Written evidence from Acas (ERB0091)
6 December 2024
1. Acas welcomes the opportunity to respond to the Business and Trade Select Committee call for evidence on the Employment Rights Bill. While the response is informed by consensus views of Acas’s independent Council (employer representative, worker representative and independent members) this is an Acas Executive response, informed by operational data, and should not be taken as the view of Acas Council.
2. Acas (Advisory, Conciliation and Arbitration Service) is a statutory, non-departmental public body with a duty to promote the improvement of industrial relations in Great Britain. We work with millions of employers and employees every year to improve workplace relationships, providing free and impartial advice on employment rights, good practice and policies, and preventing and resolving workplace conflict. Acas offers several services in connection with its duty, in 2023 to 2024 this included:
3. An independent research paper estimating the economic impact of Acas services calculated an overall benefit-cost ratio of £12 for every £1 invested in Acas services delivered during the 2018 to 2019 financial year, with a total net benefit to the economy of Acas services of £644 million. Acas has considerable practical experience of employment relations and of the issues that can be experienced by workers, employers and representatives across all areas of employment law and workplace practice, including in the areas that fall within the remit of the existing pay and work rights enforcement agencies.
4. Acas is led by an independent Council, representing the social partnership: employer representatives, worker (trade union) representatives and independents (currently employment lawyers and non-profit sector representatives). This broad insight and direction ensures that Acas is impartial and focused on what benefits workforce relationships, as well as economic growth.
5. The introduction of the Employment Rights Bill (ERB) presents an opportunity to address the systemic barriers to effective conflict management in workplaces, which are a significant drag on the economy and on productivity. The estimated cost to employers in the UK of individual workplace conflict is c. £28.5bn per annum. This excludes the costs of collective conflict and industrial action. The majority of this individual conflict cost is incurred during employment and is associated with c.914 000 resignations and/or dismissals each year.
6. The ERB offers an opportunity to make changes which would lead to a reduction in that cost, which would support an increase in productivity and which would mitigate the negative effects on individuals and businesses of engaging with protracted and often harmful procedures.
Q: Are there weaknesses or loopholes in the Bill that could be exploited or have unintended consequences?
7. As a number of areas of the Bill require secondary legislation, Acas is not in a position to provide detailed commentary at this stage.
8. There are specific risks relating to proposals on unfair dismissal, which are likely to require careful legislative development to avoid unintended consequences and ensure that measures meet the intended policy aim. We anticipate that day one unfair dismissal rights are likely to lead to a higher proportion of claimants with under two years in role making a tribunal claim on such grounds. Acas analysis forecasts indicate that the current upward trajectory of cases, when combined with the Government’s own assessment of 15% increase in claims upon the introduction of day one rights, could lead to a total rise of up to 25,000 additional early conciliation cases.
Background data on unfair dismissal:
9. It is estimated that between 20% (ONS) and 31% (CIPD) of UK workforce has been employed for less than two years. The Government’s Regulatory Impact Assessment suggests 8.5 million staff (of 33.4 million employed) have less than two years’ service.
10. In 2023 to 2024, nearly 19,000 (18.6%) Early Conciliation notifications had an indicative jurisdiction related to unfair dismissal (UD). Of these, 1,400 (7.4%) were flagged as having a claimant who had worked for their employer for less than 2 years (we know this is under-reported in our system). In the first half of 2024 to 2025, Acas has noted an increase in UD cases (13,750 notifications) compared to patterns in recent years. Should this trend continue, it is likely the total UD cases for this year could reach 25,000.
11. Changes to unfair dismissal also have equality impact implications:
Increasing time limits on ET cases:
12. Acas receives approximately 5,000 early conciliation notifications per year that, based on the information provided by the claimant, appear to be potentially out of time. The Government’s intention to amend the Bill to bring in measures to extend employment tribunal limitation periods is likely to capture more cases and therefore result in a greater number of notifications to Acas. However, a longer period may also provide a greater opportunity for resolution of cases before hearing. Acas would urge clarification in how any extended time limit would potentially interact with early conciliation timeframes to ensure that rules are clear and accessible to all parties.
Q: Are there areas of employment law not covered by the Bill that weaken workers’ protections?
13. In Acas’s experience, when employment rights change whether due to new legislation or developments in case law, this can inevitably create gaps in awareness of rights and responsibilities and potential for new areas of confusion which could weaken protection. Our data shows that the biggest risk is that employees turn to ‘no-one’ for advice. (In a 2021 YouGov poll when asked where they sought information, advice or guidance from 52% said “I wouldn't go to any source for information, advice or guidance”.)
14. Acas plays an important role in filling this gap: our website has an annual reach of 18 million digital visits with 91% positive engagement by users of our advice. Acas media activity has a current reach of 82% all public with a 99% positivity rating (Cision Media Monitoring). Awareness of Acas amongst small and medium-sized businesses is currently at 96%.
15. There are particular gaps in awareness of rights for some employees with protected characteristics and more vulnerable workers. For example, DLME research shows that those in precarious work (more likely to be female, younger and working class) are less likely to be aware of their rights.[3] The BEIS Public Attitudes survey further shows that employees aged 16 to 24 were the least likely to say they knew at least a fair amount about their rights at work (45%, compared to 66% of those aged 25 and over). Employees working full time were also more likely to report knowing at least a fair amount about their employment rights (67%, compared with 54% of those working part time, who are disproportionately female).[4]
Q: 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?
16. The Government’s proposed Fair Work Agency (FWA) offers a significant opportunity to reconfigure and improve the way in which workplace rights and responsibilities are communicated, understood and enforced, particularly through an increased focus on advice services, communications and business support. This is essential to realise the Make Work Pay agenda. There is also a strategic opportunity to align the vision of the Fair Work Agency with the aims of the Industrial Strategy. Enforcement must be part of an eco-system that focuses on prevention as well as resolution in order to change workplace practices for the better and drive inclusive economic growth.
17. Acas supports the policy objectives of the FWA to “enhance and simplify the experience for both workers and businesses seeking information or enforcement action”.[5] Roles and responsibilities between Acas and enforcement bodies have evolved over years of working closely together, particularly since Acas took over responsibility for an amalgamated Pay and Work Rights (PWR) Helpline for the enforcement bodies nearly a decade ago. The rationale for this change included evidence of user confusion on where to access the right advice for their specific issue, as well duplication of effort and inefficiencies between the PWR Helpline and the Acas Helpline. There is a potential risk that in developing a role for the FWA to provide a further source of information on employment rights and responsibilities, this could unintentionally re-introduce some of those issues that the current arrangements with Acas were designed to address.
18. In the creation of the FWA we will be looking for:
Q: Will the proposed trade union reforms improve working relationships between workers and businesses, and hence, productivity and enable voice at work?
19. While we would not comment on the specific trade union reforms in the Bill, Acas does support the general principle that good industrial relations are a critical enabler of growth.
The case for good industrial relations:
20. The OECD recent report on the Future of the Work states: “Collective bargaining and social dialogue can help address the challenges posed by a changing world of work. As demographic and technological changes unfold, collective bargaining can allow companies to adjust wages, working time, work organisation and tasks to new needs in a flexible and pragmatic manner. It can help with shaping new rights, adapting existing ones, regulating the use of new technologies, providing active support to workers transitioning to new jobs and anticipating skills needs."[6]
21. The importance of employee voice and engagement is frequently cited in literature and interviews. Businesses with good engagement are reported to experience improvements in key performance outcomes: productivity, profitability, customer loyalty, employee turnover, safety incidents, absenteeism, patient safety incidents, product quality, wellbeing and citizenship. For instance, a 2024 meta-analysis by Gallup found that businesses with the highest levels of employee engagement outperformed those with the lowest by 14% in productivity and 23% in profitability.8 A further US study found that companies with high employee engagement are more innovative, profitable, safer and keep their customers for longer (Harter et al 2020).[7] On the contrary, low employee engagement in 2023 cost the UK more than £257 billion annually, approximately the same amount it cost to run the NHS the previous year (11.3% of GDP(Gallup, 2024).[8]
22. There is also evidence to suggest that the broader set of labour-related practices, often called ‘good work practices,’ contribute to productivity gains. Research by the Carnegie UK Trust and the RSA in form of a working group examined the dimensions of ‘good work’. These include: Terms of Employment; Pay and Benefits; Health, Safety and Psychosocial Wellbeing; Job Design and Nature of Work, Social Support and Cohesion, Voice and Representation and Work-Life Balance.[9] Research by the Warwick Institute for Employment Research also examined the dimensions of ‘good work’ and found a strong or moderately positive correlation between Pay and Benefits, Health Safety and Psychological Wellbeing, Job Design and Nature of Work and Voice and Representation.[10]
23. Acas analysis shows the average cost of a conflict is around £1,000 for every employee in the UK.[11] Increased volumes of disputes would therefore bring these additional costs to individual businesses. Stronger industrial relations would reduce these costs to employees, businesses and the economy.
Risk of industrial unrest:
24. The Government’s Impact Assessment of the Employment Rights Bill states: “There is the potential for reduced industrial action, and other possible benefits from a more cooperative industrial relations environment. The removal of legislative barriers could result in increased industrial action than there otherwise would have been." Whilst both scenarios (more, and also less, industrial action) are outlined in the above, Acas expects there is likely to be a slight increase in demand for Acas’s collective conciliation service in the short-term.
25. The link between employment law reform and industrial unrest is complex. Pay, and sometimes working conditions, remain the key issues at the root of most collective disputes. Industrial action is most prevalent in sectors experiencing the biggest real terms falls in pay (in particular in the public sector), which is also where trade union membership is highest.
26. Two wider variables may see increases in the short term:
Industrial action background data:
27. In each of the past two years (2022 and 2023), around 2.5 million working days were lost to industrial action. The average since 2020 has been 450,000 days.
28. At Acas, demand for our collective conciliation service rose and we handled over 600 collective conciliations, achieving a positive outcome in 94 per cent of such cases, almost half of which involved threatened or actual industrial action.
Impact on the dispute resolution system:
29. DBT’s Impact Assessment showed an expectation that policies covered within the Bill may impose a direct cost on business of <£5b annually. This includes employers familiarising with new legislation, admin and compliance costs: Acas has a direct role in mitigating this cost.
30. DBT's Impact Assessment estimates an increase of around 15% in cases to the ‘individual enforcement’ system with total public sector financial costs of c. £80m over the appraisal period. These are costs associated with additional Acas and Employment Tribunal cases. Acas suggests that the overall increase in demand is likely to be higher because of already rising case volumes. Acas case receipts data over the last 6 quarters shows an increase of 10,000 additional cases per year (rising to 11,000 in Q3 2004-25). The combined impact of 10% per annum rising caseloads and the 15% increase projected by the Government’s impact assessment suggests there may be around 25,000 additional cases upon the introduction of Day One Rights. If the current increase in cases becomes greater, and/or the actual caseloads are higher than projected 15% increase, then early conciliation cases to Acas will increase further, possibly exceeding 140,000 per annum.
31. Early Conciliation cases are broken down to Fast Track (straightforward cases, mostly related to unpaid wages) – which we are seeing fewer of; Standard Track (more complicated cases, includes Unfair Dismissal) – which has consistent volumes to previous years; and Open Track cases (the most legally complex cases, eg discrimination and whistle-blowing) – where we are currently seeing significant increases. Acas data shows that people with fewer protections under current law will sometimes add additional jurisdictions to allow them to submit a claim.
32. There are various factors that will influence both parties to a claim – on the nature of the claim, the track to which it is allocated, and the layers of complexity to the claim, for example, adding additional jurisdictions. This could include:
Other contributory factors:
33. A key factor in the success of the legislative reform will be the capacity of employers and employees to seek resolution. This is of critical importance to reducing the cost of conflict alongside any process of legislative change. There is developing evidence that the skills, knowledge and confidence required to undertake effective collective negotiations has reduced significantly.[12] Positions are becoming earlier and faster entrenched – making it harder for Acas to offer effective resolution services. While regulation of industrial action has tightened in recent years, established unions appear to have grown more willing to mobilise towards industrial action compared to the ‘last resort’ approach typically observed in the pre-pandemic period, with even some traditionally 'strike-averse' unions now more willing to seek industrial action mandates.
34. The ‘social partnership’ has diminished – the positive trusting relationship between the employer and the trade union/ employee network, which can identify improvements for better business outcomes - leading to more conflictual relationships. Organisations where this is successful are proven to have better outcomes.
35. There is broader evidence that employers, line managers and trade unions lack the skills to manage workplace conflict effectively and to prevent and resolve disputes which arise, which has an undermining impact on growth and economic success. In difficult economic circumstances, employers traditionally cut investment into training/de-prioritise skills.[13] More specifically, Acas research illustrates that employers do not prioritise line management skills; the ability to resolve conflict before it escalates; and to negotiate effectively when formal conflict does arise.[14]
36. The Acas Strategy for 2025 to 2030 is to close these gaps and increase ‘conflict capability’ in the British workforce. We will continue to have a critical role resolving collective disputes early – we can support all parties impartially and we understand the ingredients of success to resolve collective disputes: investing in relationships, taking time to prepare for talks, and being committed to finding resolution is essential. Third party support, such as Acas conciliation, can bring fresh eyes to critical situations, diffuse tensions and build pathways out of damaging disputes.
Q: What impact will the areas covered by the Employment Rights Bill have on small, medium and large businesses?
37. We have covered above (at paras 29-36) the potential impact in terms of rises in individual and collective dispute cases coming to Acas.
38. A particular challenge is likely to be experienced by small and medium sized enterprises (SMEs). In 2022, Acas carried out qualitative research into disputes in SMEs from an employer perspective including gross and general misconduct, bullying and harassment, negligence, unfair treatment, discrimination, poor performance, poor timekeeping, health and safety issues and issues relating to pay/terms and conditions.[15] Smaller employers tend to have less experience of handling disputes and less confidence in their processes to resolve disputes. Few have an HR manager. This can lead to the initial issue being exacerbated by how a dispute is handled, and, in turn, lead to complaints about poor handling. Escalating disputes drain resources for growth, innovation and shared solutions.
39. Specific SME challenges include recognition of conflict resolution skills as important; releasing staff in small firms from business delivery to undertake training; and adequate differentiation in engagement approaches because the SME population is highly heterogeneous, fragmented and seeks specific tailored training. Sectors with high shares of SMEs which also need improved conflict leadership and management skills are: accommodation and food, and admin and support services; manufacturing and hospitality.
40. Acas support can mitigate these risks: with continued investment we will work with millions of employers and employees every year to improve workplace relationships, providing free and impartial advice on employment rights, good practice and policies, and preventing and resolving workplace conflict. 90% of employers report being able to take action following a call to the Acas helpline.
Q: How will the Plan to Make Work Pay impact:
Economic growth and productivity
Q: What solutions or actions are required by Government, businesses and workers to effectively support the labour market while boosting productivity and protecting workers’ rights?
42. There are tree critical conditions for success for the Government to effectively support the labour market, boost productivity and protect workers’ rights.
A - Ongoing investment in Acas
43. Our good practice services and dispute resolution services benefit the economy £12 for every £1 spent (conservatively). Recognition that this need will be greater than ever in the coming period, and giving employers and trade unions the tools to build strong positive workplace relations; and resolve conflict at the earliest possible point will have significant benefit.
B - A strong modern industrial relations framework
44. Acas agrees with the Government’s proposal to build a modern, positive industrial relations framework around the four key principles of: collaboration and partnership between unions, businesses, and employees; ensuring that proportionality is at the heart of the framework; relationships built on trust andaccountability; and balancing the interests of all parties.
C – Capability and skills in conflict management and dispute resolution
45. The estimated cost to employers in the UK of individual workplace conflict is c. £28.5bn per annum. The majority of this individual conflict cost is incurred during employment and is associated with c.914 000 resignations and/or dismissals each year. Reducing this cost is contingent on building the capacity of employers and employees to seek resolution as well as revising policies and law.
46. In our response to the Government’s consultation on Making Work Pay: creating a modern framework for industrial relations, we further recommended that the new framework also:
[1] Employment Rights Bill economic analysis
[2] Employment Rights Bill economic analysis
[3] Measuring the scale and nature of labour market non-compliance affecting people in precarious work in the UK: executive summary - GOV.UK
[4] https://www.gov.uk/government/statistics/beis-public-attitudes-tracker-autumn-2022
[5] DBT impact Assessment – Fair Work Agency
[6] OECD (2019), “Negotiating Our Way Up: Collective Bargaining in a Changing World of Work,” Retrieved from OECD Publishing, Paris, https://doi.org/10.1787/1fd2da34-en.
8. OECD Employment Outlook 2019: The Future of Work | READ online (oecd-ilibrary.org) Retrieved from : https://www.oecd-ilibrary. org/sites/9ee00155-en/1/2/5/ index.html?itemId=/content/ publication/9ee00155-en&_ csp_=b4640e1ebac05eb1ce93dd e646204a88&itemIGO=oecd& itemContentType=book
[7] Harter,J.K. Schmidt,F.L. Agrawal,S. Blue,A. Plowman,S.K. Josh,P. Asplund,J. (2020, October). GALLUP 2020 Q12 Meta-Analysis: 10th Edition. “The Relationship Between Engagement at Work and Organisational Outcomes.” Retrieved from: https://www.mandalidis.ch/coaching/2021/01/2020-employee-engagement-meta-analysis.pdf
[8] https://www.gallup.com/workplace/349484/state-of-the-global-workplace.aspx
[9] Carnegie UK Trust and RSA Future Work Centre. (2018, September). “Measuring Good Work. The Final report of the Measuring Job Quality Working Group”. Retrieved from: https://d1ssu070pg2v9i.cloudfront.net/pex/pex_carnegie2021/2018/09/06105222/Measuring-Good-Work-FINAL-03-09-18.pdf
[10] Bosworth,D and Warhurst,C. Warwick Institute for Employment Research. (2020, Jan ) “Does Good Work Have a Positive Effect on Productivity? Developing the Evidence Base.” Retrieved from: https://d1ssu070pg2v9i.cloudfront.net/pex/pex_carnegie2021/2021/06/05091227/Research-findings-summary-does-good-work-have-a-positive-effect-on-productivity-Jan-2020.pdf
[11] Estimating the costs of workplace conflict | Acas
[12] Continuity and change in collective workplace conflict in Britain | Acas
[13] Employer investment in training in England | Institute for Employment Studies (IES)
[14] Managerial capability and staff engagement − findings from the Skilled Managers Productive Workplaces research programme | Acas
[15] https://www.acas.org.uk/research-and-commentary/resolving-workplace-disputes-in-smes-qualitative-research-with-employers