Labour's 'New Deal for Working People': What may not happen so quickly, and what will be the impact of Labour's overall 'New Deal' on shareholders and investors?
Published on 1st Jul 2024
Our fifth report considers the impact of measures that may take longer to come into force, such as the single worker status, and the wider impact of Labour's plans
Single status of worker?
Labour's proposal to introduce a single status of worker would remove the existing distinction between employees and workers; it would create a dual system of workers and the self-employed.
This will be significant development for businesses using contingent workers and those operating a gig economy model. It would, for example, require most agency workers to be employed by staffing companies (with rights to statutory minimum notice and the right not to be unfairly dismissed, perhaps from day one). It could also cause problems for many current operators of umbrella models.
It does not seem to be proposed that this single status will be accompanied by a clear statutory definition of self-employment for tax purposes – but any legislation in this area may well lead to further calls for that.
We consider, as has been suggested by Labour, that there would be detailed consultation about this proposal before any new legislation is introduced, so users of workers and agency workers do not need to take immediate steps to manage this change. However, they would be wise to start considering the feasibility of staff bank and platform models where they are no longer "suppliers" of relevant staff but facilitators of the hirers' direct engagement. There is also a possibility in some sub-sectors of larger players choosing to develop large benches of permanently employed staff whom they are confident of deploying to clients for 90% plus of the time.
General ban on zero hours arrangements?
Labour has been vocal on its intent to ban "exploitative" zero-hour contracts as it seeks to address the "modern challenge of insecurity, where new technologies and ways of working mean too many face insecurity over working hours… ".
As we have previously observed, however, there are all sorts of zero-hour arrangements – from a consultation with a doctor in Harley Street or a conference with a top barrister or the Ministry of Justice's engagement of a part time tax tribunal judge, to someone doing a bit of garden clearance or baby-sitting. It also, of course, includes a lot of traditional short-term agency worker staffing arrangements like agency nurses, locum teachers and many industrial/warehouse roles, as well as classic gig working arrangements like delivery, taxi app working and home tutoring.
We do not believe Labour intends to ban all these business models as currently operated. Instead we believe the right to request predictable hours will come into force relatively quickly, after which there will be a review of the extent to which there are pockets of exploitation left which may lead to some targeted legislation, perhaps limited to certain roles and/or sub-sectors.
Adoption of Platform Workers Directive style 'presumption of employment status' for platform workers?
The EU has approved at political level a Directive (the Platform Workers Directive or PWD) under which platform workers are presumed to have employment status unless the platform can prove they are not employees. Platform work is widely defined in the PWD and this measure could capture a wide range of agency staff and contractors operating via traditional staffing companies and consultancies – the definition turns on whether technology plays a part in matching them to opportunities.
The idea had been to accompany this measure with a statutory status test, to the effect that if three or more out of five factors apply then the individual is self-employed. However, the original proposal was watered down and instead the relevant employment test will be whatever local laws are in the relevant Member State relating to employment status. See this briefing for more detail about the PWD.
Given the problems pushing the PWD through, and the fact it has still not been formally adopted in the EU (due in October), we consider it less likely than we once had that Labour will look at convergence with the EU in relation to the presumption of employment status and/or an employment status test.
Transparency relating to AI-powered and algorithmic decision-making in recruitment?
The current government has looked to regulators (such as the ICO) to set out guidance for employers, as well as publishing most recently its own guidance on AI and recruitment. Labour has indicated that it will work with "workers and their trade unions, employers and experts" to consider the impact of AI on "work, jobs and skills".
While Labour have not so far put forward any specific proposals for legislation, this may be an evolving picture. In April 2024, the Trade Union Congress published its proposed draft Artificial Intelligence (Employment and Regulation) Bill, intended to create legal protections for workers and employers in relation to the use of AI (and which would create a broadly similar regime to that in the EU).
The PWD will also give workers the right to know how decisions about them are made by automated systems. It will ban the use of the processing of certain types of personal data of persons performing platform work, such as biometric data or their emotional or psychological state. Human oversight and evaluation are also guaranteed in automated decisions, including the right to have those decisions explained and reviewed.
We believe that in some form or another this sort of measure will be introduced in the UK though, again, not until after considerable consultation.
Changes relating to self-employed workers
Labour's proposals relating to this seem limited to giving self-employed individuals the right to written contracts and the statutory right to be paid promptly. This in fact does not touch on attacking "false" self-employment, which will primarily be a campaign HMRC leads as covered separately in Labour's proposals.
We question whether genuinely self-employed people generally see the need for these rights and wonder if, for those that do, that is sign that they are not truly self-employed. In any event we consider there will need to be proper consultation about this measure, not least to help define who is deemed "self-employed" (which has been a challenge for legislators all over the world, including, most recently, the EU).
What will affect how quickly new laws can be introduced?
Leaving aside geo-political events completely changing the political landscape, there are three key factors potentially slowing the timetable:
- The Labour announcements do not promise early legislation for some of the areas they wish to reform – Labour is not in a rush about everything. Even the 100 day bill covering more urgent measures is only a "bill" (meaning that "100 days" comprises only the very earliest stage in the legislative process rather than introduction of final law).
- Even in those instances where Labour may wish to move more quickly, many of the proposals cover ground that is far more complex than might first meet the eye, requiring a lot more thought and consultation than the unions and more activist parts of the Labour party might like, and will take a long time to implement effectively. The manifesto confirms that there will be a full consultation with "businesses, workers and civil society [on] how to put our plans into practice before legislation is passed".
- Rachel Reeves, a likely dominant force in the new government, has been clear about not wanting to do things which might damage UK growth, and she is likely to be against measures that have not been thought through and that may cause unexpected damage.
However, there are three factors that will potentially speed some things up:
- Labour will want to achieve as much as possible in terms of tangible change in the early "honeymoon" period of a Labour government. It is easier to push through more controversial measures in this period when a new government has the greatest amount of political capital, especially if it has a large majority.
- Ms Reeves has linked day one rights to improving UK economic performance by getting the best people in the right jobs quicker.
- It cannot be discounted that, notwithstanding the influence of Ms Reeves, unions will force the government's hand on some of the promised measures.
Our current view is that effective legislation in many areas affecting contingent work arrangements will take some time to finalise, but that some measures will be taken fairly quickly (relating to predictable hours, some day one rights and tax and regulatory enforcement).
Impact on shareholders and investors
Some investors and shareholders will be concerned about the impact of some of these measures on the future profitability of relevant businesses.
Our assessment is that more sophisticated platforms, staffing companies and other intermediaries will be able to adjust and probably thrive, with higher market share, not least because users are likely to trust them more to be on top of compliance (and fear inheriting chain liability risk from intermediaries who seem less able to deal with compliance issues). However, there will be a greater administrative and compliance burden and, as ever, that may weigh more heavily on relatively smaller players and affect investor appetite in them unless they have a clear strategy for compliance.
Particular operating models that may become more prominent include margin-only and temp bank arrangements or pure licensing (on a SaaS basis) of technology and systems to allow end users to do the recruitment and scheduling for themselves. Those models expose staffing companies and intermediaries to far less tax and employment risk and allow end users of contingent workers to take more control of risk management. They do, however, need to be set up carefully to ensure that the staffing company, platform or payroll provider are properly removed from the contractual supply chain and to ensure that they do not create new payment service and recruitment regulation risk.
There may also be a greater move to consultancy models where contractor services are provided on an output basis to minimise the impact of these measures.
Clearly Labour's proposals to make access to Apprenticeship Levy funding available for a wider range of training perhaps makes the Hire-Train-Deploy model more economically attractive, and we would expect growth in that model.
A range of other employment measures are proposed by Labour and more detail on that is set out in our Insight.
What to do next
Let us know if you would like to discuss which types of worker Labour's plans will apply to and the detailed actions you will need to take to minimise risks.
Our series of reports
Read our other reports covering further aspects of Labour's plans:
Report one: the right to predictable hours
Report two: further crackdown on 'dodgy' umbrella arrangements and increased IR35 enforcement
