Navigating the forthcoming changes to UK employment law with confidence and success
The new Labour government is proposing some of the most radical changes to employment law that have been seen for some time. Employers will need to prepare to adapt, including potentially taking on increased regulatory, legal and financial liabilities.
Here, Moore Kingston Smith Employment Law Advisor, Donal Moon, shares some ways that employers can navigate the changes, summarises the key proposals and explains what they mean for employers.
While we hope that you’ll find this summary of the proposed changes useful, it is based on the details we have available to us. We will be publishing updates as developments occur.
How employers can navigate changes with success and confidence
Following the general election, the new Labour government confirmed its commitment to implementing proposals for employment law reform in its Plan to Make Work Pay.
Labour also reaffirmed its commitment to introduce an Employment Rights Bill and to start the process of passing it into law within 100 days of taking office — which means that we are expecting the Employment Rights Bill around 12 October 2024.
What actions should employers take right now?
While the legislation will be introduced quickly, it doesn’t mean that the proposals will become law quickly. The Bill needs to go through a lengthy and complex legislative process, including consultation with interested stakeholders and parliamentary scrutiny.
Some commentators are suggesting that, in theory, it is possible for some changes — such as the qualifying rights to claim unfair dismissal, family friendly leave and pay and sick pay — to be implemented quickly via statutory instruments. But that, in reality, we are unlikely to see the proposals become law until 2026.
As an employer, you should have sufficient time to take the necessary actions to adapt your HR and employment law practices to accommodate the new laws. But you can certainly get ahead of the game.
Here are some actions we recommend taking now:
- Review the Plan to Make Work Pay for a useful snapshot of what is being proposed.
- Await the introduction of the Employment Rights Bill for the finer details of what is being proposed.
- Conduct an impact assessment to identify what the changes will mean for your business and how you will adapt.
- Plan what your organisation needs to do in order to implement the changes and remain compliant. Allocate sufficient resource to carry out tasks and assign people responsible for implementing the plan. Some tasks that could be incorporated into your plan are:
- Update contracts, handbooks and policy documents:
- Update HR practices and processes
- Update record keeping practices and processes, including GDPR privacy notice
- Update payroll practices and processes
- Organising and delivering training for staff and managers impacted by the changes so that everyone is aware of the new obligations
- Update contracts, handbooks and policy documents:
Ongoing actions
Stay up to date with developments as they occur. Update your impact assessments and plans with details of the changes and timescales for the tasks that need to be undertaken.
Implement the plan once you know the full details of the employment laws and when they will be coming into force. That way, you can try to avoid making changes that may have to be changed again later.
New rights for workers from day one
Reform of employment status
Currently, the UK has three employment statuses:
- Employees, who have full employment rights
- Self-employed contractors, who have very few right
- Workers, who have some but not all rights
The Government proposes to merge the two employment statuses of employee and worker into one status of worker. Workers will have the full array of employment rights, so that there will be only two statuses – worker and self-employed contractor.
The Government also proposes strengthening rights for self-employed contractors, including giving them the right to receive a written contract, action to tackle late payments and extending health and safety and blacklisting protections to them.
Unfair dismissal
Currently, unfair dismissal can only be claimed by employees with two years’ continuous service. The Government is proposing to make unfair dismissal a day one right and to extend that right to workers as well as employees.
Some employers do take advantage of the fact that employees with short service can generally be dismissed without cause and possibly without process. Under this new law, employers will need to ensure that they are being fair, transparent and keep detailed documentation regarding performance during probation.
They will also need to ensure they have one of the five legally fair reasons for dismissing short service employees and follow a full and fair process before deciding to dismiss.
The Government has stressed that employers will still be able to dismiss employees for fair reasons, such as conduct, capability, redundancy, or reasons required by law. It has also stressed that the change will not prevent employers using probationary periods to assess new recruits’ suitability for a role.
Sick pay
The Government is proposing making sick pay a day one right, remove the three-day waiting period and remove the requirement for a worker to earn at least the lower earnings limit (currently £123 per week) to be eligible for statutory sick pay.
Strengthened family friendly rights
The Government proposes to make all types of family friendly leave e.g. maternity, paternity, shared parental, adoption, carers, parental and bereavement leave a day one right and:
- Make it unlawful for employers to dismiss pregnant workers for 6 months after return from family leave, except in certain circumstances
- Clarify and possibly strengthen carers’ leave rights and bereavement leave rights
The Government has also said that it wants to encourage employers to sign up to the Dying To Work Charter and introduce measures to ensure that those diagnosed with terminal illnesses are treated with respect, dignity and are supported in the workplace.
Outside of its Plan to Make Work Pay, the Government has also said that it will look at ways to increase the uptake of shared parental leave, currently very low.
A new right for workers to disconnect
The Government is proposing to introduce a right for all workers to disconnect outside of working hours, something many countries have already introduced. It appears that the Government is looking closely at the Irish and Belgian models, so we could expect a UK right to disconnect to include:
- A right not to have to routinely perform work outside their normal working hours
- A right not to be penalised for refusing to attend to work matters outside of normal working hours
- A duty to respect another person’s right to disconnect.
Such models do not include a blanket ban on out of hours contact and give some scope for employers and workers to work together to agree the boundaries of the arrangement.
If these models are followed, the onus would be on the employer for:
- Managing workers’ working time
- Ensuring that out of hours contact does not become routine
- Ensuring that workers are not treated unfavorably as a result of refusing to work outside of working hours
However, there would be flexibility for workers to work outside of traditional working hours if they wished, or if this fitted the requirements of the job.
It is proposed to introduce this change as a statutory Code of Practice rather than as a standalone legal right. So, while it will not be possible for an employee to bring a claim on the basis of the breach of this right alone, any breach could form part of other substantive claims such as constructive dismissal, discrimination or whistleblowing. And, if a tribunal finds a breach of the right to disconnect, it would have a discretion to award a 25% uplift in any compensation.
A ban on ‘exploitative’ zero hours contracts and fire and rehire
Zero hours contracts
The Government proposes to ban ‘exploitative’ zero hours contracts.
Instead, all workers will have the right to a more stable contract based on the hours they work over a twelve-week reference period. They will also have the right to reasonable notice of any change in shifts or working time and compensation proportionate to notice given for any curtailed or cancelled shifts.
Employers will still be able to use fixed term contracts, but it is likely that they will have to replace any zero hours or casual worker contracts with the more stable contract Labour proposes.
Fire and rehire/fire and replace
The Government proposes to strengthen protection against employers using the threat of dismissal to force employees to accept negative changes to their terms and conditions. But it recognises that employers sometimes have no choice but to restructure their business to remain viable.
With that in mind, it proposes strengthening existing laws and issuing a strengthened code of practice, so that changes can only be made following a fair and transparent consultation process based on dialogue and common understanding between workers and employers.
Stronger protections and enforcement
Tribunal claims
The Government proposes to increase the time limit for bringing claims from 3 months to 6 months, giving a longer time limit for employees to act if they wish to pursue a claim.
Acas – Collective grievances
The Government proposes to introduce the facility for employees to raise collective grievances via Acas, the Advisory, Conciliation and Arbitration Service.
A Single Enforcement Body
The Government proposes to establish a Single Enforcement Body, with trade union and TUC representation. The body will have the power to undertake targeted and proactive enforcement of workers’ rights, including bringing civil proceedings against non-compliant employers.
Strengthened redundancy collective consultation requirements
Currently, employers are required to collectively consult with their employees if they propose to make 20 or more employees redundant at a single workplace within a 90-day period.
For example, if an employer is proposing redundancies of 25 employees across several work locations, but each individual location has less than 20 employees, there is no obligation to collectively consult.
The Government is proposing to change this. Instead, the 20-employee threshold will be based on the number of redundancies planned across the whole company, rather than the individual location.
Employers would have to be careful to ensure that all employees in scope for redundancy across the whole business are considered when reviewing whether there are collective consultation obligations.
Strengthened TUPE protections
TUPE regulations protect employee rights when they transfer to a new employer. The Government is proposing to strengthen TUPE protections for employees. There are no details of what these strengthened protections might be, but two possibilities are:
- Scrapping the recent change which allows employers in TUPE transfers on or after 1 July 2024 to consult directly with employees instead of having to invite them to elect representatives (if they have less than 50 employees or if they are an employer of any size transferring less than 10 employees).
- Making it more difficult to make employees who transfer under TUPE redundant or make changes to their terms and conditions.
Strengthened protections for whistleblowers
The Government is proposing to strengthen protection for whistleblowers, particularly workers who report sexual harassment in the workplace.
Improvements to workers’ pay and conditions
Tips and gratuities
New laws are already incoming in relation to the fair allocation of tips and gratuities, although the Government proposes to strengthen these to ensure front line workers receive their tips in full and that workers decide how tips are to be allocated.
Flexible working
Flexible working is already a day one right. The Government proposes to build on the existing framework and make flexible working the default position, offering support to employers to enable them to adapt.
A number of articles were published suggesting that the Government is planning to grant workers the right to request a 4-day working week with compressed hours. Employees already have the right to request a 4-day working week under existing flexible working legislation, so it is unclear at the moment how this would differ from existing laws. It could be that the new Government will seek to make it more difficult for employers to deny such a request without strong reasons.
Equal pay
The Government is proposing changes to equal pay legislation, which currently gives men and women the right to equal pay for doing like work; work that has been rated equivalent under a Job Evaluation Scheme; or work of equal value.
The key proposed changes are:
- Anti-avoidance measures to prevent outsourcing of services being used to avoid paying equal pay
- Strengthening Equality Impact Assessments for public sector bodies
- Implementing a regulatory and enforcement unit for equal pay with involvement from trade unions.
Pay gaps
The Government has set out its commitment to tackling pay gaps. At present, firms with over 250 employees have a legal duty to report their gender pay gaps, but don’t have to take action to close the gaps.
The Government proposes a legal requirement for large firms to publish and implement action plans to close gender pay gaps and include outsourced workers in their reporting. It also wants to extend the pay gap reporting requirements for firms with over 250 employees to disability and ethnicity.
Genuine living wage
The Government is proposing to increase the National Living Wage and increase enforcement powers of the Single Enforcement Body and HMRC. It also wants to abolish the age bands, so that everyone receives the same living wage regardless of age.
The Low Pay Commission has recently recommended a 6% increase, which would take the National Minimum Wage to £12.10 for all levels. If that recommendation is accepted, it would mean a significant uplift for many employees and workers. Changes to the National Minimum Wage usually take place in April each year, so we would expect any change to take effect from April 2025.
Increased enforcement powers mean that it is imperative that employers keep abreast of developments and apply the new rates once they are in force.
Unpaid internships
The Government proposes to ban unpaid internships unless they are part of education or a training course.
Expansion of the law in relation to equality and diversity
New employment laws are coming into force in October 2024 which place a duty upon employers to take reasonable steps to prevent sexual harassment in the workplace. This new law was introduced by the previous government and there are no signs of the new Government seeking to reverse it.
If they have not done so already, employers should be taking steps to prepare for this by updating contracts, handbooks and policies and ensuring that all staff receive training on the new law to comply and reduce legal risk.
The Government is proposing other significant developments in equality and diversity:
- Reintroduce the third-party harassment provisions were rejected by the House of Lords, so that employers would also be responsible for preventing harassment of its workforce by third parties
- Raise awareness of neurodiversity in the workplace and society as a whole
- Introduce a new requirement for firms with over 250 employees to produce menopause action plans and guidance, along with support for smaller employers.
- Legislate to ensure that employers proposing to introduce surveillance technologies can only do so following consultation and negotiation with trade unions or elected staff representatives.
Strengthening the role of Trade Unions
The Government is proposing to reinstate the School Support Staff Negotiation Body, which will be tasked with the responsibility for establishing a new national terms and conditions handbook, training, career progression routes and fair pay rates for school support staff.
The Government is also proposing several changes to strengthen the role of trade unions by:
- Removing restrictions on trade union activity
- Reforming the ballot processes
- Simplifying the process of union recognition
- Giving unions more freedom to organise, recruit, represent and negotiate
- Introducing a requirement for employers to inform all workers on day one of their right to join a union
- Introducing increased protections for union reps against intimidation, harassment, threats, unfair dismissal and blacklisting
- Introducing new statutory rights for union equality reps
- Introducing a new method of collective bargaining across specific sectors called sectoral collective bargaining and introducing Fair Pay Agreements for those sectors.
Conclusion
While employers will need to prepare themselves for huge changes, including increased regulatory, legal and financial liabilities, we do not suggest incorporating all proposed changes into your contracts, handbooks and policies yet.
The Plan to Make Work Pay provides a useful snapshot of the laws that will be coming in, but it does not contain full details and legislation can be abandoned or amended before it ultimately comes into force.
As an employer, you can certainly get ahead of the game to some extent by ensuring that your documentation is as up to date as possible, making it easier to adapt to new laws as and when they come into force.
The proposed changes are complex and will require wide-ranging reform of your HR and employment law documentation, practices and processes. All staff and managers will need to be aware of and act in accordance with the new laws, once implemented, to reduce legal risk.
Our HR and employment law consultants are here to help you reduce your legal risk. We can review and update your contracts, handbooks and policies to ensure they comply with current legislation around employment law and HR best practice and help you keep them up to date as the law develops and changes.
We can also advise and support you with any employee relations issues that may arise, guiding you through the process and drafting and reviewing correspondence to ensure compliance and reduce claims risks.
We are always available to answer any queries you may have about employment law and HR best practice, so please contact us or view our full range of services.
