The last couple of months in the U.K. have been busy, with a snap general election called and political parties sent into campaign mode with little notice, setting the political machine into action.
However, for policy people like me, other parts of government, such as the civil service, do the exact opposite. The pre-election period of sensitivity brings strict rules on what can, and more importantly, what can’t be said. Key departments such as HM Revenue & Customs (HMRC) and the Department for Business and Trade cease all talk of policy changes, new plans, or anything that could influence the election outcome.
But now we must look to the future, under a new government, and see what the new Labour Party administration is likely to bring to the payroll world. Thankfully, U.K. political parties set out what they want to achieve in government in manifestos. Part of Labour’s manifesto, “Delivering a New Deal for Working People,” is full of proposed changes, tweaks, and revisions of employment laws and legislation.
‘One-Sided Flexibility’
A large area of focus for the government is the rules and regulations that allow flexibility but are unfairly leveraged by employers without the same flexibility equally benefiting workers.
They intend to end the use of exploitative zero-hours contracts, a type of contract that does not state the expected hours of work. This, in theory, allows workers to pick up shifts as and when it suits them. However, in practice, it is common for the reverse to be true, as shifts are offered by employers as and when there is work available. This can create uncertainty for workers and their income. The proposals include ensuring the right for contracts to reflect the number of hours someone will regularly work over a 12-week reference period and reasonable notice of any changes to shifts or working time with proportionate compensation for cancellations or curtailments. It will be interesting to see how these rules are configured to allow genuine flexibility to workers who require it, without allowing exploitation to continue.
“Fire and rehire” is another area of keen focus, with the government now planning to end the practice of making a worker redundant and then re-engaging with the worker but on less favourable terms under a new contract. As with zero-hours contracts, the government seeks to extend protections to workers, but also maintain the ability for businesses to make changes where it is necessary. This will be a thin line to balance on and remedial processes will be key to ensuring the rules are followed.
Rights From Day One
The government wants to ensure that workers have a strong suite of protections from their first day in a job. While this policy is fantastic for workers, it brings some considerations for employers to be aware of.
Flexible working has been a hot topic since droves of office workers were sent home during the pandemic, but it has gained much more traction outside of this and now has a reasonable robust statutory process. However, the government wants to ensure that not only is flexible working given the focus it deserves, but that it is a genuine default for new employees.
We currently don’t have a “right to switch off” in the U.K. This has been adopted in some European Union countries as changes to remote working practices have blurred the lines between home working and home life. Labour’s plan indicates it will borrow from Irish and Belgian policies to allow workers to disengage from work and allow employers to build bespoke policies that suit their workplace.
There are several rights given to U.K. workers which can depend on length of service or income levels. One such statutory right is sick pay, which currently is paid by an employer when an employee is off with an illness. It can only be paid once a worker exceeds the lower earnings limit (LEL) of £123 average weekly earnings and is off for at least four consecutive days. There are proposals to remove the LEL test and the qualifying days test.
National Minimum Wage
Over the past few years, the National Minimum Wage (NMW) has risen more steeply compared to previous years, which has been driven mainly by high inflation. The Low Pay Commission (LPC), an independent body which makes recommendations to the government on what the rates should be, received a remit from the government to investigate the market and return its findings. The previous government gave the LPC the remit to increase the National Living Wage (NLW), the highest level of NMW, to be in line with two-thirds of median hourly income. This remit has now been reached and it has been asked to maintain at this level.
The new Labour government intends to expand their remit, asking the LPC for the first time to consider the actual cost of living in addition to median wages and economic conditions. Along with this, it intends to remove the age related NMW bands, which allow workers under 21 to be paid a rate lower than the NLW.
A single enforcement body, which will partly be responsible for enforcing compliance and issuing penalties for those who fail, is mentioned as a key goal. This is something that the previous government had consulted on but never came to fruition, so time will tell if it is successful on this occasion.
Employers should start to plan now for these potential changes to NMW, as past rises have already put pressure on businesses that did not foresee the large uplifts we were delivered. While the changes are welcome for low earners and the general workforce, employers need to fund the rises and should get their budgets ready to do so.
One Worker Status
You may have noticed that I have mentioned “workers” on several occasions and sometimes “employee.” This is because the U.K. has three statuses for employment rights purposes: worker, employee, and self-employed. If you are confused, don’t feel bad—the new government agrees and seeks to change this.
The current way to determine which status you belong to can be mired in case law and require specific knowledge and legal tests to conclude. With new ways of working, such as gig work, being ever prevalent, this ambiguity is causing some knock-on effects in the labour market.
Consultations will therefore take place on establishing simplified rules on differentiating between workers and the genuinely self-employed. This is likely to be a long and drawn-out process as the legislative positions behind status determinations are complex and abundant.
Tax and National Insurance
The last thing to briefly mention is tax and National Insurance (NI), of which the commitment is to not raise the current headline rates, but it must be noted that nothing is mentioned on the thresholds. Currently these thresholds are frozen until 2028, but with a new government, this could change. I am not saying they will, but it’s something to think about.
There are a lot of changes ahead for employment, which are undoubtedly good for workers that employers will need to keep up to speed with to ensure they are compliant and can effectively plan. Much of the additional administrative burden of the above changes may fall on payroll teams as a key facilitator in collecting and using employment data, but good planning can limit this and ease the responsibility placed on them. A new government brings an interesting mix of certainty and uncertainty for businesses which should be embraced as much as possible.