Top 5 issues for HR in 2023

This is our selection of key issues which we think will be significant for HR during 2023.

Also see our update, Changes ahead for UK workplace law, on the key employment law developments which we believe will impact businesses in the coming months.

1. Recruitment and retention and protecting business interests when key staff leave

A cost-of-living crisis and recession potentially creates a host of employment issues for employers to grapple with.  For example, employees who are concerned about struggling to make ends meet may be thinking about changing jobs to increase their pay.  So the challenge for employers is to find creative and cost-effective ways of retaining staff.   Examples might include introducing financial education programmes to help with budgeting and money saving; being (more) flexible about home working to help save on commuting costs; asking staff what support would be most helpful; and finding ways of tying employees in through deferred bonuses and other financial incentives.   

It seems fairly likely however that, despite best efforts by employers, some employees are bound to leave looking for a salary hike. Therefore, unless the employer can retain them by making a counteroffer, some staff may be lost.  Losing staff can be expensive, not just because of the recruitment costs to replace them, but because when a highly skilled/long term employee leaves, the organisation loses both institutional knowledge about the business and confidential information – information that a departing employee cannot unlearn.  Only where the employment contract contains a valid non-compete clause, and that clause is observed, can an employer properly guard against dissemination of that confidential information (confidential information clauses being difficult to enforce). Therefore, when employees leave there is a material risk that know-how will walk out the door with them.

Of course, if one employee leaves then others may follow and the coordinated departure of teams of individuals generates potential breaches of a variety of legal obligations. A properly drafted, and up to date, set of restrictive covenants can help protect employers from potentially large costs which may be associated with the loss of key staff and teams of individuals.

2. Artificial Intelligence (AI) and discrimination risk

The use of AI and machine learning at all stages of the employment lifecycle is growing quickly and proposals for greater regulation is expected in the near future.

AI can take various forms, including CV sifting, targeted job adverts, monitoring employees and assessing their performance.  But there are number of risks associated with the use of AI systems.  By way of example,  using AI presents significant risk of discrimination claims because humans, who have inherent biases, input the data.   Also, as it’s not currently possible to give machines a human level of context to inform decision making, this can lead to concerns about the way decisions have been taken and the lack of any compassion.   

So how can these risks be managed?  Employers must first understand what AI systems are being used in the HR process and then be able to understand and, if necessary, explain what decisions are being made by technology and how those decisions are taken.  If not, there is already a significant risk.  It may be possible to ask the software suppliers to provide a sufficient explanation and/or carry out an equality audit on the way the AI system is operating and put steps in place to defend a claim.  To reduce litigation risk, any such audit should be done under legal professional privilege. 

We are in the midst of a significant shift towards greater regulation of AI both in the UK (where we are expecting a government White Paper) and internationally (such as in New York where new legislation has been implemented), so employers need to be prepared. 

3. Hybrid working and digital nomads

During the pandemic, hybrid working became mainstream with a significant proportion of employees being forced to work from home. Some employees even worked remotely from abroad temporarily, for example where they found themselves stranded abroad. Now, increasingly, employees are asking their employers to allow them to work abroad for personal reasons, such as to be closer to family who live abroad or to reduce their cost of living.

With remote working technology allowing many roles to be performed effectively from just about anywhere, and employers keen to attract and retain the best talent, some employers are exploring allowing their employees to work remotely from outside the UK for a set period of time each year.

Allowing employees to work remotely from abroad raises a number of considerations for employers which can sometimes be overlooked, including:

• Immigration - does the individual have the right to work in their chosen country?
• Tax - there are three key issues to consider: (1) the employee’s tax obligations (2) the company’s social security obligations, and (3) whether the arrangements create a corporate tax obligation on the company;
• Employment rights – will the employee gain employment rights in the country they are working from?
• Regulatory issues – is an employee performing a regulated function allowed to work abroad?
• Time difference – will the employee be able to communicate with their colleagues effectively where there is a material time difference?
• Health & safety – how can you comply with your obligations to provide a safe workplace where employees work remotely abroad?
• Data protection/security – how can you ensure communications are secure and data protection obligations are complied with?

We have advised many employers on these issues and can also provide advice and documentation on introducing a global policy on working remotely abroad if this is of interest.

4. Workplace culture

The importance of diversity and inclusion is ever increasing, with gender pay reporting leading to greater analysis of data underpinning D&I strategies, along with greater pressure from clients, investors and shareholders in the Environmental Social and Governance (ESG) space (with culture falling squarely within ‘Social’). We have extensive experience in this area - we can carry out culture audits, and help with analysing and auditing diversity data to enhance your D&I strategies.

The government is now legislating to introduce one week’s unpaid leave for carers and additional paid leave for parents whose babies are born prematurely or suffer from medical issues, as well as expanding redundancy protection from the moment of becoming pregnant to six months after their return. In terms of HR trends, we are seeing a move in some sectors towards paid leave for both parents regardless of gender – for example, six months paid leave for men and women on having a child – which is an important step towards improving gender equality at work.

Employers are increasingly expected to facilitate an open culture where women’s health issues, such as the menopause, endometriosis, fertility and baby loss, can be freely discussed and, to a reasonable degree, accommodated. For example, we have been advising employers to enable them to meet cultural expectations around menopause – steps they have been taking include:

• Raising awareness of the issues around menopause for all staff
• Setting up support groups for women going through this stage of life
• Having a policy setting out the support available and signposting external help
• Negotiating with private health insurers to provide increased cover for menopause issues
• Training managers on how to spot women’s health issues and respond accordingly

In addition, despite approximately 15% of the UK population being neurodivergent, there is a significant lack of awareness and understanding around neurodiverse conditions, and how employers can and should help these employees. Neurodivergent employees who qualify as “disabled” under the Equality Act definition, are protected against discrimination, and employers must make reasonable adjustments to remove or minimise any disadvantage to them in the recruitment process and the workplace. We can deliver training and advise on adjustments and flexibility employers can adopt, as well as drafting a neurodiversity policy.

5. Climate change

Since April 2022, the largest UK companies have had to publish certain climate-related information, and it’s inevitable there will be increased regulation in this area. Taking steps now will allow businesses to get ahead of the game.

HR are uniquely positioned to draw on the connection between employees and the business to help organisations meet their climate-related goals. We consider that businesses should take a holistic approach to reducing emissions and improving sustainability, and taking steps to encourage a greener workforce is a logical part of this process.

Many organisations now have sustainability policies but to drive real change in this area, employers should engage every single employee, and embed sustainability into the very foundations of the business by building sustainability obligations into all policies, employment contracts, benefits, communications and employee culture.

Our HR Eco Audit is designed not only to enhance employers’ documentation to promote sustainability, but to assess where they are on environmental issues at a snapshot in time.

If you would like further information on how we can help you with any of these key issues, please contact your usual team member or one of the authors.