
Insight
Employment law will likely undergo the largest overhaul under the newly elected Labour government. The party seeks to boost wages, make work more secure and support people to thrive. Nick Hobden explores the key changes to be expected over the coming months and how you can prepare your businesses and workforce for them, in an article for Insider Media.
Labour wants to introduce a two-tier system for identifying employment status whereby everyone is categorised under a single ‘worker’ status, except for those who are genuinely self-employed. This differs from the current three categories of 1) employees, 2) workers and 3) the self-employed, the first two of which have different levels of employment rights and protections and the last category has no employment rights and protections.
If implemented, all individuals regardless of sector, contract and wage would be entitled to receive the same rights and protections including sick pay, parental leave, unfair dismissal protections and holiday pay. Employers are likely to incur greater costs to comply with the requirement to pay statutory entitlements to all ‘workers’. Currently, even the self-employed may have worker rights if they are workers giving their own personal service under a personal service contract for an ‘employer’ with no right of substitution.
Employers should pay particular attention to this proposal over the next coming months. Although fewer employees may bring claims regarding ambiguous employment status, employment tribunals may see more claims for delayed or underpaid statutory entitlements, especially given the intention to make various employment rights enforceable from day one of employment.
The current time limit to bring a claim in the employment tribunal will be extended from 3 months to 6 months. This aims to decrease the number of claims by allowing employers more time to exhaust internal procedures. In practice, it may have the opposite effect, especially if implemented in conjunction with certain new day one rights.
In any event, employers need to update and/or review their disciplinary and capability policies, to ensure that they are robust, functional and fit for purpose in the new era of day one rights.
Employers tend to have a greater bargaining power due to economic strength and flexibility. The proposal seeks to put a stop to ‘one-sided flexibility’ of employers in forcing employees into ‘exploitative’ zero-hour contracts. The aim is for employees to have greater security via more predictable working patterns.
The proposal does not seek to ban all zero-hour contracts. It is not clear whether there will be further criteria or guidance regarding what ‘exploitative’ means.
Certain industries and sectors may struggle to support this change where historically zero-hours contracts are prevalent due to the nature of the work (e.g. ‘on call’ work in the care, delivery and hospitality industries). Employers should consider how a potential reduction or influx of flexible and zero-hours type work may impact the day-to-day running of a business and consider whether a different workforce is required (for example, hiring of agency staff or temporary fixed contract employees).
Under the new Labour government era of extended rights, workers would be entitled to a fixed hours contract that reflects the hours regularly worked, based on a 12 week reference period. Systems should be implemented to accurately monitor hours worked and guarantee that any changes are reflected in updated contracts. This raises practical issues of how increases or decreases following the provision of a contract are dealt with and how frequently employers will be required to review and update contracts.
‘Fire and rehire’ is a practice often used by employers when employees refuse to agree to proposed changes to their terms and conditions. Whether due to wage or hours reduction or re-location. Here the employer dismisses the employee and offers to re-engage them on new but sometimes less favourable terms. If the employee rejects the new terms, their employment comes to an end, although they may be entitled to redundancy pay and the employer may replace the employee with someone who will accept the new terms.
The practice itself is not illegal, but risks creating reputational damage, poor employment relations and potential unfair dismissal claims. Labour has criticised the Conservative party’s draft statutory code, which was due to come into force this month. The draft code was beneficial in providing clarity for employees and concise practical guidance for employers about the limited remits in which fire and rehire practices may be allowed.
In seeking to make changes to employment contracts, Labour wants employers to continue consultation statutory practices (a legal requirement where more than 20 or more staff are involved – to collectively inform and consult via trade unions or elected employee representatives, where no union is recognised in the workplace) and request agreement with employees, insofar as possible. Labour’s policy is that fire and rehire should be a last resort. If Labour does implement the code or introduce its own re-written code, employers will need to take steps to comply and rehearse best practice now.
Labour wants to implement day one rights (from the first day of employment) including unfair dismissal, Statutory Sick Pay (SSP), parental leave and pay and flexible working. Against the backdrop of Labour’s proposal to move towards a single ‘worker’ status and combining the rights of employees and workers – this is likely to be complex and difficult to finalise and it may take Labour some time to fully iron out. This is in spite of its pledge to introduce legislation to make these proposals law within 100 days of entering government on 5 July 2024
Labour claims that it will introduce its proposals within 100 days of entering government. It remains to be seen which, if any, of the plans are implemented and what proposals are prioritised over the next coming months.
If you require employment law advice or assistance, please contact a member of the Thomson Snell & Passmore Employment team on 013226 23700 or info@ts-p.co.uk.