Paul Mander from UK solicitors Penningtons Manches Cooper LLP, provides a detailed look at some of the Labour party’s key proposals and what lies ahead for employers and their advisers over the coming months.

The King’s Speech confirmed Labour’s manifesto commitment to implementing in full ‘Labour’s Plan to Make Work Pay: Delivering a New Deal for Working People’, published in May 2024. The plan promises ‘the biggest upgrade to rights at work for a generation’ and it seems likely that over the next couple of years we will see seismic changes to the UK employment law landscape, the likes of which the majority of us have not experienced before.

Unsurprisingly, the new government is promising greater rights for workers, including strengthening the minimum wage and statutory sick pay. Many of the proposals in the plan will be contained in the new Employment Rights Bill, a draft of which is promised within the government’s first 100 days in office. Some of the key proposals are considered below.

Unfair dismissal rights

One of the headline changes proposed by the new government is to make unfair dismissal a ‘day one’ right. Currently, only employees with two continuous years’ service can bring a claim for unfair dismissal in the Employment Tribunal.

If this proposal is implemented, unfair dismissal rights will be extended not only to new employees, but also to those currently classed as ‘workers’ (see Employment status section). While employers will still be able to dismiss employees fairly, and there is likely to be a probationary period in which performance can be assessed, employers will need to analyse how they monitor and address staff performance from the start of employment, and greater emphasis will be placed on recruitment processes. We are likely to see an updated code of practice on disciplinary and dismissal procedures.

Labour also proposes to increase the time limit for bringing an unfair dismissal claim, and other employment claims, from three to six months.

Fire and rehire

The government will end the practice of ‘fire and rehire’ as a lawful means of changing an employee's contractual terms. It will be automatically unfair to dismiss an employee for failure to accept a less favourable contract, save in very limited circumstances; perhaps to prevent a whole business closure, for example. The code of practice on dismissal and re-engagement which was drafted by the previous government and came into force earlier this month will be replaced.

Employment status

Labour proposes simplifying the current three-tier system for employment status, in which ‘employees’, ‘workers’ and the genuinely ‘self-employed’ are treated differently. Instead, there will be a simpler two-tier system of ‘workers’ and ‘self-employed’, with all workers acquiring the rights currently only afforded to employees, such as unfair dismissal rights.

There will also be greater rights for the genuinely self-employed, such as the right to a written contract and better protection against late payment. These changes are likely to take some time to be implemented, and may not even happen during the government’s first term. However, employers who engage large numbers of workers or self-employed individuals should be alert to the fact that these groups may gain additional rights and benefits, and consider the potential impact on their business.

Zero-hours contracts

Labour will ban ‘exploitative’ zero-hours contracts and ensure everyone has a contract in place which reflects the number of hours they regularly work over a twelve-week reference period. Workers will also be entitled to adequate notice if their work is cancelled.

Employers who rely upon zero-hours contracts will need to review their current practices and the possible alternatives.

Family-friendly rights

There will be a 12-month consultation over family-friendly rights. Currently it is proposed that parental leave (which gives parents the right to take up to 18 weeks’ unpaid leave for each child) will become a ‘day one’ right – there is, at the moment, a one-year qualifying period. There will also be a new right to bereavement leave and additional rights for carers.

It will become unlawful to dismiss an employee within six months of returning to work following maternity leave.

Flexible working

Flexible working will become the default from day one. Employers will be required to accommodate this ‘as far as is reasonable’ to reflect the modern workplace.

Right to switch off

The initial suggestion of an absolute right to switch off outside working hours has now been watered down to allow scope for collaboration on bespoke proposals that are mutually beneficial to the business and individual.

How this will work in practice remains to be seen; however, given that this is already a tried and tested regime in other jurisdictions, it is likely that individuals will gain the right not to routinely work, or be penalised for refusing to attend to work matters, outside of normal working hours.

Redundancy consultation

The government has committed to strengthening redundancy rights and protections for employees. The only example given for now is that the current requirement to engage in collective consultation where there is a proposal to dismiss 20 or more employees in one establishment within 90 days or fewer, will be extended to 20 or more employees across the entire business.

This will mean that the somewhat onerous collective consultation provisions apply more frequently, in particular to businesses that operate across multiple sites.

Trade unions and collective action

Having historically been the party of the trade union, unsurprisingly, Labour wants to encourage trade union membership. It is seeking to ‘modernise’ the existing legislation in respect of industrial action, simplifying the process for unions to be recognised by the employer, and introducing a duty for employers to notify their staff of their right to join a union.

The government also plans to protect union representatives in respect of their time carrying out their duties, and offer stronger protection from blacklisting (where an employer maintains a list of union members and seeks to use this list to the members’ detriment). A ‘quick win’ for the new government is likely to be the repeal of the Trade Union Act 2016, which introduced restrictions around picketing and strike mandates, and of the minimum service levels legislation, which enables the government to set minimum service levels in specified industries in the case of industrial action.

Labour’s vision is one where trade unions and employers work in partnership for the benefit of staff and the wider economy. For employers, this may mean that union membership and involvement in the running of the business increases, and we are likely to see an increase in voluntary recognition requests. Trade union activity in the private sector is likely to increase significantly, and many employers may find themselves subject to requests for recognition. For some employers and many staff, this may mean working alongside trade unions for the very first time.

We are also likely to see sectoral bargaining in the UK which, although commonplace in other European countries, has not been a feature of the UK employment law landscape to date. The new Bill is likely to include provisions enabling the first ‘fair pay agreement’ (FPA) in the adult social care sector, and this could pave the way for collective bargaining in other areas, in both the public and private sectors, particularly where low pay and retention rates are a feature.

Labour will also enable employees to raise collective grievances about workplace issues via ACAS. It is as yet unclear how these proposals will work in practice.

Other proposals

In addition to the Employment Rights Bill, the government has also promised an Equality (Race and Disability) Bill, which will be published in draft form and subject to consultation. The Bill’s purpose is twofold: firstly, to enshrine in law the full right to equal pay for ethnic minorities and disabled people; and, secondly, to introduce mandatory ethnicity and disability pay reporting for employers with 250 or more employees.

Labour also intends to implement a regulatory and enforcement unit for equal pay, with involvement from trade unions. Large firms will be required to develop, publish and implement action plans to speed up the closure of their gender pay gaps, and outsourced workers will be included in their gender pay gap and pay ratio reporting to ensure that the outsourcing of services cannot be used to avoid paying equal pay to women.

A new body, Skills England, will also be established to bring together businesses and trade unions, and to reform the apprenticeship levy.

Finally, the government will ‘seek to establish the appropriate legislation to place requirements on those working to develop the most powerful artificial intelligence models’. It will engage with workers, trade unions, employers and experts to consider what AI and other new technologies mean for work, jobs and skills, and how to promote best practice in safeguarding against threats to privacy through surveillance technology, spyware, and discriminatory algorithmic decision-making.

Enforcement

Labour will establish a new single enforcement body, the Fair Work Agency, to enforce workers’ rights. This is not a new idea, and was also proposed by the previous government, although the plans did not materialise.

The remit of the new body is as yet unclear; however, it is likely to have strong powers to inspect workplaces and to undertake enforcement work. Given the current delays in the employment tribunals system, it is to be hoped that it will be overhauled, to ensure that workers can enforce the new rights they are promised.

Although we are likely to see some quick changes to workplace rights, many will take time to implement, given the need for consultation and/or changes to legislation, and indeed some may require a second term in power for the Labour government. What is clear, however, is that the next few months and years will be a time of seismic change in the UK employment landscape, and employers will need to ensure that they are prepared for these changes.

For more information, contact Paul Mander from UK solicitors Penningtons Manches Cooper LLP.