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What does a new Labour government mean for employment law?

An extraordinary amount of change has already happened this year, with 10 new laws having come in already applying to all businesses, no matter how small. With the SME sector facing increased costs on several fronts, the bottom line for many businesses could be less growth, jobs, and competitiveness. There is a risk that all these additional costs may be too much to bear for certain employers, particularly SMEs. 

The results are in, and we now know that Sir Keir Starmer will be in Government as the UK’s new Prime Minister, following a resounding Labour victory at the polls.

But what does this mean for employment law?

Kate Palmer, Employment Services Director at Peninsula, says, “While most employers will be glad to get back to business as usual now we know which party will form the new government, Labour campaigned on a ‘Plan to make work pay’ so employers should be prepared for significant changes to employment law as they look to strengthen employee rights. With more than 60 proposed changes in their manifesto and a pledge to bring in the majority of these changes within 100 days of taking office, now is not the time to relax. We can expect to see a significant rise in the number of employment tribunal claims being brought once these changes come into law, so it’s more important than ever for businesses to ensure they are across all potential changes, updating policies and contracts as needed to ensure they remain fully compliant.

“An extraordinary amount of change has already happened this year, with 10 new laws having come in already applying to all businesses, no matter how small. With the SME sector facing increased costs on several fronts, the bottom line for many businesses could be less growth, jobs, and competitiveness. There is a risk that all these additional costs may be too much to bear for certain employers, particularly SMEs.

“Unfortunately, this could lead to a reduction in business and the prospect of layoffs or redundancies. While reducing headcount should be a last resort, it’s vital to ensure that any termination of employment complies with the relevant redundancy or unfair dismissals legislation that applies.”

Here are the areas we can expect to see change.

  • Day one rights – The qualifying periods for basic rights such as unfair dismissal, sick pay and parental leave will be removed, meaning they become day one rights. There will still be some flexibility for employers to dismiss employees using probationary periods, but this is a huge change that could lead to significant tribunal claims. Dismissal policies will need to be reviewed; employers will need to make changes to their practices for dismissals of any employees with under two years’ service and conduct a thorough review of their probationary periods. There will be much wider scope for unfair dismissal claims, so this is an area that businesses will need to get right to avoid ending up in employment tribunal.
  • Single status of ‘worker’ – The distinction between employees and workers will be removed, meaning all staff will get the same basic rights and protections. This includes parental leave, and protection against unfair dismissal. Under current laws ‘employees’ have the full range of employment rights whereas ‘workers’ only have a small number of rights. Current contracts will no longer be applicable and will need replacing.
  • Strengthening existing rights – Existing rights and protections, including those for pregnant workers, whistle-blowers, workers made redundant, and workers subject to TUPE processes and those making grievances will be strengthened. Labour has also pledged to reinstate the School Support Staff Negotiating Body, encourage employers to sign up to the “Dying to Work” charter to support workers with a terminal illness, and establish a new Fair Pay Agreement in the adult social care sector for workers and trade unions to negotiate fair pay and conditions.
  • Increased wages – Continuing their commitment to raise National Living Wage, they will ask the Low Pay Commission to take cost of living into account when recommending minimum wage rates. Certain unpaid internships will be banned, ‘sleep over’ hours in sectors like social care will be paid as well as enforcing the law on pay for travel time in sectors with multiple working sites.
  • Sick pay – Rules around Statutory Sick Pay (SSP) will be strengthened, making it available to all workers without the current waiting period. The rate payable will be increased to represent a ‘fair earnings replacement’. This could mean significant extra cost for employers, who will want to be able to manage sickness absences more effectively in order to bring employees back to work as quickly as possible.
  • Pay gaps – Firms with more than 250 employees will be required to report their ethnicity and disability pay gaps.
  • Harassment – Employers will be required to create and maintain workplaces and working conditions free from harassment, including harassment by third parties. Employers will be under a duty to take all reasonable steps to prevent sexual harassment. A proactive obligation to prevent sexual harassment was due to come into force this October.
  • Flexible working – Flexible working will become the default from day one for all workers, except where it is not reasonably feasible. There are currently 8 statutory reasons why a business can turn down a flexible working request, so more clarification is needed around what is considered to be ‘not reasonably feasible’.
  • Family friendly policies – Making parental leave a day one right is just one of the family friendly policies planned by Labour. We can expect a new right to bereavement leave and it will also become unlawful to dismiss pregnant employees for six months after their return from maternity leave, except under specific circumstances. This could have an operational impact if more employees are eligible for leave.
  • Right to disconnect – The right to disconnect is already law in several countries, including France, Belgium, Italy, Spain, and Australia. Labour plan to introduce this in the UK, saying they will “Bring in the right to ‘switch off’ so working from home doesn’t become homes turning into 24/7 offices.” Workers and employers will be given the opportunity to have constructive conversations and work together on bespoke workplace policies or contractual terms that benefit both parties. It will be for employers and employees to come up with rules together but we know that that’s not always a fruitful exercise so employers will need to know the structure of what they can do. If employers are used to contacting staff out of hours or emailing them and expecting a response then this will need to change. As the manifesto suggests, employers can endeavour to make it work for them, but they will need to consider changes to contractual wording working hours if they do want to have access to staff outside of core hours. It’s all about expectation and boundaries.
  • Caring responsibilities – A new right to Carer’s Leave came into law on April 6 this year. It is currently unpaid; Labour has said they will examine the implementation of Carer’s Leave and the benefits of making it paid leave. If this happens, contracts will need to be updated and employers are likely to see more uptake in the leave, at additional expense.
  • Zero-hours contracts – This is an interesting area as zero-hours are commonly seen as exploitative but, done properly, they can bring significant benefits for both employer and employee. It doesn’t appear that Labour will do away with the practice of zero-hours entirely, but they have promised to ban ‘one-side flexibility. This means that anyone working regular hours for 12 weeks or more will gain the right to a regular contract reflecting the hours they work. All workers will get reasonable notice of any change in shifts or working time, and recompense for cancelled shifts. Employers who use zero-hours contracts should thoroughly review how they run their operations as well as the wording on their contracts.
  • Fire and rehire – There are already changes planned to the Statutory Code of Practice on Dismissal and Re-engagement (commonly known as fire and rehire) due to take effect on 18 July, so we will have to wait and see how this could change. In the manifesto Labour pledged to improve information and consultation procedures by replacing the statutory code of practice with a stronger one and adapt unfair dismissal and redundancy legislation to prevent workers being dismissed for not agreeing to a worse contract.
  • Trade union laws – The trade union’s right of entry to workplaces will be strengthened along with the protections for trade union representatives. The process of union recognition will be simplified along with a new duty on employers to inform the workforce of their right to join a union in their written contract. Contracts will need to be updated and businesses will have to follow any new rules; this could result in an increased trade union presence.
  • Enforcement rights – The time limit for bringing Employment Tribunal claims will be extended to six months which, combined with the new day one right to bring a claim for unfair dismissal, could result in more tribunal claims. Labour, however, says it will mean the opposite as employees will have more time to resolve issues informally – we will have to wait and see the impact of this. Enforcement of equal pay will be simplified; they will also look to establish a single body to enforce worker rights.
  • Tips – The law on distribution of tips will be strengthened to ensure that hospitality workers receive their tips in full and workers decide how tips are allocated.
  • Menopause – Large employers with more than 250 employees will be required to produce Menopause Action Plans. There will be guidance, including for smaller employers, on the type of measures that should be considered as part of this plan. Policies and procedures will need to be updated to include this action plan.
  • Wellbeing – Employers will be required to support the wellbeing of workers and their long term physical and mental health, raise awareness of neurodiversity, assess whether existing regulations and guidance is adequate to support and protect those experiencing the symptoms of long Covid. Businesses will need to be aware of any new guidance and implement this in their workplace.
  • Artificial intelligence – The new government will work with workers, trade unions, employers, and experts to examine what AI and other new technologies mean for work, jobs, and skills.

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