If Labour wins the election on 4 July, it promises a suite of employment law reforms which, if implemented, would mark the most significant extension of workers' rights in more than a generation. And it is promising to bring those on stream within 100 days (date for your diaries: that's 13 October).
What are Labour's immediate proposals?
So, what do businesses need to know about what they are likely to be dealing with under Labour's promised Employment Rights Bill?
– Firstly, new workers will get "day-one rights" – so they will no longer have to wait up to two years to have protections against unfair dismissal, and entitlements to parental leave and sick pay (although Labour don't seem to have mentioned rights to redundancy payments from day one). Labour says this will not prevent fair dismissals, (e.g., for reasons of capability, conduct or redundancy) or probationary periods, but they believe it will increase protections by making it more difficult to dismiss newer employees without any fair reason. [AR1] [FD2]
– "Exploitative" zero-hours contracts will be outlawed – although what exactly counts as "exploitative" is not totally clear. Certainly, Labour are promising not to interfere with short fixed-term or seasonal contracts. The intention seems to be ensuring the right to have a contract that reflects the number of hours regularly worked, based on a 12-week reference period. Additionally, shift workers will be entitled to reasonable notice of changes to their working patterns, or compensation if it does happen.
– The minimum wage will increase to become a "real living wage", age bands will be abolished and enforcement powers will be increased through the new Single Enforcement Body and HMRC.
– It will become unlawful (in most cases) to dismiss a woman who has been on maternity leave for six months after her return to work, and there will be a review of parental leave rights in the new government's first year.
– There will be increased entitlements to flexi-time contracts, and a "right to switch-off" from work after hours, along the lines of the regime allowed in many countries in Europe.
– For cases that end up in legal disputes, Labour is promising a doubling to 6 months of the 'limitation period' for bringing most claims, and they vow there will be long-awaited improvements to the Tribunal system where delay is a common experience (to put it mildly) for the parties involved.
Getting all those changes into force in 100 days is likely to be too big an ask – Labour seems to have conceded as much by stating that much of its employment legislation will be based on regulations, and may require "substantial secondary legislation" (read: some of these promises may not be set in stone).
Fundamental changes could treat workers like employees
Currently, there are three statuses in employment law:
1. Employee – most employment rights (depending on length of service)
2. Worker – a more limited roster of rights
3. Self-employed – contractual rights only
In the longer term, Labour are promising to simplify this worker / employee/ self-employed jumble that, in Labour's view, has made it very difficult for many thousands of workers to access basic statutory labour protections. This may see the merging of employee and worker status, potentially extending the broader rights employees which employees enjoy to all workers.
This would be a fundamental change in the operation of the labour market so it would be surprising if these changes are introduced speedily. The intention appears to be to consult widely with a view to ending up with a two-category system that differentiates between workers and the "genuinely self-employed".
What about tax?
Confusingly, employment law status and tax law status do not align. In tax law, there are only two statuses:
1. Employee – subject to higher National Insurance (most notably for employers)
2. Self-employed – lower National Insurance and more tax-deductible expenses
There is no indication at this point that there will be changes in tax law status, but HMRC's direction of travel has been to increase challenges of self-employment status for tax. It may be tempting to eventually align the tax law status with employment law status, which could potentially treat many more people as employees. This could have a major impact on businesses, obligating them to pay 13.8% National Insurance contributions for workers where previously none was due.
Significant changes to the workplace are coming – if, that is, Labour forms a new government on 5 July. Get in touch now to discuss your options, including a review of your position after any changes are enacted.
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