How will the Labour government change UK employment law?

At Wednesday’s State Opening of Parliament, King Charles outlined the Labour government’s legislative plans for the session, including a host of potential changes to UK employment law, writes Cybill Watkins, Product Legislation Manager at Zellis.

More detailed payroll and HR legislation updates are likely to emerge in the coming months. For now, we’ve compiled a rundown of the key policy proposals this new government is looking to introduce.

My government will seek a new partnership with both business and working people, and help the country move on from the recent cost-of-living challenges.”

King Charles III (State Opening of Parliament 2024)

In this legislation preview:

What new UK employment law did the King’s Speech propose?

Also relevant for employers, HR, and payroll professionals

What new rights could be introduced from day one of employment?

How could renumeration be reformed?

How could workers’ wellbeing be supported?

How might workers be better protected against potentially abusive practices?

What improvements are planned for women’s rights?

How might the situation change regarding trade unions?

What new UK employment law did the King’s Speech propose?

My government is committed to making work pay and will legislate to introduce a new deal for working people, to ban exploitative practices and enhance employment rights.”

King Charles III (State Opening of Parliament 2024)

The Labour government has pledged to introduce an Employment Rights Bill within the first 100 days of taking office. Among other things, the Bill looks set to include:

• Changes to how the National Minimum Wage (NMW) is set to ensure it is a “genuine living wage”. As a result, the Low Pay Commission will take into account not just median wages and economic conditions but also wider cost-of-living considerations when setting NMW levels. Existing “discriminatory” wage bands based on age, which includes those covering apprentices, will be removed. The Single Enforcement Body (see below) and HMRC will be given NWM-related enforcement powers, including penalties for non-compliance.
• Restrictions on zero-hours contracts – originally there was discussion of an outright ban, but more recently it appears the proposals will stop short of that.
• Ending ‘one-sided’ flexibility to ensure all that all jobs provide employees with a baseline level of security and predictability. This means employers will be required to pay workers should they cancel or curtail their shifts or working times without reasonable notice. Employees will also have a new right to contracts that reflect the number of hours they regularly work over a given 12-month period.
• Outlaw collective and individual ‘fire and rehire’ practices and introduce remedies. As a result, employers will not be able to make employees redundant and then re-engage them on reduced terms and conditions. The legislation will replace an “inadequate” statutory code of practice, which was due to come into force on 18 July, with a “strengthened” one.

Also relevant for employers, HR, and payroll professionals

• A new Pension Schemes Bill is intended to help workers get more from their retirement pots. Measures include consolidating defined contribution and individual deferred small pension pots. Another aim is to reform workplace pensions, which includes increasing investment in UK companies from pension funds. The triple lock will be retained but the former government’s promise of a triple lock plus will be abandoned.

• A draft Equality (Race and Disability) Bill is expected to set out equal pay rights for people from minority ethnic communities and disabled people. This will include requiring larger employers to undertake mandatory ethnicity and disability pay reporting. The aim is to “enshrine the full right to equal pay in law”. Under the plans, ethnic minority and disabled people would find it easier to make equal pay claims in cases where they have been underpaid.

• An Arbitration Bill whose aim is to modernise dispute resolution to make the process quicker and more efficient. There will be a new right for workers to collectively raise grievances with the conciliation service Acas about any perceived misconduct at work.

What new rights could be introduced from day one of employment?

Other changes to employment law have also been tabled by the Labour party as part of its agenda for this Parliament. While it remains to be seen whether these all make it into the upcoming Employment Rights Bill, here’s what could be on the cards.

• Ensuring unfair dismissal rights from day one of employment. Such rights currently come into force after two years. Existing reasons for fair dismissal would remain the same. But there could be new rules on the use of ‘fair and transparent’ probationary periods and processes.
• Parental leave from day one of employment rather than after a year. The Government has also promised to conduct a further review of current legislation within its first year of taking power, which includes whether to make it paid rather than unpaid leave.
• All workers look set to get flexible working by default from day one, apart from where it is not ‘reasonably feasible’ to do so. This would include opportunities for flexi-time contracts and hours that better accommodate school terms.
• Statutory sick pay (SSP) could be extended to all workers from day one rather than day three. Those earning below the lower weekly earnings limit of £123 would also be entitled to SSP for the first time, as would the self-employed.

How could renumeration be reformed?

Labour has indicated that the following changes could also be in the pipeline, affecting pay practices if they come to fruition:

• The Government will review how carer’s leave, which was introduced on 6 April, has been implemented. It will also consult on whether to introduce paid leave for carers.
• Strengthening of the law to ensure tips, gratuities, and service charges are all fairly allocated. It is unclear whether changes to the Employment (Allocation of Tips Act) 2023, which was expected to come into force on 1 October, will be required. But it’s considered likely, due to a previous statement that workers should “decide how tips are allocated”.
• Unpaid internships to be banned, unless they are part of an educational or training course.
• A new Fair Pay Agreement for the adult social care sector to enable employees to collectively negotiate for better pay and conditions.
• The School Support Staff Negotiating Body to be reinstated. This national scheme collectively negotiates for better pay and conditions for educational support workers, including caretakers, office workers, and teaching assistants.

How could workers’ wellbeing be supported?

If wellbeing-related policies that have been mooted make it into legislation, here’s how things would look:

• The three existing categories of employee, worker, and self-employed could become two: worker and self-employed. Certain rights, such as unfair dismissal, are expected to be extended to people currently classified as workers. The self-employed would be given a new right to a written contract.
• Both employees and workers could be given a ‘right to switch off’. By preventing employers from contacting people out of hours, the aim is to ensure that “working from home does not result in homes turning into 24/7 offices”. Although mainly aimed at remote and hybrid workers, it could also affect those on low-hours contracts. In line with approaches introduced in Ireland and Belgium, employees would be encouraged to work with their employers to develop bespoke workplace policies or contractual terms that benefit both parties.
• All workers may be given a new right to bereavement leave. But it’s currently unclear whether it would be paid or unpaid.
• Employers may be required to consult with workforce representatives before introducing surveillance technology. They might also need to evaluate how to safeguard against “discriminatory algorithmic decision-making”.

How might workers be better protected against potentially abusive practices?

Labour has expressed a desire to offer greater protections. Here’s an idea of what that would look like if the relevant HR legislation is passed:

• A Single Enforcement Body would be introduced to enforce all statutory employment rights. It would include representation from trade unions and umbrella union body, the TUC. The Body would have powers to inspect workplaces and bring prosecutions and civil proceedings on workers’ behalf. Possible violations here relate to health and safety, NMW, worker exploitation and discriminatory practices.
• The time limits for statutory employment claims relating to things like unfair dismissal or discrimination would be increased to six months from three months.
• Employers could be obliged to take all reasonable steps to prevent sexual harassment in line with legislation due to come into force on 26 October. But the new Government also plans to extend this duty to safeguard employees from harassment by third parties. Protections for whistleblowers would likewise be strengthened, including women who report sexual harassment at work.
• There could be changes to the consultation and dismissal rights found in today’s Transfer of Undertakings (Protection of Employment), or TUPE, legislation.
• The Employment Tribunal system would be digitised and tribunals would be given greater enforcement powers. Employees would no longer have to wait two years before bringing a tribunal claim against their employer for unfair dismissal.

What improvements are planned for women’s rights?

Several key developments could be on the table for the rights of women in the workplace. If these materialise, then:

• Maternity protection would be improved by making it unlawful to dismiss a woman within six months of her return from maternity leave.
• Pay equality rules would be enhanced. The new government intends to preserve the principles behind European Union law relating to equal pay. Large employers would be required to publish action plans on closing their gender pay gaps. Gender pay gap reporting rules would be extended to cover outsourced workers. Employers would be banned from outsourcing with the intent to avoid giving women equal pay. The socioeconomic duty in the Equality Act 2010 for public authorities would be implemented.
• Menopause action plans would become a requirement for all companies with more than 250 employees. The government would provide guidance on supportive workplace measures and considerations.

How might the situation change regarding trade unions?

The relationship between employers and trade unions looks set to undergo some adjustments, depending on which proposals go through.

• Employers would be required to write a statement of employment, laying out employees’ terms. In this written statement, they would also be obliged to inform employees of their right to join a trade union, and to remind them of this right on a regular basis.
• Unions could gain a new right to access employees’ workplaces for recruitment and organising purposes, so long as they do so in a regulated and responsible way.
• Trade union reps would be entitled to facilities time. This means they would be afforded sufficient time off from work to undertake their union duties. Equality reps would also be given new statutory rights and protections.
• There could be new protections against union-related intimidation, dismissal, and blacklisting.
• The government could reform various aspects of existing trade union law. This might include making ballots simpler and more flexible. It could also change the support threshold required for union recognition to a simple majority. It could also include removing restrictions on union activity, abolishing recently introduced minimum service levels, and preventing the replacement of strikers with agency workers.

Stay tuned for further updates

As the new Parliament gets into its stride, we’ll continue to bring you relevant payroll and HR legislation updates, keeping you informed, prepared, and compliant.