Spotlight on construction sector as challenges unveiled by ER Bill

The Employment Rights Bill, currently moving through Parliament, is set to bring significant changes across industries, with particularly profound effects on the construction sector. The industry employs over 2.3 million people in the UK and relies heavily on flexible, transient work arrangements meaning even small shifts in employment rights can have broad repercussions. 

The bill includes enhanced protections for temporary, zero-hour, and part-time workers—contracts prevalent in construction—and includes provisions for flexible working requests, fair treatment of agency workers, broader trade union rights, and a review of the two-year rule for unfair dismissal. While the reforms aim to boost worker stability and security, they pose a challenge for employers – adapting to the new compliance demands while balancing costs and operational flexibility.

So, let’s consider the key areas of the bill which are likely to have the biggest impact on firms in this sector. Stuart Neilson and the team are currently talking to a number of clients in readiness for what lies ahead and earlier he joined me by video-link from Glasgow to discuss it. First, I asked about the proposed removal of the two-year qualifying period for unfair dismissal claims and what that might mean for managing recruitment and retention in this sector:

Stuart Neilson: “Yes, I think it is likely to be a pretty material change for all industries but particularly within the infrastructure sector it's likely to be a pretty material change. We go from an environment at the moment where you can recruit someone and you've got two years within which to work out if they're the right fit and if you have to get rid of them within that two-year period you can do that without the risk of an unfair dismissal claim. That is all going to change. Not immediately, they're talking about it coming in in 2026 but it will mean that at that point in time from day one people will have an unfair dismissal right but they are building in this probationary period. They're suggesting nine months but it is still to be finally determined. They're going to consult about whether it's nine months or not, and during that initial period there will be the ability to part company with someone but you will still have to follow some kind of process. It looks like it will be some form of a meeting and a letter but, again, we are waiting to see what the full detail of that is. So a simplified process during potentially those first nine months, but you will still have the potential risk of people saying you haven't followed that process correctly, or you've done something wrong, and therefore people bringing unfair dismissal claims. So in an environment like infrastructure where jobs can ramp up, ramp down, that does pose a particular challenge, I think.”

Joe Glavina: “Would implementing more rigorous and shorter-term performance evaluations be a practical way to address this change?”

Stuart Neilson: “I think that's right. It is all going to be about process and making sure you've got a good and robust process in place and that you've got probationary periods built into your contracts, and that you know what you're going to do and what process you are going to have to follow, and that you've trained people to make sure that they are capable of following that process.”

Joe Glavina: “Turning now to zero-hours contracts, which may soon be replaced with guaranteed hours requirements, do you think this poses a significant challenge for managing fluctuating staffing needs in the sector? And if so, what approaches might help firms adapt?”

Stuart Neilson: “I think it is a big issue. I think the problem from what I've seen of the legislation at the moment, and remember we've got the primary legislation and then there is a lot of the detail that's going to follow in regulations which we don't have yet so we don't quite know the full picture. But what we do know at the moment is that, in essence, what the government are proposing is a system whereby those who we currently call zero hours employees, and also employees who might be on low hours – again we don't know what they mean by that but it could be people who are maybe on under 10 hours a week, 12 hours a week, we just don't know. If you're a zero hours employee, or a low hours employee, there will be an ability, or requirement on the employer, to offer you, effectively, a guaranteed number of hours after a 12-week period. Again, we think it's 12 weeks, it could be a different reference period based on the number of hours you've actually worked in that period. So what you effectively build in is you build a ratchet in whereby people will get some guaranteed level of hours, but it only goes up and it only goes in one direction. So I think our concern is where's the flexibility in the ability to ramp down in that type of situation. Again, we don't know the full details, we don't know if there will be some mechanism whereby there might be some flexibility built in. I think there's some talk of flexibility in relation to seasonal workers, but I'm not sure that within the infrastructure sector you would really have people who would qualify as seasonal workers. I think that's more aimed at things like farming, for example, or the tourist or hospitality sector. So it is a problem. I think one potential solution might be that there will be a greater use of agency workers going forwards. Again, the government have suggested they're going to be looking at whether they regulate agency workers in a similar way. I personally think that's going to be quite a difficult thing for them to achieve so whether they actually do that or not I don't know, but I think that this certainly poses a particular challenge for the infrastructure sector, as you say, in the ability to not just ramp up, but ramp down.”

Joe Glavina: “Turning to trade unions Stuart. The new Labour government wants to make it easier for trade unions to gain recognition and to simplify the balloting system. I see from the various factsheets they’ve published most of them are around 2 or 3 pages whereas for trade unions it’s a full 13 pages long which shows the weight this is being given. From an employer’s perspective, what’s your main concern here?”

Stuart Neilson: “I think the concern for employers is that historically the number of employers in the infrastructure sector that recognize trade unions has been reasonably low and probably getting lower over the years. The public sector tends to be the area where trade unions have been stronger, certainly than necessarily in the infrastructure sector, but I do think the infrastructure sector is the sector that unions will be looking to try and get a little bit more representation and recognition from employers. Now obviously there can be positives to that, but there can also be negatives to that and I think for a lot of employers, sometimes they prefer to work with their own employees within a kind of employee forum, or employee consultative group, and with the unions being given greater powers to come in and force recognition that may force employers down the route of having to deal with trade unions in a way that they don't currently have to. The key changes that we're talking about here are, firstly, this legislation is going to give them trade unions greater access right into the workplace. So at the moment, unions don't really have the right to just come in and start talking to employees. This legislation is going to give them, effectively, that right. Secondly, at the moment, if you want to get recognition as a trade union you have to show you've got at least 10% of the bargaining unit which are members of that trade union. The government is proposing to reduce that number down from 10% although, again, we don't know what it will be but I have seen reference to it being as low as 2% which is obviously a very low number. Also, the voting requirements around getting recognition are going to change to make it easier to get recognition. So what you could end up with is recognition in situations where there's really quite small density of trade union membership within a particular bargaining unit, and I think that might represent some challenges for employers within the infrastructure sector.”

Joe Glavina: “Let’s turn to collective redundancy and the removal of the ‘single establishment’ rule. This would mean redundancies across all sites count towards the 20-employee threshold, likely triggering more collective consultations. Do you think firms will need to rethink their labour deployment to manage this risk?”

Stuart Neilson: “I think, again, this is pretty challenging change. Some of the listeners might remember back, I think it's probably 10 years ago, there was a case called Woolworths which at that point in time I think the Court of Appeal suggested that the establishment rule had to go and therefore when you had redundancies you had to count up all the redundancies across the entire organization in the UK and that created problems for about a year and then the decision got overturned in the Supreme Court and we were back to the establishment rule, so looking at redundancies within an establishment. So what the government are now proposing is effectively to go back to that world when we had the Woolworths Court of Appeal decision so you would actually have to count up the number of redundancies across the whole entire business to determine whether or not you hit the threshold. Now for large employers what that effectively means is that you are constantly in a situation where you probably are at, or above, that threshold because of the quite wide way in which redundancy is interpreted for these purposes. It's not just your classic redundancy situation, it can cover any type of situation where an individual leaves, other than for performance or misconduct. You get into a situation where you really have to proceed with collective consultation for almost all departures in those circumstances. So it is going to make it much more challenging and when you are looking at departures other than, as I say, misconduct, performance related ones, you are probably going to have to go through some form of collective consultation if the law changes on as the government are proposing.”

Joe Glavina: “Moving to fire and rehire, there’s a view that these changes will shift companies toward voluntary renegotiation, perhaps even collective bargaining. Do you see that becoming a necessity?”

Stuart Neilson: “Yes, I think it's going to make it a lot harder for employers to force through changes to terms and conditions of employment. I think it'll probably do two things. I think it's going to require employers to look very closely at their existing terms and conditions and whether or not, before this change takes effect, we can put in variation clauses into contracts, or when you putting in new contracts that you make sure you have as much flexibility built into those contracts as possible that allows you to make the changes without the need to get express consent from employees for each and every change. So there's quite a bit to look at there around existing contracts and future contracts and building in as much flexibility as possible. Then when you do get to situation where you need to make changes fire and rehire is not going to be available or, if it is, it will be a very much more costly route for employers to follow. So, I think that is going to drive much more negotiation and much more potential trade union involvement in trying to get these things agreed and across the line. I should say that fire and rehire has been described by the government as a big scourge. I have not, I have to say, seen operate, or be used, that often. It happens on very rare occasions at the moment within the infrastructure sector but sometimes it is a necessary thing for employers to have in their armoury if they want to get particular changes through and make sure you cover everybody with those changes, if you're harmonizing terms and conditions, for example. So it is just going to make some of those make some of those exercises a little bit more challenging going forward if and when this becomes law.”

Joe Glavina: “Moving to the Worker Protection Act and the new duty to prevent sexual harassment, which came into force on 26 October. The Equality and Human Rights Commission expects firms to conduct risk assessments and proactively address risks. For construction, this responsibility falls on HR rather than health and safety. What would be your message to firms in preparing these assessments?”

Stuart Neilson: “I suppose construction firms may have a slight advantage over a number of different sectors because, of course, construction and infrastructure very much operates within the world of health and safety already. Health and safety is such a massive part of the whole industry and the kind of mindset that is there around health and safety already exists and taking reasonable steps to prevent harassment is going to be a little bit of an adjunct onto that already. So I think the HR teams will be familiar working with their HR colleagues around risk assessments. So I think infrastructure are well placed to adapt, but it is an adaptation that's required to move towards assessing whether reasonable steps have been taken. This is interesting because this dovetails a little bit with the Employment Rights Bill coming in which is that the government's proposal is to up the bar even further from not just reasonable steps, but they want to move to all reasonable steps, and ally that to liability for third party harassment as well. So this is going to become, again, an area where there's going to be a little bit of work required from HR teams within the infrastructure sector going forwards.”

Joe Glavina: “You mentioned third-party harassment, which leads us to contractor compliance. Ensuring subcontractors and third parties align with the client’s anti-harassment policies will be crucial, won’t it?”

Stuart Neilson: “Yes, I think that is definitely going to become an area of focus because of the potential liabilities that the main contractor might incur because a subcontractor, or an employee of subcontractor, has harassed one of your employees or staff members. I think one of the things that inevitably is going to get looked at is the terms and conditions of engagement of subcontractors. What obligations can we place upon them to make sure that they are doing the right things around training and education dealing with harassment? Also, I suspect, that you are likely to see indemnity style provisions coming in whereby the subcontractors may have to indemnify a main contractor in the event that, because of some activity of that subcontractor’s employees, it causes a liability for the main contractor around harassment.”

On timing, it is widely expected that the bill will receive Royal Assent around the summer of 2025 and the first laws to take effect being the repeal of some of the more restrictive trade union laws which the Conservatives brought in. Most of the rest will be in 2026 so there is time for construction firms to prepare which will be necessary to achieve that crucial balance - adapting to the increased regulation whilst preserving operational flexibility. If you would like help with that please do get in touch with Stuart Neilson whose contact details are there on the screen for you, or your usual Pinsent Masons adviser.