What does the new UK Labour government mean for employers?

Following the general election on 4 July, significant employment reforms in line with the Labour manifesto are expected. The manifesto committed to implementing Labour's plan, the "New Deal for Working People" published on 24 May 2024.

What is the government's timetable?

Labour's intention to introduce an Employment Bill within the first 100 days of entering government has been well-publicised; the plan states that the proposals it contains are a "top legislative priority". More clarity on what proposals will be included in this first bill may well be forthcoming in the King's speech on Wednesday 17 July.

While it seems likely that the government will look for some quick wins – a number of its proposals build on legislative reforms already started under the previous Conservative government – employers can take comfort from the fact that Labour has stressed that it is "committed to following a proper parliamentary process for our legislative proposals, with a full and comprehensive consultation on the implementation of the New Deal" and much of the detail will be based in regulations so that it "can react flexibly to changing economic circumstances".

What is the government proposing?

In her first speech as chancellor, Rachel Reeves has reinforced the government's commitment to introducing "a modern industrial strategy, to create good work and drive investment in all or our communities", reforming the skills system for a changing world of work and tackling economic inactivity and getting people back to work.

You can read our earlier Insight on Labour's proposals as set out in its manifesto. For more detail on the anticipated employment law reforms in twelve different areas, please click on the relevant section below.

Next steps

Businesses now await the King's speech, details of the promised Employment Bill and also the date for the first Budget which we anticipate will be announced shortly. In the meantime, employers should consider the impact of the government's proposals on their workplace, including their existing workforce structure and policies and procedures.

The Equality and Human Rights Commission has also published a consultation on revised guidance to accompany the new legal duty to take reasonable steps to prevent sexual harassment in the workplace, introduced by the previous government, which will come into force in October this year. Read more.

Dismissals

Unfair dismissal

Unfair dismissal protection will become a day one right, although Labour will "ensure employers can operate probationary periods to assess new hires" and it will not prevent employers dismissing an employee "which includes dismissal for reasons of capability, conduct or redundancy or probationary periods with fair and transparent rules and processes".

More detail is awaited (including its potential application to workers, as well as employees). Employers would be prudent to look at contract terms now for new joiners to ensure that an adequate probationary period with clear performance objectives is included, as well as ensuring that current processes for addressing concerns that arise during a probationary period are fair, with an option to extend the probationary period in appropriate circumstances.

Fire and re-hire

The law will be reformed further to provide "effective remedies against abuse" on fire and re-hire, replacing the "inadequate statutory code of practice with a strengthened one".

The previous government produced a statutory code of practice which is due to come into force this July. Labour has stated that its proposal is not to ban fire and re-hire; it acknowledges that "it is important that businesses can restructure to remain viable and preserve their workforce where there is genuinely no alternative", but they "must follow a proper process based on dialogue and common understanding between employers and workers".

Collective redundancies

Redundancy rights and protections will be strengthened, including "ensuring the right to redundancy consultation is determined by the number of people impacted across the business rather than in one workplace".

This proposal may see a notable increase in the situations where the statutory collective consultation rules are triggered.

At present the statutory collective redundancy rules are triggered when a specific number of redundancies are proposed at an "establishment" within a set period of time. Identifying an establishment is not always straightforward and currently requires an employer to identify the entity or "unit" to which the workers who are proposed to be made redundant are assigned to carry out their duties. This has become more problematic given the hybrid nature of many workforces, with many employees now working across locations, including their home.

Employment status

Moving towards a "single status of worker", distinguishing only between workers and the genuinely self-employed and considering "measures to provide accessible and authoritative information for people on their employment status and what rights they are owed".

Strengthening rights and protections to help self-employed workers, including the right to a written contract and extending health and safety and blacklisting protection to this group.

Combined with the proposal to enable all workers to benefit from protections from day one of employment in respect of certain rights such as unfair dismissal, flexible working, parental leave and statutory sick pay, this is a significant proposal. Employers will have to review employment contracts and ensure that all workers receive appropriate rights and protections.

Developing a two tier framework is not a straightforward process and this is acknowledged in Labour's statement that it will "consult in detail" on how a simpler framework differentiating between workers and the genuinely self-employed could "properly capture the breadth of employment relationships in the UK, adapt to changing forms of employment and guard against a minority of employers using novel contractual terms to avoid legal obligations".

In relation to any measures to provide accessible and authoritative information to individuals on employment status and their rights, employees and workers both already have a right to a section 1 statement of terms and conditions; it will be interesting to see what further changes the government proposes in this respect.

There is no reference as to whether or not employees and workers will also be taxed the same in future. If workers are taxed as employees there will be increased costs to businesses.

Enforcing rights at work

Collective grievances

Enabling employees to collectively raise grievances about conduct in their place of work with Acas. This would be in line with the existing code for individual grievances.

Employment tribunals

On Employment Tribunals:

• Carrying out further work to digitise them.
• Improving and strengthening enforcement to provide a quicker and more effective resolution.
• Increasing the time limit within which employees are able to make an ET claim from three months to six months.

The plan states that the extension in the time limit " will particularly support those who are seeking to make claims for pregnancy discrimination as evidence suggests women struggle to make funds available to lodge claims within the time limit. It will also allow more time for internal procedures to be completed, potentially decreasing the number of claims".

Single enforcement body – the 'Fair Work Agency'

The government will establish a single enforcement body to enforce workers' rights, including strong powers to impact workplaces and take action against exploitation. This will include discriminatory practices against migrant workers who are vulnerable to unscrupulous employers. The body will have the powers it needs to undertake targeted and proactive employment work and bring civil proceedings upholding employment rights.            

A single enforcement agency was initiated by the Conservative government but stalled; we may see Labour building on this work.

Equality, diversity and inclusion

Sexual harassment

Requiring employers to create and maintain workplaces and working conditions that are free from harassment including by third parties. Labour states that it will "properly tackle sexual harassment at work" and that it will "strengthen the legal duty for employers to take all reasonable steps to stop sexual harassment before its starts".

The government's proposals reflect the original measures in the Worker Protection (Amendment of Equality Act 2010) Act 2023 which comes into force this October and which places a statutory obligation on employers to take "all" reasonable steps to prevent sexual harassment and provide for specific protection relating to sexual harassment by third parties. It has also proposed to tackle sexual harassment under its whistleblowing reforms.

Equal pay

Measures to support equal pay include:

• Ensuring that outsourcing of services can no longer be used by employers to avoid paying equal pay, including for work of equal value, to women.
• Implementing a regulatory and enforcement unit for equal pay with involvement from trade unions. This would be done in recognition of the fact that the current equal pay framework is inaccessible, for example, due to a very long employment tribunal backlog.
• Protecting the ability to draw on equal pay comparators where workers' terms and conditions can be attributed to a single source, ensuring those provisions that were previously derived from EU law remain enshrined in UK law.
• Introducing a new Race Equality Act providing a full right to equal pay for Black, Asian and other ethnic minority people and strengthening protections against dual discrimination. A full right to equal pay will also be introduced for disabled people.

The UK government recently introduced amendments to the Equality Act which seek to ensure that workers are not disadvantaged by the UK's exit from the European Union.

Pay gap reporting

Requiring large firms "to develop, publish and implement action plans to close their gender pay gaps" and ensuring "outsourced workers are included in their gender pay gap and pay ratio reporting".

Making the "publication of ethnicity and disability pay gaps" mandatory for employers with more than 250 staff to mirror gender pay gap reporting.

At present employers are only under a gender pay gap reporting obligation; they are not under a statutory obligation to develop, publish and implement actions plans, although in practice many employers do. We will wait to see what standards and measures the government is proposing around any new legal obligation in this respect.

The previous government had consulted on introducing a statutory duty around ethnicity pay reporting but instead opted for a voluntary approach, publishing guidance to support employers who wish to do so.

Menopause

Requiring large employers with more than 250 employees to produce Menopause Action Plans.

Thousands of women are struggling at work due to a lack of support in dealing with symptoms of menopause, while women in their mid-life make up a large proportion of people who are out of work and the government looks to be formalising some of the work already done in this area.

Terminal illness

Encouraging employers and trade unions to negotiate signing up to the Dying to Work Charter which sets out best practice for employing workers with terminal illness, as well as working with trade unions and others to ensure that workers diagnosed with a terminal illness are treated with respect, dignity and supported at work.   

Family-friendly rights

Flexible working

Flexible working will be default from day one for all workers, except where it is not reasonably feasible.

Since 6 April 2024, all employees have a statutory right to request flexible working from day one of their employment. The government is proposing that flexible working becomes a "default" and the introduction of a two-tier employment status would see this expanding to a wider group. However, the proposed exception to this default right where flexible working is not "reasonably feasible" may mean that in practice employers will not see a significant difference with the existing right to request. Labour acknowledges within the plan that working arrangements need "to fit the workplace and the type of work"; it does not therefore seem that the government is proposing a one size fits all approach.

Labour's plan does, however, expressly state that it will embrace technological advancements in support of this proposal and gives examples of flexible working opportunities that workers should be able to benefit from, such as "flexi-time contracts and hours that better accommodate school terms".

In any event, all employers must continue to take care when considering flexible working proposals not to discriminate.

Parental leave

The existing parental leave system will be reviewed within the government's first year and with a view to ensuring parental leave is a day one right.

Labour states that its review will look at how the current system "best supports working families" and it may be that further changes are proposed coming out of this. For example, the statutory right to parental leave is currently unpaid and can only be taken in certain amounts each year. Shared parental leave is also under-used although this was the subject of a recent review by the previous government who confirmed that it would not be implementing reforms in this area; it may be that these will be areas that are considered.

Protection during pregnancy

It will be made unlawful to dismiss a woman "who is pregnant for six months after her return, except in specific circumstances".             

Since April 2024, new regulations have introduced a right for employees returning from a period of statutory maternity leave or shared parental leave to receive enhanced protection on redundancy through a right to be offered suitable alternative employment in priority to others. It may be that the government is looking to expand on this right; it is already unlawful to dismiss a woman because of her pregnancy or her taking of a period of statutory maternity leave and/or shared parental leave.

Carers leave

Reviewing the implementation of the carer's leave introduced in April 2024, including examining all the benefits of introducing paid carer's leave, while being mindful of the impact of any changes on small employers.      

A new statutory right to one week's unpaid carer's leave was introduced in April 2024, however there has continued to be pressure from various parties for this to be a paid entitlement. In practice, many organisations already provide some form of paid carer's leave to support their employees with caring responsibilities. However, it is often individuals in the lowest paid sectors whose employers do not offer provide pay for carer's leave who in practice may need the paid leave most.

Bereavement leave

Introducing a right to bereavement leave for all workers.   

The plan notes that while "the vast majority of employers give their workers the time off that they need, the law remains outdated and ill-defined". Again, it is often individuals in the lowest paid sectors whose employers may offer individuals only a limited and/or unpaid right to time off; this may lead to employees using their statutory holiday entitlement to take the time that they need, as well as driving increased sickness absence.

Currently, statutory rights to time off around bereavement are limited to two weeks' paid time off where a child dies under the age of 18. Most recently, the Paternity Leave (Bereavement) Act 2024 was granted royal assent and which, when it comes into force, will enable fathers and partners to take time off where a mother/partner dies in the first year after birth or adoption. The detail will be set out in regulations.

Health and safety

The plan sets out a number of proposals promoting safer workplaces:

• Reviewing health and safety guidance regulations with a view to modernising where it does not fully reflect the modern workplace.
• Modernise guidance with reference to extreme temperatures, preventative action and steps to ensure safety at work.
• Working with employers, trade unions and other stakeholders "to support wellbeing of workers and their long term physical and mental health, whether existing regulations and guidance is adequate to support and protect those experiencing the symptoms of long Covid and ensuring health and safety standards reflect the diversity of the workforce".

Pay

Genuine living wage

Ensuring that "the minimum wage is a real living wage people can live on". The remit of the Low Pay Commission will be changed so that alongside median wages and economic conditions, "the minimum wage will for the first time reflect the need for pay to take into account the cost of living".

The plan also states that "discriminatory age bands" will be removed to ensure every "adult worker benefits" and that the government will work with the new Single Enforcement Body and HMRC to ensure that "they have the powers necessary to make sure our genuine living wage is properly enforced, including penalties for non-compliance".            

The cost of living crisis has had a significant impact on lower paid workers and while some employers have taken specific ad hoc measures to support their workforce, for example, through one-off pay increases, it is clear that many individuals are still struggling. Raising the living wage will pose challenges for businesses with increased wage costs and may drive some businesses to cut jobs or reduce hours to offset these costs, although employers may see a positive impact on productivity .

Businesses will also need to factor in any further reduction in the age limit for paying the statutory national minimum wage. This was lowered from 23 to 21 in April 2024 and it appears that Labour is looking to lower the age at which it is paid to 18 with its reference to adult workers.

Statutory sick pay

Statutory sick pay will be payable from the first day of ill health absence and the lower earnings limit will be removed. Currently, statutory sick pay is only payable from the fourth day of absence with a three day "waiting period" applying. Employees must also earn more than the lower earnings limit.

Labour's proposals may see more employees taking sick leave as improving financial security for sick employees may reduce the pressure experienced by those on lower incomes to work while unwell. Employers will also need to consider the impact of the proposal to give all workers day one rights, which will include a right to statutory sick pay.

Statutory sick pay cannot be reclaimed by an employer so this new development could potentially be a significant additional cost for business.

Fair tips

Strengthening the law "to ensure hospitality workers receive their tips in full and workers decide how tips are allocated".

How tips are distributed is a current issue. A draft statutory Code of Practice on the fair and transparent distribution of tips has now been approved by both Houses of Parliament; however commencement regulations are still needed to bring the Code and the remaining provisions of the Employment (Allocation of Tips) Act 2023 into force (and which it was expected would come into force in October 2024).

Unpaid internships

Banning unpaid internships except when they are part of an education or training course.

The plan states that unpaid internships are "good for social mobility, ensuring that talent of tomorrow get the vital skills and experience they need to succeed".

There have previously been concerns though that businesses have abused the use of internships, essentially using them as free labour. The government looks to be clarifying the position by banning all unpaid internships unless they are part of a specific education or training course, with presumably individuals falling outside the exception being classified as workers and potentially, under its proposals, entitled to day one rights including the right to a minimum wage. 

Technology

AI

Examining with workers and their trade unions, employers and experts to examine what AI and new technologies mean for work, jobs and skills and how to promote best practice in safeguarding against the invasion of privacy through surveillance technology, spyware and discriminatory algorithmic decision-making.

We may see the government looking to introduce more specific "workplace" regulation around the use of AI given its stated desire to "protect good jobs and ensure good future jobs and that rights and protections keep pace with technological changes". It has also stated that it "will safeguard  against discrimination and… put worker voice at the heart of Britain's digital transition".  The Platform Workers Directive may well also influence the approach the government would take and which includes specific protection around human intervention in algorithmic decision making and a right to information. 

Right to switch off

Bringing in a "right to switch off" following "similar models to those that are already in place in Ireland or Belgium, giving workers and the their employers the opportunity to have constructive conversations and work together on bespoke workplace policies of contractual terms that benefit both parties".      

We must wait and see the detail of what exactly the government is proposing and whether this will be a right to have a "constructive conversation" around introducing a right to switch off in the workplace or whether there will be an underlying fundamental right which is not subject to negotiation.

The use of technology has increasingly blurred the lines between work and personal time and there have previously been calls for some form of specific protection to address this and the consequent impact on employee wellbeing. Existing regulations do not address the use of technology and its impact on working time specifically.

Surveillance

"As a minimum" ensuring that introducing surveillance technologies is subject to consultation and negotiation, with a view to agreement of trade unions or elected staff representatives where there is no trade union; a collective agreement relating to surveillance will not override it. 

Trade unions and industrial action

Labour believes "strong collective bargaining rights and institutions are key to tackling problems of insecurity, inequality, discrimination, enforcement and low pay" and is therefore "committed to strengthening the rights of working people by empowering workers to organise collectively through trade unions".

Proposals include:

• Repealing the Trade Union Act 2016 (setting turnout requirements for industrial action ballots, increasing the notice that trade unions must give of any industrial action from one to two weeks, placing a six month limit on the validity of strike ballots, introducing additional requirements on the wording of the ballot paper and placing additional restrictions on picketing), the Minimum Service Levels (Strikes) Bill (enabling the government to set minimum service levels in specified sectors) and the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022.
• Allowing modern, secure, electronic balloting and workplace ballots.
• Reviewing and simplifying the process of union recognition and law around statutory recognition thresholds so working people (including those in precarious and gig-economy sectors) have a meaningful right to organise through trade unions. Rules will be modernised to ensure they are fit for an economy with growing platform sectors and a rise in remote and home working. Labour will remove that rule that means unions must show that at least 50% of workers are likely to support their claim before the process has even begun and modernise the rules governing the final ballot, requiring unions to "gain a simple majority to win" a vote on whether they are recognised.
• Introducing rights for trade unions to access workplaces in a regulated and responsible manner for recruitment and organising purposes, provided they "give appropriate notice and comply with reasonable requests of the employer". These reasonable and regulated new rules will be "formally monitored" to ensure "trade unions and officials and workplaces are complying with their responsibilities and obligations and that rules allowing access are used proportionately and effectively".
• Introducing a new duty on employers to inform all new employees of their right to join a union and to inform all staff of this on a regular basis. This will be required as part of the written statement of particulars that all new workers receive when starting a new job.
• Ensuring there are sufficient facilities and time for all trade union representatives "so that they have capacity to represent and defend workers, negotiate with employers and train".
• Creating new rights and protections for trade union representatives to undertake their work, "strengthening protections for trade union representatives against unfair dismissal and union members from intimidation, harassment, threats and blacklisting".
• Introducing statutory rights for trade union equality representatives in order to strengthen equality at work for all.
• Modernising rules on blacklisting to account for new technologies and ways of storing data. Use of predictive technologies for blacklisting will be outlawed and safeguards put in place against singling out workers for mistreatment or the sack without any evidence of human interaction. Labour will "end the loophole that allows employers to bypass laws through third party contractors" and it will give "the regulator and Employment Tribunals the power to order the seizure and destruction of any list, digital or not, to prevent blacklisting happening again".

Countries around the world are looking to boost worker representation in response to economic challenges and economists across the piece recognise the vital role that workers' voices have in delivering a strong economy and raising living standards. Labour states that it will "bring in a new era of partnership that sees employers, unions and government work together in co-operation and not through negotiation". However, it will ensure its plans "do not undermine existing collective bargaining arrangements that are supported by unions".

TUPE

The existing set of rights and protections for workers subject to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) processes will be strengthened. Labour will also bring about the biggest wave of insourcing in public services in a generation, ensure outsourcing is not used to avoid equal pay legislation and embed social value in rules around public sector contracting.

The plan sets out no further detail on what the government proposes in this respect. However, its proposal to introduce a single status of "worker" would have potential implications for the current TUPE rules.

The previous government recently introduced legislation to enable consultation directly with employees where there are no existing representatives in place to consult with and where the size of the business or number of employees who will be transferred meets certain triggers (for transfers occurring on or after 1 July 2024). Just before the election announcement, the previous government also published a consultation clarifying that TUPE only applies to the current status of "employee" and not "worker". It was also seeking views on avoiding fragmented services transferring to multiple employers under TUPE.

Whistleblowing

Protection for whistleblowers will be strengthened, including updating protection for women who report sexual harassment at work.

Following the #MeToo movement, sexual harassment remains a significant issue and one which the previous government had taken some steps to address by introducing a new specific duty on employers to prevent sexual harassment in the workplace, which comes into force in October 2024.

A consultation is currently taking place on updated EHRC guidance on sexual harassment. The previous government had also promised reforms around the use of non-disclosure agreements; although limitations already apply to the use of these – for example, an individual cannot be prevented from whistleblowing, reporting a criminal offence or breach of a regulatory obligation or cooperating with a criminal investigation. A key impact of treating harassment as whistleblowing would be the availability of "interim relief".

Zero-hour workers

Introducing a ban on "exploitative" zero-hour contracts to ensure "all jobs provide a baseline level of security and predictability". This includes:

Ensuring workers have the right to a contract reflecting the number of hours they regularly work based on a 12 week reference period.

Implementing anti-avoidance measures where necessary.

Ensuring all workers get reasonable notice of any change in shifts or working time, with compensation that is proportionate to the notice given for any shifts cancelled or curtailed.

Overtime and fixed term contracts, for example for seasonal work will be unaffected. The previous government was planning to introduce a right for workers and agency workers to request a predictable working pattern (no commencement date had been set but it was expected to be introduced this autumn). We may now see the new government implement and build on this.

If you would like to discuss any of the issues raised in this Insight, please get in touch with your usual Osborne Clarke contact, or one of our experts listed below.