What are the Labour government’s plans for employment law?

The Labour government has set out plans for sweeping changes to workplace rights and protections. These changes will have a significant impact on employers and workers. We look at what we know so far about the plans and when they are likely to come into effect.

The plans include making unfair dismissal a day one right, banning ‘exploitative’ zero hours contracts, reforming employment status, making flexible working the default, introducing race and disability pay gap reporting, giving trade unions a greater role and scrapping restrictions on industrial action, such as minimum service levels, introduced by the Conservatives.

Employers can expect to see significant changes to employment law over the coming year or two, but as to when precisely the proposals will become law this is less clear, particularly in view of the Labour government’s manifesto commitment to consult fully before passing legislation.  

What are the planned changes?

The proposals are outlined in the Labour’s government’s “Plan to make work pay – delivering a new deal for working people” (the Plan) and the Prime Minister’s briefing notes on the King’s Speech. Key proposals include:

Employment status

• Labour has outlined plans to move to a simpler two category framework for employment status whereby people are classified as either ‘workers’ or ‘genuinely self-employed’ for the purpose of workplace rights and protections.  Currently, people are classified as employees, workers or self-employed and each group has different rights and protections.  This would be a substantial change for employment law and would, we understand, be preceded by a detailed consultation. This means that we are not expecting any changes to employment status in the short-term.

It is not clear what would happen in relation to tax.  If employees and workers share an employment status, would they also share a tax status?  Many people currently classified as ‘workers’ are self-employed for tax purposes, whereas employees are taxed through PAYE.  Would ‘workers’ under the new regime be taxed as employees? If so, this would have significant consequences for employers and workers. It would increase employer costs because of employer national insurance contributions and may lead to some ‘workers’ arguing that they are in fact self-employed. This is an area that would need careful consideration before changes are implemented.

Employment rights

• Labour will give workers a right not to be unfairly dismissed from the first day of work (scrapping the current two-year qualifying period). This would be a major change leading to a far greater number of people having the right to bring an unfair dismissal claim.

Revised proposals suggest there may be exceptions to this where an individual remains within their probationary period. There is a suggestion that dismissals would still be fair if carried-out during ‘probationary periods with fair and transparent rules and processes.’  We are awaiting more details of how this would work. Employers may want to review their contracts to ensure they have clear, flexible and lengthy probationary periods.  

This change should make employers more cautious about hiring and could lead to greater use of alternative options, such as using agency workers or fixed term contracts, which may help manage expectations to reduce the likelihood of claims and could help reduce the compensation awarded by Employment Tribunals where someone is found to have been unfairly dismissed.

• Labour plans for all workers to be afforded the same basic rights and protections, including sick pay, holiday pay, parental leave and protection against unfair dismissal.  

It is not completely clear whether the intention is to extend unfair dismissal protection beyond employees to workers, but if that is the case, this would be a major change and would likely lead to a further increase in Employment Tribunal claims with workers being able to claim unfair dismissal, rather than just employees as is currently the case. We are awaiting further details of the plans.

Presumably, when the Labour government refers to ‘parental leave’, they are meaning all types of family leave including maternity leave, paternity, adoption and shared parental leave.

• Labour will remove the three day ‘waiting period’ before statutory sick pay (SSP) is payable. This means workers would qualify for SSP from their first day of absence rather than their fourth as is currently the case. The lower earnings limit would also be removed.
• Labour plans to give workers a new ‘right to disconnect’ - giving workers the right to disconnect from work outside of working hours and not be contacted by their employer. This would follow the lead of some European countries like Ireland and Belgium although it now appears that this pledge has been diluted somewhat. It is expected that workers would have the right to have constructive conversations on the topic with management to develop approaches that work for the business, rather than a blanket right to disconnect. This proposal was not mentioned in the Kings Speech so it may be lower down Labour’s priority list.
• Labour intends to make flexible working the default from day one for all workers, except where it is not reasonably feasible. Full details of what is being proposed are not clear, but this could be a significant change from the current position where the right is to request flexible working, as opposed to flexible working being the default position.
• Labour has said it will give self-employed people new rights, including the right to a written contract, the right to take action for late payments and health and safety and blacklisting protections. Again, it’s not clear exactly how this will work and further details are awaited.
• Labour plans to set up a new Single Enforcement Body, also known as a Fair Work Agency, to strengthen enforcement of workplace rights.

Family-friendly rights

• Labour plans to review the parental leave system within the first year of government. 
• The Employment Rights Bill will make ‘parental leave’ a day one right. It’s unclear if this means parental leave specifically or any type of family leave (such as maternity leave). Parental leave gives parents the right to take up to 18 weeks’ unpaid leave – at the rate of up to four weeks’ a year – for each child over the course of their childhood. There is currently a one-year qualifying period for parental leave. 
• Labour intends to strengthen family friendly rights. Labour’s plans include extending statutory maternity and paternity leave, introducing a right to bereavement leave for all workers and urgently reviewing the shared parental leave framework. Labour would also make it unlawful to dismiss a woman during pregnancy or within six months of her return to work, except in specified circumstances. They also plan to look at making carer’s leave a paid entitlement (it is currently unpaid).

Zero hours contracts

• New rules designed to prevent the abuse of zero hours contracts are planned. Initially an outright ban on zero hours contracts was proposed but this appears to have been revised. Instead, we understand employers will be allowed to continue to use zero hours contracts provided they are not "abused" or exploitative. We will have to wait for further details of when a zero hours contract will be classed as exploitative. 

This is likely to include a situation where the employer does not guarantee that any hours will be provided but the worker is obliged to be available for any work that is offered.  A new law is planned to set out the minimum standards expected, and there would be a new right to a contract that reflects hours that are regularly worked (as judged against a 12-week reference period).

It seems possible that the planned right to request a predictable working pattern due to come into force in September 2024 could be dropped to allow for Labour’s more radical plans in this area.

• Workers will have a new right to a contract that reflects the number of hours they regularly work. They will also be entitled to reasonable notice of any changes in shift with proportionate compensation for any shifts cancelled or curtailed. 

Fire and rehire

• Labour has committed to end the practice of "fire and rehire" as a lawful way to change an employee’s contractual terms. This would include reforming the law to provide effective remedies against abuse and a strengthened statutory code of practice in place of the one being brought into force by the current government on 18 July 2024. 
• Labour have highlighted three potential areas for change on fire and rehire including: 
  • improving information and consultation procedures, to make employers consult with their workforce and reach agreement about contractual changes 
  • adapting unfair dismissal and redundancy legislation to prevent workers being dismissed for failing to agree to a worse contract
  • ensuring that notice and ballot requirements on trade union activity do not inhibit defensive action to protect terms and conditions of employment in situations where an employer is using fire and rehire tactics. 

Redundancy

• Labour plan to change the law on collective redundancy consultation so that whether the obligation to collectively consult has been triggered will depend on the number of people impacted across the business, rather than in one workplace.  

This is a significant proposal and would, in effect, reverse the Woolworths case in which it was decided that it is the entity or "unit" to which the workers made redundant are assigned to carry out their duties that constitutes the establishment when counting the number of dismissals to determine whether the duty to collectively consult has been triggered. However, this change was not mentioned in the King’s Speech. 

It is not clear whether Labour also plan to change the number of redundancies that would trigger collective consultation requirements.  Currently, it is 20 or more within a period of 90 days.

This plan will mean that employers with more than one site will need to keep a close eye on the number of redundancies they plan across sites to check whether collective consultation obligations have been triggered, and collective redundancy consultation will be required more often than is currently the case. 

Trade unions and industrial action 

• Labour plan to strengthen trade union rights, including by:
  • Repealing:
    • The Trade Union Act 2016 - which introduced turnout requirements for industrial action ballots and increased the notice that trade unions must give of any industrial action from one week to two. It also placed a six-month time limit on the validity of strike ballots, introduced additional requirements on the wording of the ballot paper and placed additional restrictions on picketing
    • The Strikes Act 2023 - which introduced powers for the government to set minimum service levels in specified industries and issue work notices to require certain workers to refrain from strike action.
  • Trade unions would be permitted to use secure and private electronic balloting when engaging, communicating with and polling members. Allowing electronic and workplace ballots would make it much easier for unions to organise industrial action, as postal ballots are more time consuming and expensive to organise.
  • Labour would simplify the statutory recognition process by:
    • removing the requirement for a trade union to show that at least 50% of workers are likely to support recognition for the process to begin
    • modernising the rules on the final ballot in which workers vote on whether to recognise a trade union, requiring unions to gain a simple majority.
    • These measures would make it easier for unions to win recognition from an employer.
  • Trade unions would be given a new right to access workplaces to allow unions officials to meet, represent, recruit and organise members, provided they give appropriate notice and comply with reasonable requests of the employer. 
  • Labour would introduce a new duty on employers to inform all new employees of their right to join a union and to remind all staff of this on a regular basis. This will be required as part of the written statement of particulars that all new workers already receive when starting a new job.
• In a new proposal, Labour says that it will enable 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. 

Equality at work

• An Equality (Race and Disability) Bill is planned which will give black, Asian and ethnic minority people the right to make equal pay claims. We would expect this to consulted on before any changes are made. 
• The Bill will also introduce ethnicity and disability pay gap reporting for employers with more than 250 employees. This is a complex area and careful consideration will need to be given to how this will work in practice.
• Labour plan to revise gender pay gap reporting and pay ratio reporting rules to include outsourced workers. Employers will also be required to devise and implement plans to eradicate pay gap inequalities.
• Labour plan to further strengthen harassment laws, including plans to introduce protection from harassment for interns and volunteers and to reintroduce protection from third government harassment.
• Large employers with more than 250 employees would be required to produce Menopause Action Plans, setting out how they will support employees through the menopause.

Pay and tax

• The Prime Minister’s briefing notes to the King’s speech promise to deliver a genuine living wage that accounts for the cost of living and removes the age bands for adults. This could have a significant impact on employers who have large numbers of workers in the 18-20 age bracket (e.g. employers in the retail, leisure and hospitality sectors) as the current minimum wage age bandings allow employers to pay those under 21 a lower hourly rate of pay. 
• Labour would ensure workers receive their tips in full. The Employment (Allocation of Tips) Act 2023 is already coming into force on 1 October 2024 and aims to ensure workers receive their tips in full, so presumably this is a commitment to the changes that are already coming into effect.
• Labour has said it would ban unpaid internships, except as part of an established training or education program.
• Labour would establish a Fair Pay Agreement in the adult social care sector and, following review, assess how and to what extent such agreements could benefit other sectors.

TUPE

• TUPE reforms - Labour would end the presumption in favour of public sector outsourcing and oversee the "biggest wave of insourcing of public services for a generation". 

Employment Tribunals

• Labour plan to extend time limits for bringing Employment Tribunals claims from three to six months. Whilst this would allow more time for disputes to be resolved before claims are brought, it is likely to result in more Tribunal claims overall – increasing costs for businesses.

These are some of the key proposals that employers should be aware of, but there are others as well. More details about the plans and how they will work in practice will become available over the coming weeks and months.

How quickly will all of this happen?

Precisely when the proposals will become law is not clear, particularly in view of the Labour government’s manifesto commitment to consult fully before passing legislation.  

Labour has promised to “introduce” the Employment Rights Bill within the first 100 days of coming to power, and is pressing ahead with this as confirmed in a first-of-its-kind recent meeting to talk about workers’ rights between government, unions and business leaders. This would be by 12 October 2024. It is not clear which of the above policies will be included in the Employment Rights Bill, as the notes to the King’s Speech do not confirm this, so we will have to wait and see.

Before becoming law, the Bill would need to go through both Houses of Parliament, and it may be amended as it progresses. This is likely to take several months, and as mentioned above, Labour committed in their manifesto to consult fully before passing legislation, so presumably a consultation process will need to be factored in. 

What we do know is that Labour remain committed to introducing the policies set out in their Plan to Make Work Pay. On 12 August 2024, in response to a written question asking whether the Plan is a government policy commitment, Baroness Jones of Whitchurch (a Labour peer) said that the government is committed to delivering it in full.

Baroness Jones explained that ministers are identifying the most appropriate delivery mechanisms for the commitments set out in the Plan, including the Employment Rights Bill that will be introduced to Parliament within 100 days of taking office. She said that work is underway to identify and deliver measures through non-legislative and secondary legislative routes. 

The Equality (Race and Disability) Bill (Race and Disability) Bill is expected to be published in draft form for consultation. This suggests it may take longer to become law.

For information about how we can help you prepare for these changes, please get in touch.