Next year will see the long-anticipated Employment Rights Bill come into force. Promising the widest range of employment reform in years, it will offer enhanced employment law rights and protection for workers, both of which will impact businesses of all sizes.
How will the bill impact businesses?
The Bill will have a particular and significant impact on workforce management for retail, hospitality and leisure businesses. In a sector reliant on flexibility to manage seasonal, and sometimes unpredictable, peaks and troughs in trading throughout the year, some of the changes will require businesses to re-assess staff scheduling, their use of zero-hours contracts and get to grips with the removal of the two-year qualifying period for unfair dismissal protection. Combined with the further costs for businesses with national living/minimum wage and employers’ national insurance contribution increases, the forthcoming employment changes will increase the financial burden for businesses.
Yet if businesses act quickly to improve workplace culture (which will have a knock-on effect on staff recruitment and retention), it could provide them with a commercial advantage over their competitors. We expect staff wellbeing and protection to remain a critical and key workforce issue for 2025. In October 2024, we saw the introduction of a new duty requiring employers to take reasonable steps to prevent sexual harassment in the course of employment and this will be further enhanced under the Employment Rights Bill.
At the same time, the retail sector continues to campaign for greater protection for staff from customer abuse and improved mental health support for retail workers. The Retail Trust’s Health of Retail Report 2024 reports that the top five things impacting retail colleagues’ mental health include the cost of living, work-life balance, health conditions, home life and workload, reporting that 33 percent of store workers say that abuse from customers has negatively impacted their mental wellbeing. Whilst the Government is proposing to make assault against retail workers a new stand-alone offence, retailers are continuing to look at ways of protecting staff and offering enhanced wellbeing support and benefits to tackle declining mental health and sickness absence.
DEI in the spotlight
Diversity, equity and inclusion continues to be a key priority for retail businesses too. Consumers and employees alike are demanding that companies not only embrace diversity but also actively promote inclusivity and equitable workplaces.
The high profile string of equal pay cases impacting the retail sector shines a spotlight on fair and equal pay. Retailer Next faces a possible £30m compensation bill after an equal pay claim brought by over 3,500 retail staff resulted in victory for the claimants. The Employment Tribunal found that the business need to keep costs down did not justify the differential in basic pay between warehouse staff and retail staff (predominantly women) after finding that the market rate differentially disadvantaged women.
With minimum pay rates increasing, businesses are carefully reviewing pay structures to identify pay disparities between male and female dominated roles and looking at the wider business reasons, beyond mere cost, to justify their approach to setting pay.
Understanding the practical implications of the Bill
One of the biggest changes to employment law reform will include a new day 1 right to unfair dismissal protection for employees. The requirements for a fair dismissal will be modified during the “initial period of employment” (effectively the probation period), if the dismissal is for conduct, capability, a substantial reason relating to the employee or because their employment is unlawful (e.g. if they don’t have the right to work in the UK).
The Government is to consult on the length of the initial period of employment/probation period, although its stated preference is 9 months. Businesses can prepare for these changes by assessing their applicant screening and recruitment practices and consider whether existing codes of conduct and performance are fit for purpose and sufficiently clear and accessible to staff. Proactive management of staff during probation periods will be key.
The new rules around staff rotas and shift management, which are designed to give greater predictability in scheduling will directly and significantly impact retail, leisure and hospitality businesses. Employers will be required to provide advanced notice of shifts and compensate workers for last-minute changes or shift cancellations. The changes shift the financial impact on last minute rota changes from workers to businesses and adopting new HR technologies for scheduling, recruitment, and workforce analytics will be essential to manage the changes.
The long-term benefits and more efficient workforce management practices will ultimately outweigh the time, training and investment commitment to implement the changes which will also assist in balancing flexibility with the operational needs of the business.
Zero-hours contracts are once again in the spotlight and within scope of the changes that businesses need to prepare for. The new proposed duty to offer staff on zero hours contracts a guaranteed hours contract which reflects the hours they have actually worked in a reference period (details to be set out in regulations) will impact retail, leisure and hospitality businesses which frequently use more flexible types of contracts to manage trading peaks and troughs. We anticipate the change will lead to a shift away from use of zero or low-hours contracts, as businesses instead consider the use of overtime or temporary or fixed-term staff.
Mental fitness and wellbeing at the forefront
We are continuing to see HR managers in the sector focus on supporting and promoting mental wellbeing by taking proactive measures to prevent harm and abuse and offering benefits to support workers who experience periods of ill-health and sickness absence.
Preventative measures include increased security and monitoring in stores and clear signage to customers and other third parties promoting the business’ zero tolerance policy on abuse and the consequences of abuse towards workers. Enforcement of breach of policies is also key, requiring managers to be regularly and effectively trained to manage and support staff when incidents occur to help foster a safer work environment.
Customer facing businesses are increasingly providing conflict de-escalation training to empower staff to manage difficult situations while ensuring their safety. Equally important is knowing how to report incidents and being able to do so without fear of retaliation. This requires a workplace culture that promotes and encourages fairness, openness and support.
Whilst 2025 will require preparing for and adapting to a significant number of workforce related changes, a proactive approach that integrates these priorities into the broader business strategy can mitigate risks, improve employee satisfaction, and enhance brand reputation. In a competitive industry like retail, prioritising the well-being and rights of employees is not just the right thing to do – it is essential for business success in 2025 and beyond.
If you want to find out more about the key trends shaping the retail industry, download the EDGE of retail 2025 report now.
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