Five ways Labour’s Employment Law reform might affect hiring

The Labour Government are looking to reform some aspects of employment law in favour of employees in the 'Plan to Make Work Pay' scheme. These proposals took shape as a draft Employment Rights Bill at the end of October 2024. We look ahead at what these changes will be and what this could mean for hiring strategies in the future. 

What changes can be expected to Employment Law with the introduction of the Employment Rights Bill?

Day one rights for new hires

Employment rights such as statutory sick pay, parental leave, and claims of unfair dismissal will apply from day one of an employment contract. There will be a structure in place to make this known to all new hires via transparent communication. (The Labour government does not expect the reforms to unfair dismissal to come into effect any sooner than Autumn 2026. The current two-year qualifying period will continue to apply. This extended time period will allow employers to prepare and adapt to the new regime.)

More flexible working options to be made available

Flexible working can be requested by employees from the first day of employment, requiring employers to accommodate requests where possible. Hiring managers must be prepared to discuss flexible working options during interviews and be open to flexible working patterns.

Updates to the Draft Equality (Race and Disability) Bill

The Draft Equality (Race and Disability) Bill focuses on enhancing equal pay rights for workers and aims to close pay gaps for ethnic minorities and people with disabilities.

Mandatory Pay Reporting will come into fruition which will mean employers who hire 250 or more employees will be required to report on ethnicity and disability pay gaps. This will make it easier for individuals to bring equal pay claims.

The bill also looks to broaden Equal Pay Rights by extending statutory rights to equal pay beyond gender, ensuring protections for those from ethnic minority backgrounds and individuals with disabilities.

Full ban on zero-hours contracts

This bill looks to eliminate zero-hour contracts and replace with an average hour contract. This is to
rebalance one-sided flexibility and will allow workers to have a contract predetermined by their
actual working patterns.

Protection firing and re-hiring employees

Fire and rehire practices are when an employer dismisses an employee and then reoffers them a job
with different terms or pay. The bill seeks to clamp down on these practices and will replace and
strengthen the existing statutory code introduced in July 2024, promoting fairer treatment for
employees during restructuring.

How could the anticipated changes to UK Employment Law affect your hiring strategies?

The Labour Government’s proposed changes in employment law and the introduction of day one working rights could have several implications for hiring strategies:

1. Reluctance to Hire

With extended employment protections from day one, some businesses may be more cautious in hiring, particularly for roles that might have traditionally relied on probation periods to assess fit and capability. There could be a rise in fixed-term contracts, temporary positions, or freelance hires to sidestep some of these obligations. If workers have more rights immediately upon starting, firms might face more challenges or disputes over dismissals or working conditions, meaning that HR departments will need to be more robust and prepared for legal challenges.

At Carrot, we offer a range of recruitment services and can adapt our approach easily to fit with your resourcing requirements. We also have extensive experience in guiding clients through ‘contract to perm’ hiring policies which allows them to better assess suitability for the role long term before offering the position permanently, thus minimising risk. It also offers more flexibility to reduce staffing costs quickly should you need to adapt to a changing environment.

2. Stronger Retention Efforts

We predict that we will see more internal investment in retention strategies from companies looking to avoid the high turnover costs, given that employees will now have more protections from the outset. This could mean more training, upskilling, and internal mobility opportunities to keep employees engaged. It could mean companies also need to look at introducing longer term incentives such as loyalty rewards and long-service awards.

Carrot can help guide your HR and internal culture teams to create collaborative workplaces where employees feel supported and appreciated. Our 18 years working within recruitment means we have extensive knowledge of how to implement employee engagement initiatives, as well as structured benefit systems and training programmes which will help you to retain valued employees, diminishing the need to rehire. We can also provide guidance on competitor salary benchmarking to reduce the risk of losing top talent to your competitors.

Read our guide: How to use Employee Engagement strategies to retain your employees

Read our guide: Creating a positive culture through a Learning and Development Strategy

Read our guide: Impress Your New Hires with a Good Onboarding Experience

3. Focus on Cultural Fit

Companies are likely to place more emphasis on the recruitment process to ensure they’re hiring the right person from the start. There might be longer or more detailed interview processes, more focus on skills assessments, and potentially longer pre-employment checks.

At Carrot, we work in exclusive partnership assignments with 55% of our clients. In a partnership, we take the time to really understand your company intrinsically so that we are able to represent your brand professionally with the knowledge and enthusiasm to really sell your offering to potential candidates. We can help support with background checks, leadership assessments and provide guidance on compatibility evaluation to help make sure you are 100% sure of your hire.

4. Impact on Flexible Working

With Labour looking to strengthen flexible working from day one, companies may need to be more adaptable in offering remote or flexible arrangements. This could change recruitment dynamics, with candidates prioritising employers who offer flexible work structures.

At Carrot, we already offer flexible working options to all our employees and have been doing so for some years. We work with hundreds of clients who have also implemented successful flexible working structures through our guidance and we are more than happy to chat further about how we can help you do the same. We can offer lots of impartial, insightful advice in navigating flexible and home working should you need any support in this area.

Read our guide: What will the The Flexible Working Bill mean for employers?

5. A shift in Candidate Applications

With Pay Reporting becoming mandatory for companies hiring more than 250 employees, there could affect be a shift in candidates seeking roles in larger companies, attracted by their commitment to equity. This means smaller companies may need to do more to communicate their values to potential hires during the hiring stages.

At Carrot, we support clients with initiatives such as blind hiring and unconscious bias processes which allow companies to create more diverse workplaces. We also help businesses to build their Employer Value Proposition (EVP) which is a powerful tool to attract the right talent to a role by appealing to specific values, expectations, and goals. 

Read our guide: How to remove Unconscious Bias from your hiring process

Read our guide: Why is having a clear EVP important for candidate attraction?

What advice are we giving to our clients ahead of the UK Employment Law changes?

• Place an immediate emphasis on hiring new staff prior to law changes where applicable
• Evaluate hiring process to strengthen areas of weakness
• Consider hiring a contractor or semi-perm staff to reduce risk of wrong hires
• Make steps to improve retention processes in order to keep valued staff
• Analyse staff satisfaction with surveys/feedback to ensure a happy workforce
• More focus on an EVP for smaller organisations
• Review pay structures and ensure fairness to attract diverse candidates

Indeed we have some clients placing an immediate emphasis on hiring new staff before these changes take effect. Because these new employees will not qualify for day-one rights, hiring firms will have more time to assess suitability and to end the agreement if necessary.

But in the long term, these changes may push firms to refine their hiring strategies, focusing more on quality and retention, and adapting to an environment where employee rights and protections are significantly strengthened from day one. How firms adapt to this will likely depend on their size, industry, and workforce model.

As a business, we’ve worked in partnership with hundreds of clients across numerous skills functions in Pharma, Healthcare and Life Sciences since 2006 - we’ve seen some hugely efficient processes, some very clunky ones, and everything else in between.

We are now putting this vast experience to good use in helping clients to improve their own talent attraction and retention methods, by supporting your HR teams to navigate their hiring, onboarding and cultural initiatives.

We’d love to discuss how our service offering could enhance your hiring process. Get in touch with Martin for a preliminary chat about your forthcoming requirements.

martin@carrotrecruitment.com / +44 (0)7786 024 142