What does the new Labour government mean for employers?

Colleagues in a meeting discussing legal updates

The recent landslide victory for the new Labour government will lead to a raft of changes in employment law and HR.

Labour has promised that within 100 days of entering office, they will bring forward an Employment Rights Bill to legislate a “New Deal for Working People”. This means that by 12 October 2024, parliamentary consultation on a number of key changes to employment legislation could be underway.

What changes have Labour promised to make?

In June 2024, the Labour Party announced their manifesto ahead of the 2024 General Election. This article summarises their key promises, focussing specifically on proposed employment law changes and the impact this may have on UK businesses.

Rules on Unfair Dismissal

Labour has proposed that the right not to be unfairly dismissed should be a day one right. Currently, employees need two years service before gaining legal protection for ordinary unfair dismissal.

Whilst this is undoubtedly positive for employees starting new employment, it means employers may have to retain underperforming employees for longer periods. Employers will not be able to dismiss their employees with under two years’ service without following a full and fair procedure, and this may include several stages.

“Strengthening unfair dismissal rights will have a significant impact on some employers. Many businesses will be required to reconsider their approach to dismissals, ensuring that all employees, regardless of their length of service, are treated fairly and consistently.”

Louise Cossar, Senior Employment Law & HR Consultant

National Living Wage

Labour has pledged to introduce a ‘genuine living wage’ in place of the National Minimum Wage. This includes changing the Low Pay Commission’s remit to ensure that future minimum wages hikes take into account the cost of living. 

In addition, Labour has promised to remove the age bands in determining minimum wage, so that all adults will be entitled to the same minimum wage. The manifesto reads: "Labour will also remove the discriminatory age bands, so all adults are entitled to the same minimum wage, delivering a pay rise to hundreds of thousands of workers across the UK."

“It would be sensible for employers to proactively prepare for the potential rise in wage costs.”

Louise Cossar, Senior Employment Law & HR Consultant

Statutory Sick Pay

Labour has proposed to increase Statutory Sick Pay (SSP); change the qualifying rules making this a day one right; and expand eligibility to SSP to workers and self-employed. In addition, the requirement to earn above the lower earnings limit to qualify for SSP may also be removed. 

With substantially more workers qualifying for SSP, and given that the obligation to pay SSP rests solely on the employer, UK businesses will likely see increased absence related costs when these changes take effect.

Zero-hours contracts

Labour has promised to ban ‘exploitative’ zero-hours contracts and give workers a right to a contract that reflects the number of hours they regularly work, based on a 12-week reference period.

It is unclear what specific factors will make a zero-hours contract ‘exploitative’ and therefore potentially unlawful.  Commenting on this, Louise Cossar believes that “further guidance and consultation is required to establish how UK businesses and workers can continue to benefit from the flexibility that zero-hours contracts offer”.

Single worker employment status

Labour also plans to simplify employment status by moving towards a single ‘worker’ status, thereby removing the current distinction between ‘worker’ and ‘employee’. Doing this will likely strengthen the employment rights of workers, who will gain the same legal protections currently only available to employees. This will be a significant change in legislation and at present, it’s unclear how these new rights will operate in practice.

Will there be any other changes?

Yes, there are other proposals, including:

  • ending fire and rehire practices
  • establishing a “Fair Pay Agreement” in adult social care, setting fair pay, terms and conditions and training standards
  • tackling the Access to Work backlog and improving employment support and access to reasonable adjustments for disabled people.
  • introducing a Race Equality Act and ethnicity pay gap reporting for large employers
  • taking further action to reduce the gender pay gap
  • strengthening equal pay rights and protections from maternity and menopause and from discrimination and sexual harassment
  • enacting the socio-economic duty within the Equality Act 2010
  • introducing a full right to equal pay for disabled people and disability pay gap reporting for large employers
  • introducing basic rights from day one to parental leave
  • creating a Single Enforcement Body responsible for ensuring employment rights are upheld
  • strengthening rights around workplace whistleblowing and sexual harassment.

How long will it take for these proposals to become law?

Whilst Labour has committed to introducing these changes to parliament in a short space of time, this doesn’t mean that new laws will be in place any time soon. The process of creating new legislation can take many months and sometimes even several years to implement. 

Labour has also promised to “consult fully with businesses, workers and civil society on how to put our plans into practice before legislation is passed”. They also acknowledge that where proposals require substantial secondary legislation, they will engage widely with experts and stakeholders, including employers and trade unions. Given this, it is plausible that some changes will be made much quicker than others.

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