Preparing for potential employment changes if Labour form our next Government

by Debra Lee, Regional Director, North of England

While no-one can be sure of the outcome of the 4th July election, if the polls are to be trusted, we should be looking carefully at what Labour’s plans for business will involve. Their manifesto pledges could bring about a significant shift in employment laws and business leaders need be prepared so they can ensure their SMEs can respond quickly and find the commercial advantages the proposed changes could represent.

You will have heard of the Labour proposal to “Make Work Pay” which outlines their commitment to some radical reforms of current employment laws (more information can be found here: https://labour.org.uk/wp-content/uploads/2024/05/LABOURS-PLAN-TO-MAKE-WORK-PAY.pdf )

It’s important to note that Labour plan to bring forward a bill within 100 days of entering office – this mean these changes could be in place by Mid October 2024 ! (Alhough many could be delayed until April 2025 or beyond).

We are currently advising our client base on the proposed changes and reviewing what the possible impact could be on existing policies and procedures as well as costs to the business through a commercial lens.

Please find below a summary of the proposed key changes that we believe will impact mid-sized businesses

• Day 1 rights
  • Expanding unfair dismissal rights – currently an employee would need to two years’ service before they can make an unfair dismissal claim.  Labour is proposing this right will apply to everyone from Day 1.
    During probationary periods, currently SMEs often adopt a light touch process (which is close but not quite the formal dismissal process) when an employee falls short. Once outside probationary period, SMEs tend to follow the statutory process if there are performance or conduct issues, so this legislation would mean businesses will need to tighten up recruitment processes and decisions & the way they approach terminations, due to failed probationary period.
    Labour do acknowledge that this change is subject to “probationary periods with fair and transparent rules and processes”. They are also likely to set a maximum probationary time limit
  • Labour is also proposing removing the statutory cap (currently £115,115 or 52 weeks gross pay, if lower) on the compensation workers can receive, if they successfully bring an Unfair Dismissal claim
  • Redundancy rights – this would mean that an employee had a right to redundancy, from their first day of employment rather than the current 2-year qualifying period
  • Sick pay – Labour intends to strengthen sick pay by
    • Removing the lower earnings limit so that all workers are eligible
    • Removing the current 3 “waiting days” before SSP becomes payable

Therefore, SMEs need to calculate the increase in sick pay cost, based on their current absence rates

• Employment tribunal timescales – currently employees have 3 months to bring a claim, Labour are proposing increasing this to 6 months
• Scrapping zero hours contracts – the proposal is that zero hours contracts can only apply for the first 12 weeks, after which permanent employment would need to be offered, based on 12-week averaging period
• Genuine living wage – Labour have proposed removing the current age bands, so that everyone aged 18 and over will get the same hourly rates of pay.

For SMEs with a high proportion of young workers (18-20 years old) this could have a huge impact on the wage bill moving forward and some “what if” wage forecasting should be completed now

• Preventing fire & rehire – this refers to dismissing employees to make significant contractual changes then re-hiring them on the revised/new terms.  This practice is most often used in large scale re-structures.  Some would say employers use this to avoid protracted consultation discussions.  Labour’s plan to insist that employers focus more on resolving objections via the consultation process rather than rely on fire and rehire.  Beyond this, there’s no real guidance on what will happen if agreement can’t be reached.
• Single ‘worker’ status – currently there’s a clear distinction between workers and employees.  The main thing being, that employees have significantly more protection & rights compared to workers (a worker is usually someone on a flexible/zero hours contract rather than a self-employed contractor).  Currently both groups receive pay and accrue holiday but outside of this, contractual rights start to separate.  Blurring the definition to capture both employee and worker could mean that ‘workers’ become eligible for addition rights such as sick pay and protection from unfair dismissal.  If this went through it would require us to re-visit our employment practices in operations (i.e. we would no longer be able to end workers contracts without going through a formal process and operationally our costs could increase as we may have to start paying SSP).
• Right to disconnect or switch off– proposal that everyone should have the right to ‘switch off’ and disconnect from work (outside their contractual hours), a legal right which is currently offered in other European countries, including Ireland, but could significantly impact SMEs.  It’s very unclear how this would be measured or defined but it would likely impact the use of out of hours communication tools such as email, Teams, and could drive businesses to adjust hours or deploy out of hour rotas, so they can continue to operate 24/7.

1. Other items being considered; introducing a Single Enforcement Body with the power to inspect workplaces and bring civil proceedings against businesses that breach worker employment rights, trade union and collective consultation, legislation around bereavement leave, considering introducing paid carers leave, closing pays gaps based on gender, disability and ethnicity, maternity discrimination  – strengthening protections for pregnant women by making it unlawful to dismiss a woman who is pregnant for six months after her return, except in specific circumstances.

Top Tips

Top Tips to enable mid-sized businesses prepare for these changes

• Review your current recruitment, onboarding and probationary period processes and relevant documentation to enable you to operate with these new day 1 rights in place
• Review and agree notice periods with both employee and employer for new hires from October 24 onwards
• Do some cost analysis based on the proposed changes to sick pay and hourly rates for employees in the 18- to 20-year-old age bracket
• Develop a robust performance management process so that you can effectively record and monitor employee capability (a fair reason for dismissal)
• Ensure your disciplinary and grievance procedures demonstrate fair procedures when dismissing employees
• Have a brainstorm with the Senior Leadership Team on what the right to disconnect / switch off could mean for your business – how will this affect your current policies
• If you operate using zero-hour contracts – what are the changes and associated cost with moving your people onto permanent contracts 

   

  Preparing for change in business is never easy but there are always ways to manage it to ensure a smoother experience for your people, and a positive outcome for commercial performance. If you would like some help or advice planning for or implementing these changes, or any other strategic transformation, please do get in touch.

   

  We are running a Post-election drop-in clinic webinar on 17th July 2024 at 9am, highlighting some of the major changes and offering a panel of trusted people experts to answer your questions. If you would like to register, please click here