Introduction

24 May saw the launch of “Labour’s Plan to Make Work Pay”

It is an aspirational document with the nuts and bolts of the detail very much “tbc”. It accepts there will be a need for White Papers and public consultations on many of the plans. Initial Trade Union reaction to the Plan has been mixed; UNISON welcomed the Plan whilst a senior Unite official described it as ‘having more holes than Swiss cheese’.

This article looks at the key pledges in the Plan and highlights points that employers may want to consider at this stage.

Wages and pay

Labour has pledged to change the Low Pay Commission’s remit so that the national minimum wage will, for the first time, take into account the cost of living. It has also pledged to remove “the discriminatory age bands to ensure every adult worker benefits”. This approach would be likely to result in annual above-inflation increases in the national minimum wage as well as having an impact on sectors that rely on younger workers to fill roles such as hospitality and leisure.

April 2024 saw one of the largest ever annual increases in the NMW and Labour’s current pledge means that the trend of higher hourly rates would be set to continue. Some larger employers (including some supermarkets) have already opted to pay all staff, regardless of age, the over-21 national living wage. That is not likely to be a viable option for all and employers will be watching this potential development with interest.

Day-one right to claim unfair dismissal

Labour would give all employees the right to bring unfair dismissal claims from day one of employment (currently there is a two-year minimum service requirement). This will not prevent fair dismissals for reasons of capability, conduct or redundancy, or probationary periods with fair and transparent rules and processes.

This would be a ground-breaking change to our current employment landscape. Employers would need to ensure they had watertight recruitment and performance management procedures as well as line managers fully trained and conversant on how to implement and enforce the procedures fairly and effectively.

Recruitment and selection procedures may need to be reviewed and made more rigorous to maximise the business’ chances of hiring the right person from day one. Probationary periods need to be clear and well managed with performance or suitability concerns addressed as soon as they arise. Exactly how probation periods and reduced service qualification levels interact will be interesting to observe.

End “one-sided” flexibility

Labour has pledged to ensure that, “all jobs provide a baseline level of security and predictability, banning exploitative zero hours contracts and ensuring everyone has the right to have a contract that reflects the number of hours they regularly work, based on a twelve-week reference period”.

This ambition reflects changes already made this year under the Workers (Predictable Terms and Conditions) Act 2023. However, Labour’s proposals would go further. The Plan does not provide much detail and further consultation is likely especially given that some workers welcome the flexibility that zero-hours contracts provide. For businesses that use staffing models that rely on the flexibility of zero-hours contracts it is very much a case of ‘watch this space’.

Redundancy

Labour has pledged to strengthen redundancy rights and protections, for example, by ensuring the right to collective redundancy consultation is determined by the number of people impacted across the business rather than, as is currently the case, in one workplace. If this comes to pass, collective redundancy processes will need to be reviewed and updated, noting that the trigger for collective consultation will be triggered more frequently.

Trade Unions

Under a Labour government, Trade Unions would be given new rights to access workplaces and the TU recognition process would be simplified making it easier for gig and remote workers to organise. Employers who may be affected by this (for example, where there have been murmurings about TU recognition already) may want to start thinking about how this might play out in their workplaces. Are there are any pre-emptive steps that might be worth looking into at this stage? Adopting a ‘head in the sand’ approach is not advised… if Labour win power, the strengthening of Trade Union rights is all but guaranteed.

Single status of worker

Currently an individual can be a worker, an employee or a self-employed individual and the legal test to distinguish between these categories is often labyrinthine. Labour has pledged to consult on moving towards a single status of worker and transitioning towards a simpler two-part framework for employment status that differentiates between workers and the genuinely self-employed.

HR professionals will know that this is an absolute behemoth of a challenge and, for that reason, we can be fairly certain that nothing will happen quickly on this front. When (and if) it does, it will be a seismic shift in the UK’s employment landscape.

Gender, disability and ethnicity pay gap reporting

Progress on closing the gender pay gap has, Labour claims, stalled in recent years. It has pledged to require large firms to develop, publish and implement action plans to close their gender pay gaps with outsourced workers being included in gender pay gap and pay ratio reporting.

The publication of ethnicity and disability pay gaps will also be made mandatory for employers with more than 250 staff, to mirror gender pay gap reporting.

HR professionals will know that ethnicity pay gap reporting has been on the political agenda for some time. In 2022, the current Government reversed its original commitment to make it mandatory and it published guidance in April 2023 for employers who wished to voluntarily report on their ethnicity pay. Few have.

Large employers may want to start thinking at a strategic level about how they collect and process ethnicity and disability data and how this might be channelled into any future mandatory reporting requirements. The obvious challenge is that ethnicity and disability data tend to be multi-faceted and not always volunteered by staff (as opposed to gender pay data which is typically easier to capture). Given the nuances in this area, it is likely that there would be a further public consultation on this area before changes are imposed.

On a semi-related point, Labour has said it will require employers with more than 250 employees to produce Menopause Action Plans, setting out how they will support employees through the menopause, much like gender pay gap action plans.

Time limits for employment claims

Labour has pledged to increase the time limit within which employees are able to make an employment claim from three months to six months. They state that this will particularly support those who are seeking to make claims for pregnancy discrimination, as it says that evidence suggests women struggle to make funds available to lodge claims within the time limit. The longer time limit will also allow more time for internal procedures to be completed, which it says will potentially mean less claims.

In reality, we suspect that a longer time limit to bring claims may simply lead to more claims – time will tell.

A single enforcement body for workers’ rights

The Conservatives pledged a single enforcement body for employment rights in their 2019 manifesto and it was the subject of a public consultation in 2021. Labour proposes to pick up the baton on this and create a “strong, recognisable single brand so individuals know where to go for help leading to a more effective use of resources and coordinate enforcement action”.

The Single Enforcement Body would be given the powers it needs to undertake “targeted and proactive enforcement work and bring civil proceedings upholding employment rights”.

If this comes to pass, it will make enforcing employment rights easier and more accessible and employers will be held to a higher account than is currently the case in terms of compliance with their statutory obligations.

A new Fair Pay Agreement in the adult social care sector

Labour has made it clear that it would take an interventionist approach in this sector (which it says has a turnover rate of nearly a third and a vacancy rate of c10%) by introducing a Fair Pay Agreement covering staff benefits, terms and training – underpinned by rights for trade unions to access workplaces for recruitment and organising purposes.

It has said it will consult on the design of this Fair Pay Agreement, learning from economies where such agreements already operate as well as assessing how, and to what extent, FPAs could benefit other sectors and tackle labour market challenges. Social care employers will be watching this proposed development closely if Labour take power.

Summary

There is no doubt that Labour has signposted a very clear direction of travel in relation to work and employment but (to coin the overused phrase) the devil will be in the detail. Whilst some of the proposals may seem radical, it is worth bearing in mind that the last Labour government (with some involvement from Europe) introduced the National Minimum Wage, the 48-hour working week, parental leave and the right to 28-days paid holiday. All of these were reforms that seemed ground-breaking and, at times, controversial. However, as time has passed, these core employment rights now form part of our society’s consensus, and it seems unthinkable that any political party would seek to overturn them. The same goes for the general acceptance of flexible working, with items like the “right to disconnect” being on the agenda as well.

For now, we recommend the following steps:

1. Take 30 minutes to read Labour’s framework document on the proposed reforms
2. Identify the areas of reform most likely to have an impact on your business or sector.
3. Start thinking about things such as workforce relations, recruitment practices, pay forecasting, working practices etc might be impacted if certain changes come to pass. For example, in view of a possible day-one right to claim unfair dismissal, are you confident that your current selection and recruitment procedures always result in sound hiring decisions? If not, what can you do to improve them?
4. Run models and crunch numbers. For example, what would a higher single-tier national living wage look like for your workforce and wage bill? Might you need to think about making economies?
5. Perhaps set up a working group of people from different business areas to think about the changes from all angles and ensure that the likely practical impacts are anticipated. For example, have you got a trade union knocking on your door already and, if so, is there merit in starting a conversation now about how you might work together rather than waiting for TU recognition to possibly be imposed?
6. Assess what practical steps (such as tightening up existing recruitment procedures, training staff on effective performance management, building additional flexibility into terms and conditions, starting conversations with TU representatives, thinking about ethnicity and disability data and so on) might be necessary now and in the short to mid-term future. Try to stay one step ahead of events.
7. Talk to our team if you need a sounding board. Walker Morris’ employment team are here to help guide employers through this politically turbulent time and we can draw on our experience to make suggestions and highlight any potential danger zones.
8. Subscribe to our employment insights and newsletters. We will publish updates on any key announcements as they happen.

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As well as keeping you abreast of key legal and regulatory developments in this employment update and our regular employment-related briefings, our team of Employment & Immigration specialists provide advice on all types of complex employment, HR and business immigration matters. We support private and listed companies operating in a broad range of sectors, including manufacturing, food and drink, technology, sport, retail, real estate, healthcare and education. For advice, assistance or training on any employment or immigration issue, please contact any member of the Team.