Labour’s proposed employment reforms – what employers need to know

The Prime Minister has now called an election for 4 July, and while nothing is certain in politics, the Labour Party seems to be the bookies’ favourite to win an overwhelming majority. After 14 years of Conservative government, the all-but-inevitable election result is likely to bring about significant changes in policy. Employment law in particular is ripe for reform. Here, we’ve outlined some of the key proposals set out in Labour’s Plan to Make Work Pay.

Single category of worker

Perhaps the biggest change-up is the proposal to do away with the divide between workers and employees and create a single ‘worker’ category.

Currently, employment rights are divvied up unevenly between workers and employees, who stand separate from the self-employed. Workers are entitled to holiday pay and protections from discrimination, but not unfair dismissal, for example. This is particularly problematic as the gig economy has continued to grow, creating uncertainty for businesses and workers alike. The inequality between employees and the broader category of worker, is a recipe for confusion which even the courts sometimes fail to understand.

Labour propose a new, two-part framework covering workers and the genuinely self-employed. Noting the difficulty this is likely to create in practice, Labour have promised to “consult in detail” prior to implementing any concrete changes. How workable Labour’s proposed levelling-up will be, however, remains to be seen.

The self-employed will also be entitled to their own new protections, including a right to written contract and further (unspecified) enforcement action to tackle late payments.

Unfair dismissal – day-one right

Another big change is the proposal to give workers new “day-one rights”. Currently, employees have to wait two years before they can qualify to bring a claim for unfair dismissal (except in some of the so-called “automatically unfair” dismissal categories, including whistleblowing, where there is no minimum service requirement). Under the proposals, employees will be entitled to protection from day-one (although this will be subject to a probation period). It makes sense that businesses would want to have flexibility to terminate new hires who simply aren’t a good fit, but two years is more than enough time to account for any “teething” problems. Hopefully, the new changes when they are implemented will strike more of a balance.

Family-friendly protections

Following on from new changes that came into force on 6 April this year, Labour are also proposing to further enhance “family-friendly” rights. This includes making flexible working a default right, except where it is not reasonably feasible, and introducing bereavement leave and a “right to switch off” outside normal working hours.

Wages

Labour are also promising to make sure the minimum wage is a “real living wage” by changing the Low Pay Commission’s (who set the minimum wage each year) remit to take account of the cost of living, as well as median wages and economic conditions. The proposals would do away with age bands which set different minimum wages for those between 18 and 21 years of age.

Labour has proposed further ways to tackle pay inequality, including banning most unpaid internships and ensuring hospitality workers receive tips in full.

Union protections

Finally, it should be no surprise that the Labour Party – which remains closely linked with the country’s big unions – will have something to say about industrial relations. Labour note that 2022 and 2023 saw more work days lost to strike action than any time since the 1980s, and it would be hard not to have noticed the impact on wider society as train workers, doctors and teachers have repeatedly gone on strike.

Blaming the upheaval firmly on the Conservatives’ “scorched-earth” approach to industrial action, Labour present their plans to enhance union rights as facilitating constructive conversations between employers, employees and trade union representatives.

The changes include proposals to repeal recent legislation: the Trade Union Act 2016, Strikes (Minimum Services Levels) Act, and the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022. Labour would also simplify and modernise processes for unions, for instance by allowing secure electronic balloting of union members (currently, members must be balloted by post). Labour would also require all employers to inform their employees of their right to join a union, by making this part of the required written statement of particulars.

Conclusions

Labour’s leader Sir Keir Starmer and his shadow cabinet have gone to great lengths to distance themselves from Mr Starmer’s predecessor Jeremy Corbyn, whose anti-capitalist streak created a rift with business leaders. Labour have presented their proposals as balancing the interests of employers and employees, and indeed it would appear that there are no big surprises for companies to worry about. In any event, it remains to be seen to what extent Labour’s proposals become a reality.

For advice on any aspect of employment law, email us at [email protected] or call us on 020 7377 2829.