Burden or Reform? What the General Election Means for UK Employment Law

1. Ending ‘fire and rehire’
2. A ban on zero-hours contracts
3. Single ‘worker’ status
4. Removal of age bands from minimum wage rates
5. New ‘day 1’ rights and entitlements, including the right to claim unfair dismissal, the right to sick pay and parental leave
6. Introduction of unpaid bereavement leave
7. ‘Fair Pay Agreement’ to allow to set fair pay and conditions in the adult social care sector
8. The right to ‘switch off’
9. Strengthening protections from discrimination on the grounds of maternity and menopause
10. Removing previous changes to the Trade Union Act 2016, which required higher turnouts for ballots. Abolishing minimum service levels for strikes and removing the requirement for 40% voting thresholds for trade union recognition

1. Unfair dismissal rights from day one of employment

The big one. Under current UK employment legislation, an employee requires two years’ service to bring a claim for unfair dismissal against their employer.

Removing the qualifying service for employees to bring claims for unfair dismissal will have a huge impact on how employers manage the employment of short-serving employees.

Employees should always be treated fairly regardless of their length of service. However, employers rely on short service clauses in contracts which allow them to vary formal procedures to take account of an employee’s limited service.

For example, in a disciplinary situation, an employee with less than two years’ service could face dismissal for a first disciplinary offence. A longer-serving employee would have their misconduct managed by issuing a succession of formal warnings before dismissal.

In a redundancy situation, employers sometimes rely on what is known as ‘last in, first out’ whereby employees with less than two years’ service could be made redundant without the requirement for a full redundancy consultation exercise or could be dismissed to protect the employment of a longer serving employee, this is known as ‘bumping’ or a transferred redundancy.

For more information on last in, first out, see our article here: https://www.avensure.com/articles/redundancy-is-last-in-first-out-illegal/

*Under existing employment law in the UK there are currently circumstances where an employee has the right to bring a claim of unfair dismissal from day one, known as automatic unfair dismissal reasons. For information on qualifying service and automatic unfair dismissal, please read our article here: https://www.avensure.com/articles/grievance-disciplinary-procedure-and-short-service-dismissal-your-ultimate-guide/

Will this prevent the use of probationary periods?

Labour has stated that these employment law reforms are not intended to prevent fair dismissals. ‘Labour’s Plan to Make Work Pay: Delivering a New Deal for Working People’ references employers being able to continue using probationary periods to assess new hires, suggesting that some short service dismissal types may still be possible.

2. ‘Ban’ on zero-hours contracts

The manifesto states a ban on ‘exploitative zero-hours contracts’, so an outright ban is not likely, a decision which has disappointed many who have campaigned for their abolition for many years. How ‘exploitative’ zero-hours contracts are set to be defined under the new employment legislation is unclear at this stage.

What are zero-hours contracts?

Zero-hours contracts are a form of typical contract where the employer is not contractually obligated to offer hours of work, nor is the employee under any obligation to accept work offered.

Widely used in sectors such as hospitality and care, the employer zero-hours contracts offer flexibility where cover is needed at the last minute, or extra staffing is required for a large event. To the workers themselves, they can also deliver a degree of flexibility, especially those who want to fit working hours around study or other employment.

The concern with zero-hours contracts that align with current UK employment laws has always been that they represent an unsecure form of employment which can result in financial hardship.

What is Labour proposing?

Labour’s new employment legislation proposes to end ‘one-sided flexibility’ by granting more rights to those working under zero-hours contracts.

Back in 2023 ‘The Workers (Predictable Terms and Conditions) Act was given royal assent. This legislation aimed to provide workers on atypical contracts (including agency workers) the right to request a predictable working pattern by allowing individuals the right to request a more foreseeable working schedule from their employer.

Labour looks set to build on this and give workers the right to a contract reflecting any regular hours worked using a 12-week reference period. In addition, employers will likely be required to provide reasonable notice of changes to shift times and compensate for cancelled shifts.

3. Minimum wage reforms

The biggest shake-up Labour proposes in UK employment law is regarding pay and the proposal to remove the age bands associated with minimum wage rates. Different minimum wage rates are set according to age bands, 21 and over, 18-20, under 18 and apprentices.

This year saw a significant hike in minimum wage rates, and the proposals to remove the age bands will see all workers entitled to the same minimum rate of pay, with many viewing the use of age bands to set wage rates as discriminatory and potentially exploitative.

These employment law reforms will be highly significant, especially considering the current minimum wage rate for 21’s and over is £11.44 per hour and under 18’s are entitled to £6.40 per hour. Many struggling businesses will question how they will withstand the cost of implementing this, but it is important to note that these changes will likely be phased in over time.

4. Ending ‘fire and rehire’

This is a much-debated topic and has been for some time, not least following the controversy surrounding the decision of P&O Ferries in 2022 to fire 800 staff via Zoom, only to be accused of replacing them with cheaper foreign labour.

What is ‘fire and rehire’?

Fire and rehire (or dismissal and re-engagement) refers to the legal practice of terminating employment contracts and rehiring on revised terms and conditions of employment.

Where an employer identifies a genuine and essential business need to vary the terms and conditions of the employment contracts of its workforce, the UK employment law will permit them to do so. This must follow a consultation period with the staff where employers will aim to seek mutual agreement and acceptance of the changes from the workforce.

Where mutual agreement cannot be reached, the employer then seeks to impose the variation of terms by terminating the old contract and offering a new contract under the fresh terms and conditions (hence ‘fire and rehire’). In this situation, the employees will either accept the new contract and continue working or their employment will terminate.

Critics of ‘fire and rehire’ cite the P&O Ferries controversy as an example of how these dismissal types are unfair and open to exploitation. However, employers often seek to vary terms and conditions as a last resort to sustain the future viability of their business and to prevent the need for redundancies or business closure.

A new statutory code of practice regarding dismissal and re-engagement is set to launch in July 2024. The new code places greater responsibilities on employers to consult meaningfully to ensure that all possible alternatives to dismissal with employees and their representatives are fully explored. Employers failing to adhere to the code of practice will face a 25% uplift in any subsequent tribunal action.

Whilst Labour appears to be committing to an outright ban of fire and rehire under employment law in the UK in its manifesto, it is envisaged that Labour will likely replace the new code of practice by allowing fire and rehire only in exceptional circumstances.

The Shadow Chancellor Rachel Reeves explains, ‘We will end fire and rehire, but when a company is facing bankruptcy, and there is no alternative, they will have to consult with their workers and their trade unions. Those are very, very limited circumstances.’

5. Creating a new single status of ‘worker’

Perhaps the most ambitious proposal for employment law reform is to create one employment status: the worker.

Currently, the categories are:

• Employees: Work under an employment contract, usually with set work hours. They are entitled to full rights and protections under employment law.
• Workers: Atypical contract types, such as zero-hours contracts, tend to fall under the worker category.
• Self-employed: Usually running their own business, self-employed people typically work under a contract for services and are responsible for paying their own tax and NI.

Under Labour’s proposed UK employment law changes, two categories will exist – worker and self-employed. This means that the rights and protections afforded to employees will also apply to workers.

That is not to say that workers don’t have any rights and protections currently because they do. For example, they are entitled to the national minimum wage, paid holidays, rest breaks and protection from discrimination.

By merging the status of worker with the employee, the new single status of worker will mean that everyone apart from the genuinely self-employed will have equal employment rights and protections, including (but not limited to) maternity, paternity, adoption and shared parental pay, unfair dismissal protections and redundancy pay.

It is important to be mindful that Labour has committed to consultations with businesses and the workforce before any new employment legislation is passed, and many of the proposals will likely be phased in over time.

In the interim, employers should start to look at the following:

1. Check your contracts!

Whilst an outright ban is not likely, employers should look carefully at the number of zero-hours contracts in place and specifically whether these contracts remain fit for purpose.

Introducing a single-worker status should also prompt employers to check that those classed as self-employed are truly self-employed and are not workers or employees in disguise.

2. Recruitment!

Good recruitment practices are paramount but will be even more important if the right to claim unfair dismissal becomes a day 1 right under UK employment law. Employers will likely be able to rely on probation periods to remove unsuitable new hires but the rules regarding safe dismissals within probation periods are likely to tighten up.

Ensure your recruitment practices are effective by producing clear job advertisements and accurate job descriptions, and by providing thorough on-the-job training and induction processes to give you and your new hire the best start.

3. Have your say!

Employers should participate in any consultations because many of the proposed UK employment legislation reforms will have a significant impact.

Talk to our experts. The best way to avoid costly tribunal action is to ensure that you seek advice from Avensure so that we can support you fully with any new or ongoing queries.

Keep an eye out for our newsletters and social media updates to get ahead of what is set to be a very significant period of change for employment legislation, regardless of the election result next month.

To receive expert guidance on navigating upcoming employment law changes, please contact our employment team. Simply click here: Avensure Contact!