What could Labour’s employment law changes mean for HR?

What potential employment law changes could be ahead in the event of a change in UK government – and what does this mean for HR? 

The Labour Party has said they would introduce an employment law bill within the first 100 days of power, should they win the upcoming general election on 4th July.  

We’ve summarised the key employment law updates the Labour Party have included in their 'New Deal for Working People'.

We asked Robert Burden, Managing Consultant at Kane HR, to share his HR expertise – and thoughts around how these potential employment law changes could impact SME HR teams.   

 

Skip to:

• What employment law changes are the Labour Party proposing?
• A single 'worker' status for employees & workers
• Expanding unfair dismissal rights
• Scrapping zero-hours contracts
• Preventing 'fire and rehire'
• Introducing the right to disconnect
• Employment tribunal updates
• What these potential employment law updates could mean for HR 

 

What employment law changes are the Labour Party proposing? 

We’ve compiled the key changes the Labour Party have said they will bring in, should they form the next government.  

Robert Burden, Managing Consultant at Kane HR shares his thoughts on the impact of each of these changes for HR.  

 

A single ‘worker’ status  

Labour have proposed changing what ‘worker’ means in terms of employment law, essentially combining ‘employee’ and ‘worker’ terms under one unified umbrella. 

 “Employees enjoy a wide range of rights and protections not available to those who are self-employed. As an intermediary category, ‘workers’ receive some statutory rights, like minimum wage and holiday pay, but lack others such as unfair dismissal protection and sick pay.  

Determining employment status is complex and often relies on case law, with key factors including personal service, mutuality of obligations, and control by the employer. The concept of ‘worker’ status arose in response to the growing gig economy but has led to confusion and disputes,” Robert Burden of Kane HR advises.  

“Combining the ‘worker’ and ‘employee’ status would mean those on casual working arrangements gain additional rights and protections. HR is likely to find themselves revising contracts, updating employee handbooks, and providing additional training for managers to understand the implications of the changes. 

Whilst expanding the criteria for ‘worker’ status would extend statutory rights and protections to more individuals, this would potentially lead to increased costs and operational changes for employers.  

This could also disrupt certain business models, particularly in industries reliant on flexible workforce arrangements. Navigating the complexities of the new definition would require employers to reassess their employment practices and could lead to a rise in litigation and disputes over worker classification and entitlement to rights.” 

 

Expanding unfair dismissal employment rights  

Currently employees must be employed for a minimum of 2 years to claim unfair dismissal. Labour are proposing to bring this in from day one of employment, increasing employee protections.  

We asked Kane HR's Robert Burden for the pros & cons of what this means for HR:

Pros: 

• Protection - Granting employees the right to claim unfair dismissal from day one provides them with immediate protection against unfair dismissal. This can help to foster a sense of security and stability in the workforce, encouraging loyalty and commitment among employees. 

• Fairness - Allowing employees to challenge unfair dismissals from the outset promotes fairness and equity in the workplace. It ensures that employees are not unfairly disadvantaged due to subjective decisions by employers and provides a mechanism for recourse in cases of unjust treatment. 

Cons: 

• Burden on employers - Allowing employees to claim unfair dismissal from day one imposes additional administrative and financial burdens on employers. This may result in increased costs associated with defending potential claims, as well as the need to invest in training and resources to ensure better compliance with UK employment law. 

• Impact on recruitment - Employers may become more hesitant to hire new employees if they face the risk of immediate claims for unfair dismissal. This could lead to reluctance in the creation of new jobs or investment in expanding the workforce, particularly for the SME market with potentially limited resources. 

  

Robert advises that there’s also a small risk with this change. “Overall, while granting employees the right to claim unfair dismissal from day one enhances their protections and promotes fairness in the workplace, it also presents challenges for employers in terms of increased costs and potential impacts on hiring/growth.” 

 

 

Scrapping zero-hours contracts 

The Labour Party has said they will bring in the right for anyone working regular hours for 12 weeks or more and get rid of zero-hours contracts. (Although recent reports say this stance could potentially be revised). Whilst this is an additional worker protection, could this remove the flexibility zero-hours contracts provides? 

“From a people side of HR, it’s clear that scrapping zero-hours contracts and introducing additional protections for individuals working regular hours will enhance job security and fairness in the workplace. This is likely to have positive impacts on productivity and morale,” Robert advises.  

“However, from a commercial HR perspective, it could also present challenges in terms of both flexibility and financial for employers. For industries such as manufacturing, logistics and hospitality who quite heavily depend on the flexible nature these types of engagements afford, it’s likely to present significant financial constraints which in turn is likely to be passed on to the consumer.” 

 

Flexibility 

Robert delves into the flexibility that zero-hours contracts offer, for people and businesses.  

“It’s also important to highlight that whilst there is an organisational benefit to the nature of zero-hours contracts, there are many individuals engaged on a zero-hour basis who prefer the flexibility afforded by this.. For certain segments of the workforce, such as students, caregivers, or those pursuing other commitments, zero-hours contracts offer the flexibility to balance work with other responsibilities. These individuals may value the ability to control their own schedules, accepting work when it suits them and declining shifts when it doesn't.  

Zero-hours contracts can also provide opportunities for individuals seeking supplemental income or those transitioning between jobs to gain employment without the commitment of fixed hours. For some, the unpredictability of hours may even be preferable, allowing for spontaneity or the ability to adjust their work patterns to suit personal circumstances.” 

Preventing ‘fire and rehire’ 

‘Fire and rehire’ is the practice of dismissing employees who don’t agree to changes to their contract, and then offering to hire them back again on a new contract with revised terms. Labour plans to improve consultation procedures and ban this practice.  

We asked Robert for his thoughts around this potential change.

“Preventing the practice of 'fire and rehire' would indeed have wide-reaching implications, it goes without saying that this has received recent controversial attention in the media, especially the impact it can have on employees.  

While it may not be encountered in every HR department, it's not uncommon. This practice tends to be more widely adopted during times of economic uncertainty or when clients are undergoing restructuring. Whilst ‘fire and rehire’ could be the ultimate outcome to a consultation process where the aim is to seek agreement to a proposed contractual change, it doesn’t always have to be the outcome. 

There have been several clients that we have supported with change programmes, whereby we’ve been able to seek collective agreement to support a contractual change or update without the requirement to fire and rehire, in some cases clients have also been able to consider amicable options such as voluntary redundancy, flexible working arrangements or redeployment as an alternative to fire and rehire.” 

Introducing the right to disconnect 

Labour have proposed making the right to 'switch off' or disconnect from work (outside contracted working hours) a legal right, following in the footsteps of other countries.  

Whilst this is a welcome step for healthy company cultures and the elusive work-life balance, it could also potentially be restrictive for SMEs.  

“There’s a lot of ambiguity as to how this could feature within the UK employment market, and a number of areas that would need to be addressed, such as if there should be a compensatory adjustment if contact is required, or if fines would be mandated by HMRC,” Robert Burden of Kane HR notes.  

“There’s also the question around how our national infrastructure would be impacted and whether certain industries would be excluded much like the Armed Forces and emergency services are excluded from the working time regulations. 

What’s notable is that offering employees the right or option to disconnect outside of their regular working hours would naturally promote a healthier work-life balance and attribute to a reduction in stress levels. Assuming that the introduction of such legislation requires clear guidelines around after-hours communication, I would expect this to help SMEs establish boundaries on working expectations which could also help to foster positive work cultures. 

While SMEs may initially have concerns about the impact on productivity and communication, the long-term benefits of improved employee satisfaction and retention may outweigh the perceived drawbacks.” 

Employment tribunal updates 

The Labour Party has said they would extend the time period around bringing claims to an employment tribunal to 6 months – currently, employees have 3 months to bring a claim.  

“Whilst this could mean a longer process for HR, extending the time limit for bringing claims to the employment tribunal would benefit victims of workplace discrimination by alleviating the pressure to rush into litigation and allowing more time to process potentially traumatic experiences,” Robert notes. 

“As I understand, the proposal would be to increase the time limit to 6 months. Looking at this from a neutral perspective, you could see how such an extension would provide both employers and employees more space for negotiations, promoting a better dialogue and increasing the likelihood of settling claims outside of the tribunal system.”

Additional changes

Labour also propose raising the National Minimum Wage to a minimum of £10 per hour for all workers, including young adults who earn less under the current tiers. They plan to make Statutory Sick Pay available to everyone, and strengthen employment law protections for whistleblowers & pregnant employees. They also propose closing ethnicity, gender & disability pay gaps, and introducing legislation around bereavement leave. 

What these potential employment law updates could mean for HR 

Depending on what happens at the next general election, there could be significant potential employment law updates on the horizon. 

We asked Robert Burden of Kane HR which change would be the most impactful for SME HR teams.  

“In addition to the proposed merging of ‘worker’ employment status, aligning ‘day one’ rights to all employees would provide protection against unfair dismissal and entitlement to redundancy pay from the outset, which currently requires two years of service.  

These measures would grant immediate access to a comprehensive set of rights and protections for all employees, without any waiting periods. However, this could potentially lead to additional pressure on the tribunal system and impose substantial additional costs on businesses.” 

Of course, we don’t know what will happen in terms of future employment law or government changes – but preparing where you can is only a positive. 

Store your HR policies securely within Breathe’s ISO 27001-accredited software. 

Robert Burden is the Managing Consultant at Kane HR, who are Gold HR Partners of Breathe.  

Disclaimer: Breathe is not affiliated to any political party – the purpose of this article is to provide factual information for HR, not an attempt to influence political decision-making in any way.