The King’s Speech: What are Labour’s plans for employment law?

Labour's plan to "make work pay" by protecting and enhancing workers' rights, with a view to ultimately improving economic growth, was set out in the King's speech on 17 July 2024 – most notably the generous proposal of not one, but two bills - the Employment Rights Bill and the Draft Equality (Race and Disability) Bill.

Many of the reforms echo the proposals by the Labour party in the run up to the election in their "New Deal for Working People".

We set details of proposed changes out below with some suggested considerations for employers in readiness for the upcoming change.

Employment Rights Bill – what are the possible timelines?  

The Labour government's aim is to introduce to Parliament as many of the below changes as possible within the next 100 days in the new Employment Rights Bill – suggesting that it will be introduced as a final Bill before parliament during October 2024.

To avoid panic, however, when exactly this will become an Act (and therefore law) remains to be seen but this will likely take many months post-introduction given its required passage through the houses of parliament (and subject to any amends enroute) as well as potential for secondary legislation in addition (and/or new or amended codes of practice to accompany them) to effect any changes.

There may be some changes that can occur outside the Bill itself (and therefore potentially become enshrined in law more quickly) but until we see the draft legislation, this is unknown. Rest assured, in the meantime, there is plenty to think about.

Day one employment rights – removal of qualifying periods

Unfair dismissal reduction from two years to zero

Employees currently do not have the benefit of protection from ordinary unfair dismissal until they reach two years' service with their employer. The Labour party's proposals will have the right not to be unfairly dismissed as a day one right.

Employers could still dismiss an employee for failure of a probationary period but only after following a fair process. The accompanying briefing notes do promise to ensure employers can operate probationary periods to assess new hires but the exact detail of what this entails is yet to be revealed.

It is possible we will see an update from ACAS on its Code of Practice on Disciplinary and Grievance Procedures referring to probationary periods specifically, setting out what constitutes a fair dismissal during such a period (and relevant rules that are to be followed to demonstrate this).

Impact on employers

• Increased administrative burden – we will likely see a more regimented process around dismissal during probationary periods, including shift in practice to ensure a good paper trail and handling of probation more generally.
• Potentially more caution in recruitment given the potential administrative/procedural burden of any subsequent dismissals.
• We can expect to see a rise in the number of tribunal claims.

What can you do in the meantime?

• Ensuring current contractual probation periods are clear including the process in which they operate (e.g., whether there is a right to extension of the probationary period, the process of reviewing probation progress etc).
• It's too early to tell in terms of recommending anything more concrete until we can understand exactly what this change will entail but there is no harm in ensuring the processes you currently have in place are robust.

Parental/paternity leave – Labour has promised “day one parental leave”

• Parental leave (the right to take up to 18 weeks’ unpaid leave until a child is 18) currently has a one-year qualifying period.
• Paternity leave (the right to take paid time off around the birth or within the first year) currently requires 26 weeks' continuous service.

Sick pay – removal of the lower earnings limit and the current three-day waiting period

Impact on employers

• These reforms would be relatively quick for labour to introduce, as qualifying periods merely need to be scrapped. We recommend that all family leave and SSP policies are reviewed and updated once these changes become clearer.

Flexible working

Labour proposes to make flexible working the default from day one for all workers, with employers required to accommodate this as far as is reasonable.

Impact on employers

• As the right to request flexible working is already a day one right we understand the "default" reference is referring to making it the norm to accept such requests. It is unclear whether this means that the reasons that a request can be refused may become more limited, making it harder to refuse requests, so it remains to be seen how this plays out.

Protection for new mothers

Labour intends to make it unlawful to dismiss a woman who has had a baby for six months after her return to work, except in specific circumstances. This is providing wider protection not long after more recent legislative change that provided additional protection in certain redundancy situations. No further details have been provided.

Zero-hours contracts, ending 'one sided flexibility'

Labour is looking to ban zero-hours contracts and create a right to contract based on average working hours.

Impact on employers

• If employers rely on a lot of zero hours workers to resource their business, they will need to start thinking about this soon and consider auditing the proportion of the workforce engaged in such a manner.
• If, as suggested, there will be a right to have a contract that reflects the number of hours employees work based on a 12-week reference period, further analysis of the workforce and employment contracts will be required.

Fire and rehire reforms

We would expect these to be implemented within the first two years of the new Labour government. This focuses on the scenario where the employer dismisses the employee and reengages them on less favourable terms.

Impact on employers

• We can expect more structure around when it is appropriate to use these practices. The new statutory Code of Practice grants courts and employment tribunals the power to increase employees' compensation by 25% if the employer does not comply with best practice around firing and rehiring. We might expect Labour to strengthen these provisions further in the months to come.

National Living Wage (NLW)

Labour has pledged that the NLW will take account of the cost of living and that the 18-20 age band will be removed.

Impact on employers

• Now is the time to tighten up on areas such as sleeping time or other areas such as travel time.
• This will be an area where labour can show a 'quick win' and they might ensure a new cost of living minimum wage takes effect from April 2025.
• It's possible that Labour could abolish the 18-20 age band at the same time via secondary legislation, bypassing parliament, so this may be a change that is quickly enforced.

Trade Union law reforms

Labour has pledged to change the law around trade unions in several ways:

• Secure electronic voting for union ballots.
• Simplify trade union recognition processes.
• Create a mechanism for collective grievances with ACAS conciliation playing a key role. This is a somewhat confusing proposal as individual grievances must be raised via the employer, not ACAS, but we understand there may be a new process introduced for employees to raise collective grievances, which may involve trade union representation. Sector based pay in adult social care sector and collective bargaining on terms and conditions.

In January, Kier Starmer stated Labour would repeal laws around minimum service levels during public sector strikes. These repeals are likely to take instant effect when the Employment Rights Bill receives Royal Assent.

Impact on employers

• These reforms will likely increase direct negotiations with the unions rather than employees, changing the current direction.

Strengthening enforcement mechanisms

Labour aims to:

• Establish a single enforcement body for workers' rights.
• Increase funding for labour inspections to ensure rights are protected.
• Digitise the Employment Tribunal system and improvements to processes and increase the limitation period to six months for all claims.

Impact on employers

• These changes may lead to an increase in claims being brought due to the extended deadlines, however we do not expect these changes to be implemented quickly.

Other areas to be aware of

Other areas which were not specifically mentioned in the Kings Speech but are part of Labour's proposals:

Single worker status

Labour has said that it will carry out a full and detailed consultation on its plans to move towards a single worker status (away from the current three tier system). There is no mention of this in the King's Speech but it is likely to remain part of Labour's long-term plans.

Impact on employers

• This is an incredibly complex change to get through, however obvious actions for employers will be to conduct assessments as to whether workers are genuinely workers or self-employed.
• Given the complexities in legislating on this, we suspect any changes in this area will take time.

Right to 'switch off'

Labour aim to follow similar systems as Ireland or Belgium to avoid working from home making the home into a 24/7 office.

Impact on employers

• Many employers may introduce internal policies which aim to encourage cultural change, rather than introducing rules which might risk employee dissatisfaction.
• However, employers may need to prepare for mandatory rules if a change in government brings about new rights for employees to disconnect from work.  

Tips Act

The new Tips Act has already received Royal Assent and is expected to come into force on 1 October 2024. This Act ensures that workers should receive their tips in full and Labour simply must push through the enactment.

Impact on employers

• Where you have workers who operate on a tipping system, ensure you have a clear system in place where tips are distributed evenly to employees and not fed back towards business expenses.

Draft Equality (Race and Disability) Bill

This bill will create the full right to equal pay for ethnic minorities and disabled people, making (according to the briefing note) it easier to bring pay discrimination claims. This will also introduce mandatory ethnicity and disability pay reporting for employers with 250+ employees to help close the ethnicity and disability pay gaps. This expansion of pay gap reporting is likely to take some time to implement in practice.

Impact on employers

• Gender pay gap data should be relatively easy to find within employer systems, however Labour have not explained how disability will be defined or whether it will meet the Equality Act 2010 definition or another definition instead.

Labour's ambitious reforms present a significant shift in employment law. It will be crucial for employers to stay informed about the upcoming changes and prepare for their potential impact.

For further support, please contact a member of our Employment team.