How Labour’s Employment Law Changes Could Affect Your Business

Labour’s employment law changes, what they could mean for your business

With a general election on the horizon and a lot of talk about new policy, there’s a great deal of speculation in the world of HR and employment law about Labour’s manifesto and their pledge to introduce an Employment Law Bill within their first 100 days in government.

Here’s a summary of the main points Labour have highlighted for change and what they could mean for your business:

What changes are being proposed by Labour?

A single ‘worker’ status

Within the realms of employment law there are two types of employment status, that of a ‘worker’ and an ’employee’. Labour are proposing to combine these under one single term.

The current ‘worker’ status (applied to those with a more casual working arrangement) allows fewer employment protections than ’employees’, therefore under Labour’s proposals, employment protection afforded to ’employees’ would be extended to all.

While extended protection for more individuals within the world of work may be seen positively, there is no question these changes would mean an increased burden on employers, with the need to revise employment contracts, as well as HR policy and employment processes within organisations. This all leads to an increase in costs and operational changes for businesses.

This fundamental change to employment is likely to mean big disruptions for many organisation’s business models. In businesses where there is a reliance on flexibility within the workforce, the ability to flex resource up and down through seasonal peaks is likely to be more challenging.

Expanding unfair dismissal rights

Unfair dismissal rights currently only apply to employees who have a minimum of 2 year’s service.  Labour’s pledge is to allow this right from day one of employment, providing a significant increase in legal protection for employees.

This change would mean immediate protection for employees from unfair dismissal and would no doubt encourage a greater sense of job security for employees.

However for businesses, the impact on costs in ensuring greater compliance with legal process, increased need for training managers and a general increase in administrative burdens could see employers becoming a lot more hesitant when it comes to hiring decisions and expanding their workforces. It’s expected this would have the greatest impact on the SME sector, where there are limited resources for defending costly employment claims.

Scrapping zero-hours contracts

Zero-hours contracts have been the subject of much scrutiny over the years with the common view that they are used by employers to take advantage of workers, where they are provided with limited employment protection.

Under Labour’s plans, they have stated the proposed right of ‘employment’ for anyone working regular hours for 12 weeks or more. There have been some reports more recently to say this policy could be revised, however if not, there will be several pros and cons for organisations and their people.

For workers, the increased job security and fairness afforded by scrapping zero-hours contracts would be an obvious positive move, however it’s important to remember that some workers enjoy the flexibility that a zero-hours arrangement provides them.

From a commercial perspective, there would be significant challenges for organisations who genuinely rely on flexibility within their workforce, and the financial implications of the changes are likely to be significant. Industries such as hospitality, manufacturing, retail and the care sector would likely be most heavily impacted by the change.

No more ‘fire and rehire’

‘Fire and rehire’ is used by organisations when they want to impose a contractual change, but the employee doesn’t agree to it. The organisation then dismisses and offers to rehire on the revised terms of employment.

Labour want to increase the obligation for organisations to more comprehensively consult with employees over such changes, and remove the ability to fire and rehire altogether.

While this approach is sometimes used within organisations, in my experience it is as a last resort, and usually during extremely challenging economic climates. On the whole, change and restructuring programmes within organisations usually include the necessary consultation, but these reforms will prevent employers from circumventing consultation altogether.

Switching off from work

Following the introduction of similar policies in other countries, Labour intend to make it a legal right for employees to be able to disconnect from work outside of contractual working hours.

While the sentiment around this, I believe is healthy, the policing or it could prove very difficult. Additionally, as an SME business owner myself, I understand the challenges managers face when there is a genuine need for contact to be made with an employee outside of normal working hours. It shouldn’t happen consistently, but there are times when it’s needed, so making it unlawful has the potential to make doing business very hard.

Having said that, this could be a culture change that’s needed in the UK, away from what some employees in organisations could experience as a need to be ‘always on.’ The longer term benefits are likely to increase employee motivation and retention within workforces, but the medium-term impact on efficiency and service, especially within SMEs could be significant.

Employment tribunal updates

Currently employees can bring an employment tribunal claim within 3 months, but Labour are proposing to increase the time period to 6 months.

This change would allow employees more time to consider their claim without feeling rushed, and also additional opportunity for employees and employers to negotiate a fair outcome for both parties.

There is potential for the number of claims brought to tribunal to increase, which for SMEs particularly would mean greater financial and resource burdens in handling and defending claims.

Other changes

In addition to those mentioned above, the Labour Party also plan to increase the national minimum wage to a minimum of £10 per hour for all workers, regardless of age, potentially a significant cost implication for businesses.

They also plan to make statutory sick pay available to everyone, as well as increasing employment law protections for pregnant employees and for whistleblowers.

There is also mention of closing gaps when it comes to gender, ethnicity and disability pay and introducing legislation for bereavement leave.

What these potential changes could mean for your business

Regardless of your political affiliation, it’s fait to say these proposed changes would mean big implications for the world of work and employment, so as a business owner, getting ahead by getting prepared now, should these changes become effective, is key.

Consider how each of the changes might impact your workforce and your future plans for growth and start making contingency plans. We know from Labour’s pledges that these changes would be implemented quickly, so the more you’ve planned ahead, the more certainty you’ll have once the election results come out.

At The HR Consultants we know that employing people can often be the most stressful part of running a business, but with us on your side, you don’t have to handle these challenges on your own.

Book a call with a member of our friendly expert HR team and let us take away your people stress.


Phone: 01789 614336