pass on costs, at least in part, to their customers, the proposals are likely to lead to increased costs which, in turn, will impact the employer. The impact it likely to be greatest on those businesses which operate on tight margins.
This is not to suggest that small businesses should be entitled to a blanket legislative exemption in respect of the applicability of the proposed extended employment rights in the Bill. Instead, consideration could be given to alternative means of enabling charities and small businesses to attain relief. For example, in the case of the proposals introducing employer liability for third party harassment, these could be accompanied by a legal requirement for employment tribunals to consider whether it is reasonable for the small business or charity employer to be held liable in light of its size and the administrative resources that are available to it (in similar terms to section 98(4)(a) of the Employment Rights Act 1996).
Larger businesses will likely be more able to adapt to the additional cost and administrative burden. However, it is possible that these employers will look to change their processes, focus on automation and AI and make redundancies.

What impact will these measures have on staff retention, hiring practices, probationary periods and wages?

Increased costs and increased administrative burdens are likely to make employers slower to hire and quicker to terminate employment. It is likely that, where businesses cannot cover costs, redundancies will be considered.
Due to the proposal to lower the required service for a claim of ordinary Unfair Dismissal, we consider that all businesses will pay far closer attention to performance during the probation period and that this is likely to lead to an increase in the number of terminations of employment within the probationary period. The same point (regarding the necessity for more careful review of individual worker performance) also applies in relation to the proposal to remove the length of service eligibility requirements of one year and six months for access to parental leave and paternity leave, and paternity leave respectively, as businesses will have less time to assess the performance and suitability of those employees taking leave during the probationary period.

Where costs are higher, one area which is likely to be squeezed is wage growth and it is probable that businesses will be less generous in remuneration.
The additional ‘day one’ rights are likely to lead to recruitment practices which are more exacting and slower.

How will other areas set out in the Plan to Make Work Pay impact businesses?

Those businesses that are currently more generous than statutory minima are likely either to see their competitive advantage in the job market eroded or will have to improve their offering to staff in order to remain employers of choice.

What impact will strengthened protections, such as day one rights, have on the hiring practices of businesses, UK employment rates and UK investment rates?

Please see above in relation to hiring practices.
It is probable that there will be more short-term unemployment as a consequence of a reduction in service required to bring a claim of unfair dismissal. Employers are likely to pay close attention to employees in their probationary period and will be less likely to give opportunities to improve to those staff who are performing badly during probation. This in turn is likely to lead to increased short-term employment and therefore increased short-term claims for state support.
Where the administrative burden and cost of doing business is considered too great by businesses, this is likely to have a negative impact on UK investment. Businesses are more likely to wish to operate in jurisdictions that make it cheaper and easier for them to do business.

To what extent could the Employment Rights Bill cause businesses to offshore employment and continue with weaker workers’ protections abroad?

Where for-profit employers are able to provide a similar service to customers at a lower cost base in another jurisdiction, they are likely to take this opportunity. Industries where this is not practical or possible, such as health and social care and hospitality, will not be able to do so and will therefore have to adapt their practices.
The changes to zero hours or low hours contracts will have a considerable impact on the business model of many employers.

Economic growth and wealth creation

How will the plan to Make Work Pay impact:

Economic growth?

It is difficult to confidently predict the impact of the Make Work Pay proposals on economic growth.
On one hand, we acknowledge that some of the proposals have scope to boost growth in the UK economy. In particular, the proposals in respect of enhancing the National Minimum Wage and expanding day-one rights for unfair dismissal, family-related leave and sick pay may well serve to strengthen the financial security of workers, particularly those in low-income roles. This enhancement of financial security / increased disposable income could lead to increased UK consumer spending, a key driver of GDP growth.
We are conscious, however, that businesses—especially SMEs—are likely to face higher wage bills and compliance costs as a result of the proposals. This could slow economic growth, particularly in the low-margin industries that are most “exposed” to the proposals (such as hospitality, retail and care). On a related point, the proposals in respect of zero-hours contracts would also likely complicate operations for those industries, given their frequent reliance on flexible staffing. We deem there to be a significant risk that this will make employers less likely to recruit.

Productivity levels?

Again, it is difficult to make a confident prediction here.
We acknowledge that the Make Work Pay proposals in respect of enhanced flexible working rights (i.e. shifting away from a mere right to request flexible working and closer towards a right to have it) could lead to productivity improvements. Studies indicate that flexible work arrangements reduce absenteeism and improve employee engagement, fostering a more motivated workforce.
Again, however, it appears inevitable that the proposals would increase administrative and compliance obligations and costs. These would likely be felt most keenly by SMEs, which lack the infrastructure to administer such processes efficiently. In essence, an increase in administrative and compliance obligations and costs is likely to divert SME resources away from productive operations.

Rates of investment?

It strikes us that the increased administrative and compliance obligations and costs mentioned above could lead to less appetite for investment in UK businesses. This effect would likely be most pronounced for SMEs, should potential investors perceive that such business are the most exposed to those factors.

Business start-up rates?

Similarly, it strikes us that proposals like restricting zero-hours contracts (and in particular, the proposed requirement to offer guaranteed hours following a reference period) and expanding day-one rights may pose barriers to entry for new businesses. Start-ups often rely on flexible, low-cost staffing models during their early stages.

Supply of labour?

Enhanced workers’ rights will likely increase participation among individuals previously deterred by insecure work arrangements.
However, the proposed restrictions on zero-hours contracts might reduce the availability of ad-hoc or part-time work opportunities, which some workers rely on for flexibility. In the longer term, employers may also be increasingly encouraged shift towards automation (potentially constraining job growth in some sectors).

Employment levels?

The observations under the heading “Supply of labour” apply equally here.

Incomes?

Altering the National Minimum Wage calculation to expressly consider real living costs, as proposed, would likely have a direct and positive impact on incomes (especially for low-wage workers).
Again, however, the increased administrative and compliance obligations and costs previously mentioned could lead to business – particularly SMEs – having less budget available for staff pay and benefits.

Household wealth?

The observations under the heading “Incomes” apply equally here.

What solutions or actions are required by Government, businesses and workers to effectively support the labour market while boosting productivity and protecting workers’ rights?

Government:

Consider providing assistance (such as grants) for SMEs to offset costs associated with compliance with stricter regulations.
Simplify compliance for SMEs through the creation of digital platforms or free guidance.
Introduce freely-accessible training programs to help businesses understand new developments and implement them in a compliant and effective manner.

Businesses:

Adopt technological solutions to streamline workforce management, such as scheduling software to comply with shift notice rules.
Foster partnerships with government and unions to develop industry-specific approaches to implementing the changes.

Workers:

Participate in training programs to increase productivity and adapt to changes in the workplace, particularly those related to automation and digitalisation.
Engage with employers (via union representation, if applicable) to ensure workplace rights are upheld and disputes are – where possible – resolved collaboratively

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