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Insight
On 13 June 2024, the Labour Party unveiled its manifesto for the upcoming general election on 04 July. This manifesto reaffirms Labour’s dedication to implementing its “Plan to Make Work Pay” (MWP) in full and highlights several other equality policies that were previously announced but not included in MWP.
MWP presents a robust set of employment law reforms designed to support workers, enhance their terms and conditions, and ensure modern workplace protections. It also updates Labour’s initial proposals from the “Green Paper, A New Deal for Working People.”
In its manifesto, Labour also confirmed that it will introduce legislation within its first 100 days in power to implement MWP. Below are some of their key proposals.
Labour plans to ban exploitative zero hours contracts, providing workers with the right to a contract reflecting their regular hours over a twelve-week reference period. This measure aims to protect vulnerable workers while acknowledging that some benefit from the flexibility. The manifesto includes provisions for reasonable notice of shift changes and compensation for cancelled shifts.
Given the clarity of language, we anticipate this will be one of the policies enacted within a very short timeframe. This was part of the Taylor Review, and is (to a lesser extent) incorporated in the Workers (Predictable Terms and Conditions) Act 2023, which has already achieved Royal Assent.
The vaguest part of this reform relates to the definition of ‘exploitative’ zero-hours contracts. We’ll have to wait and see how Labour defines this.
Key takeaways for employers:
Labour intends to outlaw the practice of “fire & rehire” but allows for restructuring when necessary, provided it follows a proper process involving dialogue between employers and workers. The manifesto also aims to end “fire & replace,” where workers are dismissed and replaced by a workforce willing to work on lesser terms and conditions.
There’s no detail on how Labour will determine a restructure with no genuine alternative or any other kind of restructure. This might be left to tribunals, like with the definition of redundancy. In that case, tribunals are going to be reticent to interfere with an employer’s justification without strong evidence of an ulterior motive. We shall have to wait and see what the code of practice includes. However, as there has already been consultation on this, we don’t think it will be too long before the new code of practice is published.
Key takeaways for employers:
Labour proposes extending basic rights, including unfair dismissal, parental leave, and sick pay, from day one of employment to all workers, not just employees. Currently, only employees are entitled to these rights, so removing the qualifying period for employees would be a significant change. However, importantly, as outlined in MWP, the proposals to grant day one rights would not only eliminate the qualifying periods for employees but also extend these basic employment rights to the broader category of ‘workers,’ representing a major shift.
For some context, the last time the qualifying period was changed was in 2012, following around two years of consultation and debate before becoming law. We therefore do not anticipate that this will change immediately.
Even if the removal of qualifying periods is initially limited to employees, this would still represent a significant change, especially for unfair dismissal rights, which currently require two years of service for most claims.
Labour has stated that this change would not prevent the dismissal of employees for reasons such as ‘capability, conduct, redundancy, or during probationary periods,’ provided there are ‘fair and transparent rules and processes.’ The specifics of these rules are yet to be clarified, but it is clear that this would be a challenging and potentially costly adjustment for businesses, particularly if the rights are extended to all workers. This could lead employers to review and extend their use of probationary periods and evaluate employees more rigorously during these times. Employers might also increase their use of fixed-term contracts to assess employees before offering permanent positions, a practice common in Europe.
There is currently no guidance on how probationary periods will be operated. This will likely be a feature of consultation. The shortest qualifying period for unfair dismissal to date has been six months – we would expect there to be some legislation which allows for a maximum six-month probationary period, during which there will be no protection from unfair dismissal.
One positive note for employers is that the proposal to remove the compensation cap on unfair dismissal awards appears to have been abandoned.
Key takeaways for employers:
Labour seeks to simplify employment status by moving towards a single status for workers and employees, subject to detailed consultation. This aims to clarify distinctions between workers and genuinely self-employed individuals.
While maintaining its commitment to progress towards a unified employment status, Labour acknowledges the intricate nature of employment law. It has pledged to engage extensively in consultations to develop a simplified framework that distinguishes clearly between workers and genuinely self-employed individuals, effectively encompassing the diverse range of employment relationships in the UK. This cautious approach is crucial, as a shift to a dual-status model without thorough examination could inadvertently restrict flexibility and hinder innovation.
The Manifesto for Workers’ Rights (MWP) does not address the taxation aspect, which is pivotal in any decision regarding employment status. If employees and workers were to share the same employment status (alongside associated rights), aligning their tax status would likely be necessary (currently, many workers are taxed as self-employed, while employees are taxed through PAYE). This potential change is unlikely to be welcomed by either workers or employers, as it could significantly increase National Insurance Contributions (NICs) for employers who engage workers. Consequently, both workers and employers might reconsider their work arrangements, possibly shifting towards more self-employed contractors; an outcome seemingly contrary to Labour’s objectives, especially since it could leave vulnerable workers in a more precarious position.
Realistically, we might see statutory guidance on determining employment status (we already have non-statutory guidance), increasing certainty and clarity while keeping the current three-tier system. We think Labour may be faced with a choice between a single worker status and basic individual rights from day one, and based on the language of the New Deal, they are likely to favour the latter.
Regardless of where the revised boundaries between worker categories and self-employment might ultimately lie, ongoing disputes over employment status appear inevitable.
Key takeaways for employers:
Labour proposes that collective consultation for redundancies be based on the total number of affected employees across the business. The proposal, provided as an example of how Labour plans to enhance redundancy rights (suggesting more changes may follow), would require collective consultation in a redundancy situation based on the number of people affected across the entire business, rather than the current practice of considering each individual workplace (or ‘establishment’). If implemented, this would likely increase the frequency of collective consultations for employers. This aligns with Labour’s goal to strengthen trade unions and amplify the ‘worker voice’.
They also plan to extend TUPE protections to workers, not just employees, which could significantly impact outsourcing and liability discussions. Labour also promises to strengthen protections for workers in TUPE situations. Notably, this proposal extends to ‘workers,’ not just ‘employees’, contrasting with the current government’s stance, which reaffirms that only employees are protected by TUPE. This change could significantly impact employers and contractors, especially in outsourcing, and should be carefully considered in any ongoing commercial discussions regarding the application of TUPE and the allocation of related liabilities.
The enhancement to TUPE protections is vague, but it’s noteworthy that it refers to workers. Whether TUPE protections extend to workers is a grey area at the moment, and the Conservatives recently confirmed their intention to limit those protections to employees. It seems Labour would do the opposite.
TUPE protections are already reasonably robust, so it is difficult to see what protection might be enhanced beyond the certainty of its application based on employment status. The wording also limits the enhancement to the existing set of rights and protections, so we’re unlikely to see anything groundbreaking.
Key takeaways for employers:
Labour’s proposals include making flexible working the default from day one, reviewing parental leave systems, protecting pregnant women from dismissal for six months post-return, considering paid carer’s leave, and introducing bereavement leave for all workers.
We do not yet know what will constitute ‘reasonably feasible’. It’s unclear how flexible working will become the default in practice – perhaps there will be a requirement for a flexible working clause to be included in a s1 statement, and the existing framework might be adapted to provide an employee with the right to challenge an employer’s choice to deny flexible working. Otherwise, the language here doesn’t suggest that a right to flexible working will be any more enforceable than it already is.
Key takeaways for employers:
Labour plans to strengthen equal pay measures, mandate pay gap reporting for large employers, introduce a Race Equality Act, and enforce dual discrimination protections. Employers would need to develop action plans to close gender pay gaps and address pay disparities for ethnic minorities and disabled employees.
Equal pay: Suggestions include implementing measures to prevent employers from using outsourcing to avoid equal pay obligations. Additionally, establishing a regulatory unit would expedite the resolution of equal pay disputes. In its manifesto, Labour has pledged to introduce a Race Equality Act to extend equal pay rights to black, Asian, and ethnic minority employees, as well as to disabled employees. It is notable that black, Asian, and ethnic minority employees, along with disabled employees, can currently file discrimination claims if they are unfairly paid, although proving an equal pay claim is often considered more demanding for claimants.
Dual discrimination: Labour has reaffirmed in its manifesto its commitment to enhancing protections against dual discrimination through the proposed Race Equality Act. This includes enforcing section 14 of the Equality Act, which prohibits direct discrimination based on a combination of two or more protected characteristics. However, employees already have the right to file discrimination claims based on one or more protected characteristics without specific dual protection under existing laws.
Pay gap reporting: Gender pay gap reporting would mandate large firms to devise, publish, and execute action plans aimed at closing their gender pay gaps. While many employers already undertake this, it would become an additional requirement for some. Ethnicity and disability pay gap reporting would also become compulsory for employers with over 250 staff. Although some employers already disclose this information, particularly on ethnicity pay, drafting supporting legislation will require careful consideration due to the complexity of the issue.
Menopause: Labour’s manifesto confirmed that large employers with more than 250 employees would be required to create ‘Menopause Action Plans’ outlining support measures for employees going through menopause. Many larger employers likely have existing policies or guidelines in place. Labour also expressed intent in its manifesto to strengthen protections against ‘menopause discrimination’, though the extent of these proposed enhancements beyond current provisions remains uncertain.
Key takeaways for employers:
Labour proposes a right to switch off, allowing workers and employers to create bespoke workplace policies. This approach aims to balance flexibility and employee wellbeing.
Ireland, for example, has a Right to Disconnect, but it is not primary legislation. Instead, it’s a Code of Practice which, broadly, provides a right not to routinely work outside normal working hours, a right not to be penalised for disconnecting, and a duty to respect another person’s right to disconnect. However, it allows for legitimate situations that may occasionally arise when it is necessary to contact staff. A failure to follow the Code isn’t an offence in itself, but it will be considered in any proceedings a worker takes relating to their working hours.
Key takeaways for employers:
Labour emphasises safeguarding against discrimination from AI technologies and requires consultation with employee representatives before implementing surveillance technologies.
Key takeaways for employers:
Labour’s fair pay proposals include adjusting minimum wage rates based on the cost of living, removing age bands for the National Minimum Wage, extending sick pay to all workers, and introducing a Fair Pay agreement in the adult social care sector.
Key takeaways for employers:
Labour seeks to enhance worker representation through updated trade union legislation, simplified union recognition processes, and new rights for gig economy workers. Employers would need to inform employees of their right to join a union and allow union access for recruitment and organising.
Key takeaways for employers:
Labour’s manifesto presents an ambitious vision for employment law reform, emphasising worker rights and union representation. If implemented, these changes would significantly impact employers, requiring adjustments to policies and practices to comply with new regulations.
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