Labour’s New Deal
Expected changes to employment law under a Labour government
With a new Labour government in post with a sizeable majority, we have been looking at what we might expect in terms of changes to employment law over the short and long term.
Contrary to the repeated statements over the election campaign that Labour had no plan, the party has been quite clear about what changes it wants to make to our current employment regulation. The changes were set out in their New Deal for Working People and were writ large in the Labour manifesto.
At the state opening of parliament on 17 July, King Charles outlined Labour’s plans to “make work pay”.
He said the government would “legislate to introduce a new deal for working people to ban exploitative practices and enhance employment rights”. The briefing notes on the speech confirm that they will introduce an Employment Rights Bill within the first 100 days of entering government representing “the biggest upgrade to workers’ rights in a generation”.
We’ve listed the highlights below:
- Consultation on how to transition to a single status of ‘worker’ covering both employees and workers, and consult in detail on a simpler framework that differentiates between workers and the genuinely self employed.
- Banning exploitative zero hours contracts (the use of ‘exploitative’ here suggests that perhaps this won’t be a complete ban).
- Ending fire and rehire.
- Introducing a day one right to sick pay, parental leave and most importantly unfair dismissal.
- Strengthening protections for new mothers by making it unlawful to dismiss a woman who has had a baby for 6 months after her return to work except in specific circumstances.
- Setting up a single enforcement body to enforce workers’ rights.
- Altering the criteria for determining national minimum wage to include consideration of cost of living and removing age bands, so all adults are entitled to the same minimum wage.
- Creating a ‘Fair Pay Agreement’ to allow for sectoral collective bargaining in the Adult Social Care Sector.
The following were included in the New Deal but not mentioned in the briefing notes:
- Clarification of the right to carers and bereavement leave.
- Extending the time limit to make claims from three months to six.
In this article we are going to concentrate on the government’s commitment to introduce the right not to be unfairly dismissed as a day one right.
The manifesto says this with regards to Day One workers rights:
“Our New Deal will include basic individual rights from day one for all workers, ending the current arbitrary system that leaves workers waiting up to two years to access basic rights of protection against unfair dismissal, parental leave and sick pay.
This will not prevent fair dismissal, which includes dismissal for reasons of capability, conduct or redundancy, or probationary periods with fair and transparent rules and processes. We will ensure employers can operate probationary periods to assess new hires. However, the changes will help to ensure that newly hired workers are not fired without reason or cause and will help drive up standards in workplaces”.
Assuming that this commitment to introduce unfair dismissal as a day one right reaches the statute book, how will it impact you as an employer?
The effect on employers
These proposed changes could have far-reaching implications for employers in the UK.
Recruitment
Many organisations, large and small, struggle to get their recruitment process right.
The most common causes of recruitment mistakes are: untrained recruiters, insufficient time and resources dedicated to the process and employers knowing that they effectively have two years to easily rectify any mistakes.
With the advent of unfair dismissal as a day one right, you should consider what steps you can take to improve your recruitment processes.
Probationary periods
Taking the manifesto pledges at face value, it looks like employers will still be able to use probationary periods to assess the suitability of new recruits. However, it looks like they will have to follow ‘fair and transparent rules and processes’ to terminate employment during or at the end of the probationary period.
There are important questions that will need to be answered by future legislation on that point:
Will future legislation fix the length of probationary periods (something that is codified in France depending on seniority)?
Will employers be allowed to extend the probationary period if they are still unsure about a new recruit?
What will be the procedure applicable for a termination of employment during a probationary period?
Will there be a need to invite an employee to a formal hearing which sets out specific allegations?
Will there be a right to be accompanied by a fellow employee or a trade union official of the employee’s choice? Will there be a right of appeal?
More fundamentally, will there be a need for formal warnings before the employer can terminate employment?
Process and procedures
Depending on the ‘fair and transparent rules and processes’ settled on, employers will want to actively manage employees in their probationary period, setting the grounds for a dismissal early on if necessary.
Consequently, we are encouraging you to:
- Revisit your contracts and staff handbooks to ensure that the policies and processes for dealing with conduct and performance management and the termination of employment are up to date;
- Monitor new employees during their probationary period, something that many employers are historically not good at. Too often, completion of the probation period is just assumed rather than explicitly confirmed;
- Tackle any issues as soon as possible, rather than letting them drift on.
The end of ‘short-form’ dismissals?
At present, within the first two years of employment, many employers will use a ‘short form’ dismissal process, or no process at all, because they can do so without the risk of a standard unfair dismissal claim.
With the right to fair dismissal starting from day one, this will no longer be the case. It will become much more important to be able to show that any dismissal, for whatever reason, is fair and that you have followed an agreed procedure.
Consequently, from day one, the process for dismissal is likely to take longer and cost more than it does at the moment.
Settlements
We expect to see the increased use of settlement agreements as a way of facilitating the exit of employees. With the employee’s hand being strengthened by these new rights, the cost of any settlement may also increase.
On the positive side, we would hope to see a corresponding decrease in the number of tenuous claims, particularly discrimination claims, within the first two years. This is an acknowledged tactic to counter the lack of real protections encountered under the current legislation.
The Labour Party had produced an Employment Rights Green Paper a few years ago. Whilst the majority of the promises made in that Green Paper were included in the New Deal and the manifesto, one of the notable absences from the Green Paper was the following:
‘Caps which limit the amount of compensation that workers can receive are unfair and discourage companies from following the law. Labour will ensure that workers will receive full compensation, without statutory limits, if they suffer loss because of employers’ breaches of the law’.
We don’t know whether this is going to make a reappearance in new legislation, however, the cap on damages is one of the factors employers take into account when considering the value of the settlement offers they make. We are already concerned that settlement offers will increase for employees with shorter service. With no cap on damages, it is likely to make negotiations over settlement payments more protracted, or alternatively, less amicable, as employers make it clear from the outset that an offer is ‘take it or leave it’.
In summary
From an employee’s perspective, these proposed changes are wholly positive. For employers the changes will require careful consideration and some work to ensure that recruitment and HR processes are both legal and effective.
Labour’s plans are not inherently novel, but they will extend your duty to ensure that dismissals are fair and properly handled from the first day of employment.
This in turn will add emphasis and importance to the probationary period, and we recommend that all employers should review their policies regarding probation as a matter of priority.
We will no doubt be writing again, as the government starts putting flesh on the bones of these plans.
If you have any questions or concerns regarding this, or any aspect of employment law, please get in touch and we will be happy to discuss.
For more specific information or to discuss your requirements please call either Amanda Galashan or Julie Calleux at Employease on 03339398741, or email us at info@employease.co.uk. This note does not constitute legal advice on any particular situation you may have.
Copyright: Employease 2024
