Adapting to change: 3 key employment law shifts set to reshape hospitality in 2025

As we head into 2025, staying ahead of the sweeping changes in employment law has never been more important. The hospitality sector in particular must adapt to survive a significant shift that will dramatically alter the balance of power between employers and employees. 

In this piece we’ve focused on three key changes which may have gone under the radar but are set to reshape the industry, ensuring that you’re prepared for what’s on the horizon. 

Tipping the scales – government proposes strengthening legislation

The snappily named Employment (Allocation of Tips) Act came into force on 1 October 2024. While the Act required employers to pass tips on to staff without deduction and mandated a written policy, there was no statutory requirement to consult with workers when developing policies. 

The new Labour government believes that the Act does not go far enough in protecting workers’ interests and ensuring their voice is heard. The government is therefore proposing strengthening the law by mandating consultation with workers as part of the Employment Rights Bill. 

The Government’s own impact policy accepts that there will be costs associated with consulting and that small and micro business are likely to experience a disproportionate share of those costs (with 51% of workers in tipping industries employed in those businesses). However, it believes that the enforcing consultation could improve staff productivity, reduce disputes over the allocation of tips, and improve business reputation and customer loyalty. 

It is proposed that the new provisions will come into force on 1 October 2026 or 12 months after Royal Assent of the Employment Rights Bill, whichever is sooner. 

What to do now: Consulting with your employees on the allocation of tips is good practice and will help avoid later disputes and potentially costly litigation. If you’re not doing so already we recommend that you get ahead of the curve and put in place a system of consultation. 

Flexibility in flux: new zero hours rules stretch business limits 

Zero-hours contracts have long been in the crosshairs of the Labour Party. In October last year Business Secretary Jonathan Reynolds said that the restriction on unwanted zero hours contracts was a change that he had been trying to bring about for 14 years. 

The Government is particularly concerned about “one-sided flexibility” and the new measures include a right to guaranteed hours after the end of every reference period (expected to be 12 weeks), the right to reasonable notice of shifts (including change and cancellation) and the right to payment for cancelled, moved and curtailed shifts where sufficient notice has not been given. 

What has arguably been missed by some is the proposal to require employers to track worker hours and proactively make an offer of guaranteed hours at the end of a reference period. This is a departure from the familiar flexible working regime where the onus is on the employee to make a request to vary their terms and conditions. The stated aim of the Government is to address concerns with the balance of power. 

The Government accepts that the cost of loss of flexibility will be significant for business, however it believes that workers will benefit from the policy in the form of improved income security and predictability. The Government estimates that in the initial year of the new measures between 1.3 and 1.4 million people will be offered a switch to guaranteed hours. Contrast this with research from 2022 which found that just 22% of workers on zero-hours workers found the arrangement unsuitable - about 260,000 people.

The proposed changes appear practically unworkable and have faced considerable criticism. The burden on business also appears to have been underestimated, particularly given research that shows that the benefits of zero-hours contracts outweigh the downsides for most workers. 

What to do now: We hope to see some watering down of the proposals following consultation and would encourage affected businesses to participate in that process. For now, think about the systems you have in place and whether they enable you to track hours accurately. Consider the potential added costs to your business in offering guaranteed hours/payments for cancelled or rearranged shifts, and how you will approach workforce planning with less flexibility. 

Third party harassment: employers must serve up new protections

New legislation on preventing workplace sexual harassment came into force last year. Employers must now take reasonable steps to prevent harassment, with proposed amendments requiring all reasonable steps. The EHRC can enforce this duty, and Employment Tribunals can increase compensation by 25% for breaches.

There is now further proposed legislation to prohibit harassment by third parties, albeit the EHRC’s guidance already extends this far. For the hospitality industry this presents unique challenges due to the customer-facing nature of its work, high staff turnover, alcohol consumption, and resource constraints. 

The new rules are intended to address findings of significant workplace harassment. In May 2023 the TUC found that 39% of harassment incidents involved third parties, with the EHRC reporting that 52% of women aged 18-34 reported third-party harassment at work, with many of the affected individuals working in the hospitality industry.

What to do now: A common theme found by the EHRC was a lack of management support, with some employers viewing sexual assault as a normal part of the job. As a minimum, businesses should be conducting risk assessments, implementing robust policies and procedures, and should consider surveying their workforce to understand and monitor the issue.