Since publishing the article below, we have now launched our series of follow-up articles on: 'Preparing for employment law change' which discuss the changes in more detail and explain what they could mean for employers.
You can read the first of these articles here:
Preparing for employment law change: navigating 'Day One Rights'
Sean McEntee, a solicitor in our Employment Law team, assesses Labour’s recently published New Deal for Working People, and the potential impact this will have on employers.
Rachel Reeves, who will be the United Kingdom’s Chancellor on the 5th July if the polls are to be believed, pledged that Labour will be the “party for business” and the most pro-business treasury “our country has ever seen”.
These comments are accompanied by Labour’s New Deal for Working People, which is framed as a core part of their mission to grow the UK economy. It has numerous policies which will impact businesses, small and large alike, throughout Scotland.
Reading the full 24-page document will not be for everyone, but for those who are interested please see Labour’s Plan to Make Work Pay. It’s surprisingly digestible for those with an interest in employment law.
In this article, some of the most significant changes affecting businesses are highlighted and advice is offered on how to prepare for these changes.
Protection against unfair dismissal as a day one right
For many employers, this will be the most eye-catching proposal.
In most circumstances employees do not have protection against unfair dismissal until they have acquired two years’ service. In practice, this gives employers freedom to dismiss short service employees without following a fair dismissal process.
Labour intends to change this and make protection against unfair dismissal a day-one right. The impact of this would be that employers would have to follow a fair dismissal process when dismissing short service employees, or otherwise face the prospect of an unfair dismissal employment tribunal claim.
In this context probationary periods become very important, with Labour confirming that employers can still operate probationary periods to assess new hires.
To employers, our recommendation is therefore that all contracts of employment issued to new hires include a 6-month probationary period, with the option of extending this for a further 6 months to monitor performance.
Ending zero-hour contracts
Labour has pledged to ban zero-hour contracts, replacing them with a contract that reflects the number of hours a person regularly works. It’s proposed this will be based on a twelve-week reference period.
While it’s unclear when this ban will come into effect, employers who have staff on zero-hour contracts should carefully consider their current position.
It’s made clear that anti-avoidance measures will be introduced if necessary to prevent the flouting of the proposed policies, so it may be worth considering now if it’s appropriate to move some members of staff over to a contract of employment.
Single status of worker
As employers and employees know, defining employment status can sometimes be confusing, with people being classed as employees, self-employed and workers.
Labour’s assessment is that this three-tier system fails to provide clarity for workers and businesses. In response the intention is to move towards a two-part framework, with a single status of worker on the one hand and self-employed on the other.
Labour have indicated that they will consult in detail on the new framework, and employers may therefore not need to take immediate action in respect of this. However, for future planning, it’s important to be aware that changes are incoming if Labour form the next government, and the likely impact is that more staff will become what is currently recognised as an employee.
Employment Tribunals
Another important proposed policy change relates to the time limit within which employees can bring an employment tribunal claim. This is currently 3 months for most heads of claim. It’s proposed this will be increased to 6 months.
This, combined with the above changes to protection against unfair dismissal, ending zero-hour contracts and worker status, will mean that the pool of employees able to bring a claim will significantly increase.
This places even more importance on following fair internal procedures to make sure that the likelihood of successful employment tribunal claims is reduced.
Genuine living wage and sick pay
The New Deal for Working People also outlines important changes to the national minimum wage and sick pay.
It’s proposed that the minimum wage will consider the cost of living alongside median wages and economic conditions. The wage bands will also be scrapped.
Regarding sick pay, employers are also likely to see their liability increased under Labour’s plans, with the lower earnings limit and the 3-day qualifying days removed. This would mean, in most circumstances, sick pay would be paid on the first day of sickness absence.
Both the above changes appear good news for employees, but employers should be aware that the changes will likely mean an increase in payroll expense and should plan accordingly for this.
Flexible working and right to switch off
It’s clear that Covid-19 fundamentally altered work practices. Many employers are now far more flexible regarding their employees’ working patterns and practices, most notably working from home.
However, while the current government have made some significant changes to flexible working (including introducing a flexible working request as a day-one right, which is set out in our recent newsletter), Labour intend to take this a step further and make flexible working the default from day one, except where it is not reasonably feasible.
Labour also intends to introduce the right to switch off, with the aim of ensuring that home working does not inadvertently blur the lines between home and work life. While few concrete details are set out, there is a suggestion that they could mirror similar models in place in Ireland and Belgium.
We advise that employers remain dynamic and ahead of the curve here and think about what work practices they can introduce that benefit both themselves and their employees.
Overview
This is far from an exhaustive analysis of the New Deal for Working People. There are further important changes which this article has not touched on, including trade union and industrial action, equal pay, and redundancy rights.
If Labour do indeed win the General Election, our assessment is that many businesses will have more staff who are considered employees, and they will have greater obligations and responsibilities to these employees.
We are happy to help businesses navigate these new waters, so please get in touch if you would like to arrange a confidential chat.
Published 3 June 2024.
