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Labour wins UK general election: What changes are coming for employers?

The Labour Party has officially been elected as the new government of the United Kingdom meaning it will likely now be hurrying to initiate its proposed (and radically transformative) legislation, as outlined in its Manifesto and Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People (the “Plan”), within the next 100 days of office (or by 12 October 2024).

Employers should now start considering how these proposals may affect their business to ensure they are ready for the reformed employment and business landscape that is inevitably on the (near) horizon.

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Published 5 July 2024

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The Labour Party has officially been elected as the new government of the United Kingdom meaning it will likely now be hurrying to initiate its proposed (and radically transformative) legislation, as outlined in its Manifesto and Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People (the “Plan”), within the next 100 days of office (or by 12 October 2024).

Employers can however breathe a (small) sigh of relief as putting these proposals into law will take time and despite the initial 100-day promise, Labour has committed to “consult fully with business” before legislation is passed so the raft of changes will likely take longer (in most cases) to come into force. This being said, employers should now start considering how these proposals may affect their business to ensure they are ready for the reformed employment and business landscape that is inevitably on the (near) horizon.

To help employers better understand what is to come, we have summarised some of the key proposals including the impact we anticipate that these will have on UK employment law (and as result, your business) in the coming months (and years) and will continue to provide more comprehensive analysis as Labour provide more information going forward.

The Plan – the key points for employers

  1. Employment status – a single “worker” status

Labour is looking to overhaul the UK’s current three-tier employment status system that currently differentiates between employee, worker and the genuinely self-employed (which has separate employment rights and taxation systems) to a simpler two-tier system with individuals either being classified as “workers” or “self-employed”. This is inevitably due to a rise in the gig economy that has meant the current complex legal framework is difficult to apply to new (and often innovative) ways of working resulting in significant challenges for both employers and vulnerable workers.

Individuals in the “worker” category will obtain the full set of employment rights that are currently reserved for employees only as well as any new rights passed into legislation. This would mean they would benefit from rights to maternity, paternity and other family-related leave and unfair dismissal rights (see also point 2 below). Businesses who engage “workers” should start auditing this workforce and begin to consider the potential cost implications of the extended provision of rights.

  1. Employment protections – changes to unfair dismissal law

Another significant change is the proposal to remove the two-year qualifying period before an employee obtains unfair dismissal protection which would therefore make unfair dismissal a “day one” right. This will likely have a substantial effect on recruitment practices, use and management of probationary periods and training for managers. Employers would need a justifiable reason for dismissal and to follow a fair process (including lengthy performance improvement plans) from the outset of an individual’s employment. It is also open whether it will be easier to dismiss someone in their probationary period or whether the full rules on dismissal will apply to them as well. If so, employers may be encouraged to use them routinely, and perhaps, for longer periods of time than is currently the case. If so, this could mean that we see a cap in length of probationary periods coming into force to prevent them being used excessively and unreasonably.

Given the existing legislation has scope for the government to make these changes without consultation or parliamentary approval, this change is one that could be pushed through quickly meaning there could be a rapid uptick in grievances and Tribunal claims that will require more management time and money to deal with. In practice, we think that claimants with automatic unfair dismissal and discriminatory dismissal claims (especially if higher paid) will continue to bring those claims as they are able to do as these are “day one” rights anyway, but instead pleading ordinary unfair dismissal as an alternative or additional claim to add another string to their bow. Going forward, employers will inevitably become more cautious when it comes to recruitment to limit the risk of a bad hire.

  1. Employment Tribunals – reform of the procedure

Currently, claimants have (for most claims) three months in which to issue an employment claim against their current or former employer. Labour’s ambition is to increase the time limit to six months and their view is that it will allow more time for internal procedures to be carried out (along with settlement discussions), therefore (hopefully) decreasing the number of Employment Tribunal claims. This could be the case as employees will not be forced to act as quickly to protect their position; but it does mean that there will be a significantly longer period of time before employers are out of the woods in terms of whether an employee has brought a claim or not.

  1. Other key changes
  • Zero hours contracts: Ban on “exploitative” zero hours contracts, ending “one-sided flexibility” and ensuring that all jobs provide a baseline level of security and predictability (including reasonable notice of changes in shifts/working time) and that everyone has a right (should they want it) to a contract that reflects the number of hours they regularly work averaged over a 12-week period. Employers may need to audit their workforce to understand the potential impact and may wish to explore alternative flexible working arrangements. Although this proposal may be included in the Employment Rights Bill, it is likely to require substantial consultation and secondary legislation before coming into force.
  • Pay: Scale the National Minimum Wage (NMW) rate to reflect the cost of living, abolish NMW age bands so all adult workers are paid the same rate, removal of lower earnings threshold for Statutory Sick Pay (SSP) and removal of SSP waiting days (with both being implemented as early as April 2025), ensuring the fair allocation of tips and altering the treatment of travel time as paid working time in certain circumstances.
  • Fire and rehire: A full ban on dismissing and re-engaging employees on new, less favourable terms (currently permitted provided the employer has a “substantial reason”) has been diluted under the Plan. Fire and rehire will likely still be permissible but in a more restricted set of circumstances, including if the business genuinely has no alternative to remain viable and after a fair consultation process.
  • Collective consultation: Change the collective redundancy consultation obligations (currently 20 or more proposed redundancies “at one establishment” within a 90-day period) to apply to the aggregated total across all of an employer’s sites rather than to each separate work unit.
  • Equal pay and discrimination: Extend pay gap reporting to ethnicity and disability (for employers with over 250 employees) and amend gender pay gap reporting to require the publication of action plans and that outsourced workers’ data is included. A new regulatory and enforcement unit for equal pay will also be created. Further, Labour also plans to extend the equal pay regime to cover the protected characteristics of race and disability and bring into force dual discrimination provisions in the Equality Act 2010.
  • Right to disconnect: Introduce right not to be contacted outside of normal working hours to promote a positive work-life balance given the growth in flexible and remote working practices which has “inadvertently blurred the lines between work and home life”. The plan is to follow similar models to those that are already in place in Ireland or Belgium with the wording – “We will bring in a right to switch off” – suggesting that we will follow the Belgium model, which, since 1 April 2023, means private sector employers with 20 or more employees have been required to implement a right to disconnect for all employees via a collective bargaining agreement or work rules.

Conclusion and key takeaways

As mentioned above, whilst it is not immediately clear when (or if) some of these changes will be implemented and what they will look like when/if they are, we suggest starting to consider how these changes will affect your business by:

  • Auditing and reviewing current practices, identifying any areas of concern and taking legal advice, where necessary.
  • Being ready to update policies, handbooks and procedures in anticipation of changes and ensuring these are communicated to employees and stored in a readily accessible location (such as on the Company intranet).
  • Planning training and preparing FAQ documents for HR and managers to ensure a smooth transition when the changes are brought into force.
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Shorter Reads

Labour wins UK general election: What changes are coming for employers?

The Labour Party has officially been elected as the new government of the United Kingdom meaning it will likely now be hurrying to initiate its proposed (and radically transformative) legislation, as outlined in its Manifesto and Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People (the “Plan”), within the next 100 days of office (or by 12 October 2024).

Employers should now start considering how these proposals may affect their business to ensure they are ready for the reformed employment and business landscape that is inevitably on the (near) horizon.

Published 5 July 2024

Associated sectors / services

Authors

The Labour Party has officially been elected as the new government of the United Kingdom meaning it will likely now be hurrying to initiate its proposed (and radically transformative) legislation, as outlined in its Manifesto and Labour’s Plan to Make Work Pay: Delivering A New Deal for Working People (the “Plan”), within the next 100 days of office (or by 12 October 2024).

Employers can however breathe a (small) sigh of relief as putting these proposals into law will take time and despite the initial 100-day promise, Labour has committed to “consult fully with business” before legislation is passed so the raft of changes will likely take longer (in most cases) to come into force. This being said, employers should now start considering how these proposals may affect their business to ensure they are ready for the reformed employment and business landscape that is inevitably on the (near) horizon.

To help employers better understand what is to come, we have summarised some of the key proposals including the impact we anticipate that these will have on UK employment law (and as result, your business) in the coming months (and years) and will continue to provide more comprehensive analysis as Labour provide more information going forward.

The Plan – the key points for employers

  1. Employment status – a single “worker” status

Labour is looking to overhaul the UK’s current three-tier employment status system that currently differentiates between employee, worker and the genuinely self-employed (which has separate employment rights and taxation systems) to a simpler two-tier system with individuals either being classified as “workers” or “self-employed”. This is inevitably due to a rise in the gig economy that has meant the current complex legal framework is difficult to apply to new (and often innovative) ways of working resulting in significant challenges for both employers and vulnerable workers.

Individuals in the “worker” category will obtain the full set of employment rights that are currently reserved for employees only as well as any new rights passed into legislation. This would mean they would benefit from rights to maternity, paternity and other family-related leave and unfair dismissal rights (see also point 2 below). Businesses who engage “workers” should start auditing this workforce and begin to consider the potential cost implications of the extended provision of rights.

  1. Employment protections – changes to unfair dismissal law

Another significant change is the proposal to remove the two-year qualifying period before an employee obtains unfair dismissal protection which would therefore make unfair dismissal a “day one” right. This will likely have a substantial effect on recruitment practices, use and management of probationary periods and training for managers. Employers would need a justifiable reason for dismissal and to follow a fair process (including lengthy performance improvement plans) from the outset of an individual’s employment. It is also open whether it will be easier to dismiss someone in their probationary period or whether the full rules on dismissal will apply to them as well. If so, employers may be encouraged to use them routinely, and perhaps, for longer periods of time than is currently the case. If so, this could mean that we see a cap in length of probationary periods coming into force to prevent them being used excessively and unreasonably.

Given the existing legislation has scope for the government to make these changes without consultation or parliamentary approval, this change is one that could be pushed through quickly meaning there could be a rapid uptick in grievances and Tribunal claims that will require more management time and money to deal with. In practice, we think that claimants with automatic unfair dismissal and discriminatory dismissal claims (especially if higher paid) will continue to bring those claims as they are able to do as these are “day one” rights anyway, but instead pleading ordinary unfair dismissal as an alternative or additional claim to add another string to their bow. Going forward, employers will inevitably become more cautious when it comes to recruitment to limit the risk of a bad hire.

  1. Employment Tribunals – reform of the procedure

Currently, claimants have (for most claims) three months in which to issue an employment claim against their current or former employer. Labour’s ambition is to increase the time limit to six months and their view is that it will allow more time for internal procedures to be carried out (along with settlement discussions), therefore (hopefully) decreasing the number of Employment Tribunal claims. This could be the case as employees will not be forced to act as quickly to protect their position; but it does mean that there will be a significantly longer period of time before employers are out of the woods in terms of whether an employee has brought a claim or not.

  1. Other key changes
  • Zero hours contracts: Ban on “exploitative” zero hours contracts, ending “one-sided flexibility” and ensuring that all jobs provide a baseline level of security and predictability (including reasonable notice of changes in shifts/working time) and that everyone has a right (should they want it) to a contract that reflects the number of hours they regularly work averaged over a 12-week period. Employers may need to audit their workforce to understand the potential impact and may wish to explore alternative flexible working arrangements. Although this proposal may be included in the Employment Rights Bill, it is likely to require substantial consultation and secondary legislation before coming into force.
  • Pay: Scale the National Minimum Wage (NMW) rate to reflect the cost of living, abolish NMW age bands so all adult workers are paid the same rate, removal of lower earnings threshold for Statutory Sick Pay (SSP) and removal of SSP waiting days (with both being implemented as early as April 2025), ensuring the fair allocation of tips and altering the treatment of travel time as paid working time in certain circumstances.
  • Fire and rehire: A full ban on dismissing and re-engaging employees on new, less favourable terms (currently permitted provided the employer has a “substantial reason”) has been diluted under the Plan. Fire and rehire will likely still be permissible but in a more restricted set of circumstances, including if the business genuinely has no alternative to remain viable and after a fair consultation process.
  • Collective consultation: Change the collective redundancy consultation obligations (currently 20 or more proposed redundancies “at one establishment” within a 90-day period) to apply to the aggregated total across all of an employer’s sites rather than to each separate work unit.
  • Equal pay and discrimination: Extend pay gap reporting to ethnicity and disability (for employers with over 250 employees) and amend gender pay gap reporting to require the publication of action plans and that outsourced workers’ data is included. A new regulatory and enforcement unit for equal pay will also be created. Further, Labour also plans to extend the equal pay regime to cover the protected characteristics of race and disability and bring into force dual discrimination provisions in the Equality Act 2010.
  • Right to disconnect: Introduce right not to be contacted outside of normal working hours to promote a positive work-life balance given the growth in flexible and remote working practices which has “inadvertently blurred the lines between work and home life”. The plan is to follow similar models to those that are already in place in Ireland or Belgium with the wording – “We will bring in a right to switch off” – suggesting that we will follow the Belgium model, which, since 1 April 2023, means private sector employers with 20 or more employees have been required to implement a right to disconnect for all employees via a collective bargaining agreement or work rules.

Conclusion and key takeaways

As mentioned above, whilst it is not immediately clear when (or if) some of these changes will be implemented and what they will look like when/if they are, we suggest starting to consider how these changes will affect your business by:

  • Auditing and reviewing current practices, identifying any areas of concern and taking legal advice, where necessary.
  • Being ready to update policies, handbooks and procedures in anticipation of changes and ensuring these are communicated to employees and stored in a readily accessible location (such as on the Company intranet).
  • Planning training and preparing FAQ documents for HR and managers to ensure a smooth transition when the changes are brought into force.

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