Important post-election employment law update
Now that the dust has settled from the general election, we’ve been able to give some thought to the most significant employment law changes, and the steps which employers need to take to get prepared.
It’s fair to say that Angela Rayner’s statement that the changes are “the biggest upgrade of workers’ rights in a generation” is true. As the Labour government start to enact their manifesto promises, employers will have to get used to some very different concepts and will have to adapt working practices to reflect new obligations towards staff.
Let’s look at some of the key points:
Employment status
Labour’s view is that the current categories of employee, worker and self-employed are confusing and open to manipulation – as has been reflected in the number of cases looking at the distinctions between these categories. To tackle this, it is proposed that all workers and employees would have the same rights – including protection against unfair dismissal, sick pay, holiday pay, parental leave, etc. – effectively a levelling up of rights for those currently categorised as ‘workers’. A commitment has been made to a full and detailed consultation and, as such, it’s anticipated that this change will take longer to review and implement.
We’re advising employers to audit the employment status of their existing workforce prior to this change and plan/budget for these enhanced rights.
In addition, employers will want to have a clear strategy as to whether they continue to engage workers on different contracts to their employees.
Self-employed individuals are also due to benefit from enhanced rights – including the right to a written contract with the end user and clearer processes to tackle late payments. These individuals are also set to benefit from enhanced protection in respect of health & safety and blacklisting.
Finally, the use of unpaid internships will be narrowed so that these will only be permitted where such a placement is required as part of an education course.
Zero hour contracts
It’s recognised that there is a place for zero hours contracts in some workplaces and so these will still be permitted, but exploitative arrangements will be banned. Zero-hour workers will also have a right to a contract with the end user which reflects the number of hours they’ve regularly worked in the preceding 12 weeks. Employers using these contracts will be required to give reasonable notice of changes to working times and shifts and, where shifts are cancelled, they will be expected to pay compensation to the affected worker – with the amount of that compensation dependent upon the amount of cancellation notice provided.
Our suggestion is that employers who use zero hours contracts consider how and when to use them most effectively and introduce policies and procedures to clarify their implementation and operation.
Pay
One of the quickest changes we’re likely to see will be an increase to the National Minimum Wage (NMW) rate. No legislative process needs to be followed to implement that change and so an increase can be achieved by a government instruction to the Low Pay Commission. It is anticipated that the age bands for those 18 and over will be removed, building on a recent trend of reducing the difference between the age bands – and that the headline rate will increase from the current level of £11.44/hour. What Labour want is to have a “genuine living wage”, perhaps akin to that supported by the Living Wage Foundation which currently sets the London Real Living Wage at £13.15/hour and, for the rest of the UK at £12.00/hour?
Going forward, the Low Pay Commission will be required to take account of the UK cost of living in setting the NMW, rather than just looking at median wages and general economic conditions.
We’re also anticipating an increase to the rate of Statutory Sick Pay from the current level of £116.75/week. The scope of individuals entitled to receive SSP will also widen as the Lower Earnings Limit (the wages level below which there is no entitlement to receive SSP – currently £123/week) will be removed and SSP will be available to the wider category of workers as a result of the changes to employment status rules. In addition, the current 3 day waiting period, during which employees are not entitled to any SSP, will be removed.
It’s sensible now to consider which staff are at or near the NMW rates and budget for wage increases in the short to medium term.
It will also be worth considering whether increases in wages for your lowest paid staff could cause issues with the erosion of pay disparity to the next level of employees – often those with supervisory and lower management responsibilities – and how you may address that either with further wage rises or with non-financial benefits.
Equality law
The new duty on employers to take proactive steps to prevent sexual harassment is already due for implementation on 26th October this year. Labour plan to make that duty more onerous for employers in that they will be required to take all reasonable steps to prevent sexual harassment, not just reasonable steps, in the workplace. Failure could result in an uplift in compensation and intervention by the EHRC. The EHRC has produced revised technical guidance which is subject to a brief period of consultation (closing date 6th August) the final version of which will provide employers with practical guidance and examples of the sorts of steps that they will be expected to take to discharge their legal duty. In addition, employers will need to ensure that staff are protected from harassment by third parties – for example, your clients, suppliers and business contacts.
The Equality Act 2010 already includes wording about dual discrimination to cover situations where a Claimant says that they have been discriminated against on the grounds of more than one protected characteristic – it’s just that those provisions have never been enacted, but the new government are planning to do so. This is likely to be particularly relevant for menopausal employees seeking protection, perhaps on the basis of a combination of their age, sex and/or disability.
Equal Pay claims will be able to be bought on the basis of a race or disability related pay disparity, rather than just sex as is the current position.
Employers should ensure that workplace equality and harassment statements and policies are up to date, are in line with updated EHRC guidance, and that the opportunity is taken to re-communicate them to all staff.
Undertaking appropriate risk assessments to understand where / how sexual harassment may take place in the workplace and implementing measures to limit the incidences of sexual harassment will be essential, irrespective of the size of the organisation.
Having a training plan for managers, which is routinely refreshed, on how to handle complaints sensitively and acting decisively in response to legitimate concerns will also be important, as will having the paper trail to demonstrate that you have done all these things.
Work-life balance
The right to request flexible working has recently become a day one right but the rules will be tightened up to grant a flexible working requests unless it is not reasonably feasible. The difficulty is that we don’t currently know what the guidance will be around what makes a request not reasonably feasible, although it seems likely that a limited list of business reasons – akin to the current list of 8 acceptable grounds for refusing a request – will be provided.
Labour is also proposing to introduce a right to disconnect – with the idea that staff will be able to switch off and stay motivated and resilient as a result. Inspiration will be taken from countries who have already introduced rules in this area, including Ireland and Belgium, but given that the rules in those countries are very different (Ireland is voluntary and Belgium is limited to large employers only) and little extra detail has been provided in the manifesto, we’re going to have to wait and see what this will look like in practice.
There are clear recruitment and retention benefits from being able to offer meaningful flexibility and a sustainable work life balance and we’d encourage employers to take a creative and proactive approach. Adopting a style of “why can’t I accept this request” rather than “why should I grant it” will make you well prepared for future developments.
Family leave
Labour have promised to undertake a thorough review of the existing parental leave framework in the first 12 months of coming to power. By ‘parental leave’, we think they mean a review of the entire spectrum of family leave rights, rather than just the existing right to take (unpaid) parental leave, as otherwise the review would be very limited in scope. As part of that review, we also expect them to propose the removal of qualifying periods of service for certain types of leave / pay, consistent with their aim to extend the availability of parental leave and pay to a much larger proportion of the UK’s workforce.
Important changes are also planned in relation to the newly introduced carer’s leave converting it from a right to take one week’s unpaid leave a year, to fulfil caring responsibilities, to a right to take paid time off to care for a dependent or another family member. We expect the period of leave to be capped at a week still, but the fact that it will be paid will undoubtedly increase its popularity and take up.
Employers may want to consider amending their family leave policies in anticipation of planned changes. Qualifying periods of service and other eligibility criteria will still be permissible and can be retained for any enhanced benefits over and above statutory leave and pay limits.
Mandatory reporting for large employers
Large employers (those employing 250+ employees), already subject to annual mandatory gender pay gap reporting, will need to brace themselves for more accountability and public scrutiny of not just their gender pay gaps, but also their action plans for closing existing pay gaps as well as requirement on the near horizon to publish ethnicity and disability pay gap data as well. The government plan to introduce a new Equality (Race and Disability) Bill which will contain these mandatory reporting obligations in more detail.
The Labour government is committed to providing greater support to women in the workplace suffering with the symptoms of perimenopause and menopause, with the introduction of new requirement to have (and potentially publish) menopause action plans. It is hoped that these measures will help to retain more women in the workplace and reduce the cost to businesses of avoidable sick days associated with the menopause and its related symptoms.
We know many employers already publish more than bare gender pay gap figures, but for those large employers that do not, there’s no time like the present to start to formulate a more proactive approach to developing specific action plans (and monitoring their effectiveness) for closing gender pay gaps, and devising a strategy to gather meaningful data in readiness for ethnicity and disability pay gap reporting.
Employers that have menopause policies in place, and menopause-specific training for line managers, will be well placed when these additional requirements come into effect. So if you don’t have a policy, now’s the time to introduce one.
Dismissals
By far the most radical change to UK employment law that we are set to see in the short to medium term, is the right for all workers, irrespective of their length of service, to be able to claim unfair dismissal. This change will involve the removal of the current 2-year qualifying period of service, meaning any new hire, including one that is still in their probationary period, can pursue a complaint of unfair dismissal if their employment is ended.
Labour has said that employers can still fairly dismiss workers in the first 2 years of their employment (provided there is a fair reason to do so, etc) and probationary periods can still be used by employers to assess an employee’s suitability; however, quite what, if any, additional flexibility will be available to employers to dismiss someone during their probationary period remains to be seen. There are no current plans to remove the statutory cap on compensation for unfair dismissal, as had previously been suggested, which will be some small comfort for employers facing the inevitable influx of complaints and Tribunal claims that this change will bring about.
Employers proposing to make multiple redundancies in the future will need to be watchful of an important change to the trigger for collective redundancy consultation. Currently, the obligation to consult with reps of affected employees, is only triggered where the number of proposed redundancies at an establishment – which has been interpreted to mean local business unit in a multi-site operation – is 20 or more in a rolling 90-day window. Going forward, establishment will not be broken down into individual business units, but will be treated as the organisation as a whole, resulting in a sharp increase in the number of employers having to embark on collective redundancy consultation processes, as well as much greater legal and financial risk for those employers that (inadvertently) tip into collective territory without realising it.
In readiness for probationary periods having heightened usefulness, we expect many employers will start to move to a 6-month probationary period as standard, and devise specific probationary policies and training for line managers.
Given the increased risk to employers of poor recruitment decisions, we also expect employers will want to review and potentially upgrade their current recruitment practices to make them as robust as possible.
We would also recommend having an internal tracker which is routinely updated to capture the number of planned redundancies, including voluntary redundancies, on a rolling basis, to ensure that collective redundancy consultation takes place, or the trigger point is avoided altogether.
Tribunal claims
The current 3-month limitation period for the majority of Tribunal claims is considered to be too short, forcing claimants and particularly litigants in person, to file claims before there’s been a proper opportunity for conciliation and settlement. The time-limit for submitting Tribunal claims, including those for discrimination, will be extended from 3 to 6 months. The Labour government believes that the extra time will, ultimately, lead to a reduction in the number of claims coming through the (virtual) doors of the Tribunal – whether that ends up being the case will remain to be seen. However, given our recent experience of delays when trying to engage with ACAS during the 6 week early conciliation window, this seems like a wholly sensible proposal.
Timing
We can expect further clarity on some of these plans relatively quickly and certainly within the next 100 days, so by 12 October 2024 (at the latest); this is the date Labour has said its Employment Bill will be laid before Parliament, with a draft Equality (Race and Disability) Bill to follow thereafter. But, there’s no immediate need for panic: there’s a strict Parliamentary process to be followed which can take months and even years to complete, plus Labour is committed to a programme of proper consultation prior to introducing new or amended legislation.
As you would expect, Team Torque will be monitoring the progress of all these and other proposals arising from Labour’s manifesto, and we will produce regular updates, to ensure Torque Law clients and contacts remain appraised of the key developments and how these will likely affect them and their workforce.
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