Could Employment Law Change Under Labour?

by Jim Moore Employee Relations Expert at Hamilton Nash

Prior to the election, Labour set out their proposed changes to employment law. In this article, we’ll look at some of the more significant proposed changes and what they could mean for employers.

Parental leave & unfair dismissal rights from day one

Currently, an employee needs at least two years’ service before they can claim for unfair dismissal (except for specific situations that are considered automatically unfair). This makes it easier for employers to dismiss someone if they think things aren’t working out, without having to follow a full and fair process. This is sometimes known as a ‘short service dismissal’. Labour say they want to remove the two year limit, allowing employees to claim unfair dismissal from day one of employment.

This would force employers to assess the risks of a potential claim, even for new hires within their probationary period. Labour have also suggested that they would like to make parental leave a day one right as well, so there is no minimum service required before an employee can get maternity or paternity pay, etc.

Making sick pay available to all

Labour want to remove the 3 day qualifying period, so that workers don’t have to be off sick for 4 or more days to get statutory sick pay (SSP). They also want to remove the lower earnings threshold, that require someone to earn at least £123 per week on average to be eligible for SSP. This means that people taking a single day off sick would get paid, which could make it more tempting for some workers to ‘pull a sickie’. Employers will need robust absence management processes.

Minimum wage & fair pay agreements

The National Living Wage is the minimum that a worker aged 21+ can earn per hour, and the National Minimum Wage is the minimum hourly rate for a worker aged between 18 and 20. There are different rates of pay for these bands, and Labour propose to remove the lower band and have all workers over 18 get no less than the National Living Wage.

This could push up the wage bill for employers that engage a lot of young people under 21. Labour have also said they will consult on designing ‘Fair Pay Agreements’. These are large-scale agreements defining a minimum wage across all employers and employees in a given sector. Their proposal sounds similar to the ‘social plans’ in the EU, which define pay levels and termination compensation payments for each sector within an economy. We had something similar once before in the UK, with the ‘Wage Councils’ under the Wage Council Act 1945, which effectively ceased when Margaret Thatcher introduced the Wages Act 1986. At the moment, Labour are targeting the social care sector, but if enacted, employers may see this spread to other sectors.

Banning one-sided ‘zero hour’ contracts

There’s a lot of devil in the detail with this one. Labour wants to ban zero hour contracts where the employer is not obliged to offer work, but the worker must accept the work if offered.

Labour also wants to introduce the right to demand a contract based on your average hours over the past 12 weeks. There are a whole load of questions about how this might be implemented, and how the 12-week reference period is calculated, so we’ll have to wait and see the detail in any proposed legislation. This will definitely be something that could impact a lot of small businesses that use zero hour contracts.

Introduce a single ‘worker’ status

Under the Employment Rights Act 1996, we have three categories of worker; employees on a contract of employment, self-employed people running their own businesses, and ‘workers’ who fall somewhere in the middle. These ‘workers’ are people who are treated as self-employed contractors, but are actually providing a personal service to the employer and look like employees to an outside observer.

Labour want to remove the difference between ‘employee’ and ‘worker’, so that everyone has the same employment rights. This is easier said than done, because the difference between a ‘worker’ and a genuinely self-employed person is not always obvious, e.g. freelancers and single-person contractors who provide services to clients.

Union recognition & industrial action

Labour want to simplify the process of union recognition, making it easier for workers to unionise in their workplaces. This is likely to involve removing, or reducing, some of the current thresholds, for example requiring that at least 50% of workers vote in favour of unionising before an employer must recognise the union. Labour also wants to repeal legislation that they see as ‘red tape’ on union activity, such as the Trade Union Act 2016, the Minimum Service Levels (Strikes) Bill and the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022.

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