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A new Labour government – what it means for UK employment laws and employers

After weeks of campaigns, televised debates and polling predictions, the Labour Party has won the UK’s 2024 general election. Imminent changes to UK employment laws are expected in the coming months that will significantly strengthen employee rights and entitlements.

As a business owner or HR professional, it's crucial to stay ahead of any new regulations to ensure compliance and maintain a thriving workplace. Here is a summary of some of the key proposed changes:

  • Unfair dismissal protection: From day one, employees will have the right to unfair dismissal protection.
  • Fire-and-rehire restrictions: Dismissal and re-engagement practices will face stricter controls.
  • New enforcement body: The Fair Work Agency (FWA) will oversee workers' rights.
  • Extended tribunal time limits: Time limits for bringing claims will extend from three to six months.
  • National Living Wage: All adult workers will be entitled to this wage.
  • Day-one Statutory Sick Pay: Eligibility starts immediately with no earnings requirement.
  • Ban on unpaid internships: Only paid internships or those part of educational programs will be allowed.
  • Zero-hours contract ban: Contracts must reflect the average hours worked.
  • Employment status reform: Moving towards a single status of ‘worker’.
  • Enhanced equal pay and anti-discrimination laws: Stronger protections and regulations.
  • Default flexible working: From day one of employment.

In this article, we cover everything we know so far about Labour’s plans for employment law reform and the short and long-term implications for employers.

A ‘new deal’ for working people

Earlier this year, Labour published its New Deal for Working People, setting out a number of specific changes to employment laws in the UK that it would implement within 100 days of entering government. This commitment was reflected in Labour’s pre-election manifesto, meaning imminent changes are on the horizon.

The reforms touch on broad areas of working life, from flexible working and zero-hours contracts, to trade unions and artificial intelligence. For businesses and HR teams, some of the reforms appear radical, for example the introduction of a day one right not to be unfairly dismissed and the creation of a new government agency to enforce employment law compliance. However, Labour acknowledges that while it can implement some of the changes quickly through legislation, other changes will require consultation and may take longer.

Employers are therefore encouraged to prepare for imminent changes, although many of the proposals we discuss in this article may take effect later down the line. Below, we cover the main proposals for reform together with our view on what they might mean for your business.

Dismissals

Unfair dismissal: day one protection

One of the most significant changes for businesses is the plan to make unfair dismissal protection a day one right for all employees. Many businesses will be aware of the requirement for employees to have, in most cases, at least two years’ continuous service in order to qualify for unfair dismissal protection and to bring unfair dismissal claims. This requirement has typically provided employers with flexibility to assess an employee’s compatibility during the first two years of employment and dismiss such short-serving employees on notice without needing a fair reason or fair process to do so.

We await the specific details of Labour’s proposals, but a genuine day one right not to be unfairly dismissed would effectively require employers to approach the dismissal of all employees from day one of their employment in the same way they currently approach dismissals of employees with over two years’ service (ie by having one of the potentially fair reasons for dismissal and adopting a fair process). This would be a significant departure from long-standing employment laws - for over fifty years, there has always been some form of minimum service requirement for employees to qualify for unfair dismissal protection.

It’s clear that these changes are significant and will likely add additional time, risk and cost for businesses when it comes to implementing dismissals. This might mean employers need to think more carefully about their initial hiring decisions. It’s also likely to increase the overall number of employment tribunal claims given all employees will qualify for unfair dismissal protection from day one of employment.

However, Labour has made it clear that employers will still be able to operate probationary periods and dismiss employees during a probationary period, as long as there are ‘fair and transparent’ rules and processes that apply to probationary periods. It’s not yet clear what this means, including whether there will be limits on the length of probationary periods or whether employers will need to discuss concerns with employees first before dismissing during a probationary period.  It does appear, however, that probationary periods will become an important tool in being able to dismiss short serving employees and so we advise reviewing your current contracts of employment and ensuring that any new starters have a probationary period within their contract.

It’s also worth noting that Labour’s plans involve creating a single employment status of employee and worker (see Employment Status below). Given this, it’s possible that the day one right to unfair dismissal protection could eventually cover both employees and workers, meaning a broader category of workers could benefit from unfair dismissal protection which has previously not been the case. We will be following this proposal closely in the coming months and you can stay up to date by subscribing to our newsletters to receive details about the latest guides and webinars.

Restricting ‘fire-and-rehire’ practices

Another significant development is Labour’s proposal to restrict so-called ‘fire-and-rehire’ practices, which is more formally known as dismissal and re-engagement which we cover in this article. Dismissal and re-engagement involves terminating existing contracts of employment and immediately offering a new employment contract, usually with less favourable terms and conditions around pay and benefits.

The purpose behind dismissal and re-engagement is usually to make forced changes  to terms and conditions where employees are refusing to accept changes to their existing contracts. For example, legacy contractual benefits such as pensions and severance terms may have become too expensive for an employer to administer, or an employer may be in financial distress and need to take measures to reduce its staff costs by cutting pay. Removing these terms is likely to be very unpopular with the employees entitled to them and they would be unlikely to accept the change. Terminating the existing contracts with these terms and offering re-engagement on a new contract is a potential solution in these circumstances to transition staff onto new terms, although often at the expense of good employee relations.

Dismissal and re-engagement practices became particularly controversial during the Covid-19 pandemic, with many high profile cases making the news. Steps had already been taken to limit the use of dismissal and re-engagement, with a new statutory code of practice coming into force on 18 July 2024, limiting its use only as a last resort.

Although it has stopped short of calling for a total ban on dismissal and re-engagement, Labour plans to provide ‘effective remedies’ against abuse of fire-and-rehire practices and provide a strengthened code of practice to replace the code coming into force this month. At the same time, Labour acknowledges that businesses may still be able to use these practices as part of a genuine business restructure where there is no alternative. However, Labour’s plans will clearly require a more robust process and consultation with affected staff.

Overall, dismissal and re-engagement is a delicate balance for Labour. On the one hand, these practices are controversial with the trade unions, many of whom are affiliated with Labour. On the other hand, dismissal and re-engagement can be a lifeline for businesses that are experiencing shock economic conditions and need to take urgent cost-saving action. It seems Labour is trying to pull off this balance delicately, but with a strong message that it will scrutinise dismissal and re-engagement measures robustly.

Enforcement of employment rights

New enforcement body for employment rights

Labour plans to set up a new Fair Work Agency (FWA) responsible for enforcing workers’ rights against non-compliant employers. The FWA will have powers to inspect workplaces and take legal action against employers who fail to uphold employment rights, which includes imposing fines and the use of civil proceedings. The FWA will include representation from trade unions and it’s expected its remit will include health and safety matters, breach of national minimum wage laws, worker exploitation and discrimination.

Although the creation of a new government body to oversee employment law compliance might sound alarming to some employers, it’s really an amalgamation of existing state enforcement bodies into one (eg the Gangmasters and Labour Abuse Authority, HMRC’s national minimum wage unit, and the Employment Agency Standards Inspectorate). This is something previous governments had considered following the Taylor Review in 2017, which recommended better enforcement of employment rights by state bodies.

However, the remit and powers of the FWA do sound broad, meaning employers will need to make sure they take more proactive steps to comply with statutory employment rights and keep adequate records to demonstrate their compliance.

Increase in employment tribunal time limits from three to six months

In most cases, workers have three months (normally from the date of dismissal) to bring a claim against their employer in an employment tribunal (eg for unfair dismissal). This time limit can be extended in very limited circumstances, but this is at the discretion of the employment tribunal. Labour is proposing to increase the time limit for bringing employment claims from three to six months.

Labour’s rationale for the increase in the time limit is somewhat confusing. On one hand, it says this will help pregnant employees with pregnancy or maternity related discrimination claims based on evidence that shows they struggle to raise funds to bring claims within the current time limits. We believe such funds must relate to legal advice and support given it’s been free of charge for anyone to lodge employment tribunal claims since July 2017.  On the other hand, Labour also states the increase in time limits will encourage employees to exhaust internal processes first (eg through a grievance process), leading to a decrease in claims. This is certainly possible, but internal resolution of complaints is never guaranteed.

On balance, the increase in time limits is a significant proposal that is expected to have direct consequences for many employers. It’s likely that the number of employment tribunal cases will increase, not decrease. And that’s within an employment tribunal system which is already at capacity and where employees can currently expect to wait on average one year for an employment tribunal to hear their claim. For employers, the increase in the time limit means they will need to wait out any claims for a much longer period than before. Under Labour proposals, employees will have much longer to think about bringing a claim, which might happen if they are struggling to find new employment after being dismissed from a job.

Fair pay

National Living Wage

The National Living Wage is the higher rate of the National Minimum Wage that’s payable to workers aged 21 or over. The exact rate is set each year based on recommendations from the Low Pay Commission (the independent body that advises the government on the National Living Wage and National Minimum Wage). The Low Pay Commission typically looks at factors such as median pay and economic conditions when recommending rates to the government.

Labour is proposing to remove the age threshold for receipt of the National Living Wage, meaning every adult worker would be entitled to the National Living Wage, and not just the National Minimum Wage. Labour also plans to give the Low Pay Commission a wider remit to take into account the cost of living when making its recommendations. These proposals would result in added costs for employers, which will be felt mostly by businesses operating in sectors that engage younger staff, for example the hospitality and leisure sectors.

Statutory sick pay

Statutory Sick Pay (SSP) is a statutory entitlement available to employees who have been off work sick for more than three days in a row. It’s payable for up to 28 weeks of sickness absence, with the exception of the first three days. To be eligible, employees must have average weekly earnings of at least the lower earnings limit.

Labour’s proposals involve removing both the three-day waiting period and the lower earnings limit for eligibility. This would mean all employees will be entitled to SSP from their first day of sickness absence and there will be no earnings requirement to be eligible. There had been indications that Labour would also increase the rate of statutory sick pay (currently £116.75 per week), although it’s not currently clear whether that will happen.

For employers, these changes will increase direct costs and administration around sick pay. It may potentially encourage higher levels of short-term sickness absence if workers know they no longer need to wait for sick pay to kick in. Changes to sick pay are just one example of where employers will need to update their HR policies - our employment solicitors are on hand to assist as and when these changes take effect.

Ban on unpaid internships

Internships can be a great way for employers to attract talent and offer meaningful work experience to those looking to access a particular industry. However, research suggests that up to 31% of graduates in the UK are engaged in unpaid internships. Unpaid internships have been controversial in recent years because of the concerns over how they may limit social mobility.

Labour plans to bring an end to unpaid internships, except where they are part of an education or training course. This is clearly a positive development from a social mobility perspective, although it’s not clear why a ban is more effective than, for example, mandating a statutory rate of pay for all internships. A total ban on the use of unpaid internships could have unintended consequences, such as a reduction in the overall number of internships posted by businesses due to confusion about the rules.

When this change takes effect, businesses that wish to continue to offer internships will need to update their internship agreements. Our employment solicitors will be on hand to help you make these updates.

Job security and stability

Labour’s general philosophy under the New Deal is that workers should be entitled to a ‘baseline level of security and predictability’. It intends to achieve this through changes to how employers use zero-hours contracts. Zero-hours contracts are employment contracts that do not set a minimum number of working hours and do not oblige the employer to provide any work. These types of contracts have come under scrutiny in recent years as trapping workers in low paid and unstable employment.

Labour plans to ban ‘exploitative’ zero-hours contracts and give everyone the right to an employment contract that reflects the number of hours regularly worked, based on a 12-week reference period. So, an employee engaged under a zero-hours contract who has been working an average of ten hours a week over the 12-week reference period would, under Labour’s proposals, be entitled to an employment contract that provides for that number of hours a week.

It’s not clear whether Labour will mandate a minimum number of guaranteed hours to zero-hours employees, or what defines an ‘exploitative’ zero-hours contract. Employers may be concerned about added costs and a lack of flexibility in staff resourcing. It may not be practically possible for employers in some sectors to guarantee an average number of hours. Employers may need to consider alternative staffing models, for example the use of fixed-term employment contracts, something Labour acknowledges will be permitted.

Other measures that Labour propose to promote job security, include requiring employers to give reasonable notice to workers of changes in shift patterns or working time, with compensation proportionate to the notice given if cancelling or cutting short a shift. Again, this would add costs for employers who rely on shift-based staff and will increase the amount of administration required on HR and payroll when processing payslips.

Employment status

In the UK, staff are generally categorised as employees, workers or self-employed for employment law purposes. This is known as an individual’s employment status. An individual’s employment status has important implications for the types of rights and entitlements they have. For example, only employees can bring claims for unfair dismissal, whereas both employees and workers are entitled to holiday pay. Genuinely self-employed contractors have very few employment rights.

There are different legal tests to determine whether an individual is an employee, worker or genuinely self-employed. Over the last decade, there have been many cases in the courts looking at these tests. The rise of the gig economy meant that many individuals were wrongly categorised by businesses as self-employed and were in fact workers, meaning they had basic statutory rights such as holiday pay. Although the case law has clarified the circumstances in which an individual is an employee, worker or self-employed, it’s still a complex issue for businesses to manage in practice.

Labour plans to move towards a single status of ‘worker’, ending the distinction between ‘employee’ and ‘worker’. This would then leave a simpler distinction between those categorised as a ‘worker’ and those categorised as ‘self-employed’ from an employment law perspective. Labour also intends to improve protections for the self-employed, including a right to a written contract, measures designed to help the self-employed recover late payments and extending health and safety and blacklisting protections to self-employed workers.

Although simplification is the aim, a single status of employee and worker would be a radical overhaul of employment status and is unlikely to happen imminently. Labour plans to consult in more detail on these proposals and thought will need to go into the tax implications of such a change.

Equality and inclusion

Discrimination and harassment

Labour plans to strengthen protections against harassment, including by third parties. The New Deal also suggests a tougher stance on dealing with sexual harassment. It’s not clear whether this will create additional obligations on employers beyond those already due to take effect in October 2024 under the new duty to take reasonable steps to prevent sexual harassment. Again, we await the specific detail, but given the increased focus on discrimination and harassment, now would be a good time for employers to audit their business for discrimination and harassment risks (including sexual harassment) and develop policies, practices and procedures to minimise these risks.

Equal pay 

Under the Equality Act 2010, men and women must receive equal pay for equal work. This is known as the principle of equal pay. Workers can bring equal pay claims where they believe they are being paid less than a comparator of the opposite sex for the same work.

Labour intends to reform equal pay laws by prohibiting the outsourcing of services as a means of avoiding equal pay laws. It will also strengthen Equality Impact Assessments for public sector bodies that have public sector equality duties. Additionally, it intends to set up a regulatory and enforcement unit to oversee equal pay, with a view to making it easier to enforce equal pay rights.

It’s been suggested that Labour intends to extend the equal pay framework to include equal pay claims based on race, which would widen the types of claims employees can bring based on race.

Gender pay gaps

Businesses in the UK that employ at least 250 employees have to report on their gender pay gap. Although many employers who are required to report on their gender pay gaps voluntarily provide a narrative and action plan alongside their gender pay gap data, it’s not currently compulsory to do so.

Under Labour’s proposals, these businesses will be legally required to create action plans detailing how they intend to close their gender pay gaps. Labour’s reforms will also require in-scope firms to include outsourced workers in their pay gap reports.

Ethnicity and disability pay gaps

Large businesses with at least 250 employees will have to report on their ethnicity and disability pay gaps. There is currently no legal requirement to do so, although some large employers report on these matters voluntarily as part of their DE&I initiatives.

Menopause action plans

Large businesses with at least 250 employees will have to produce a ‘menopause action plan’. The plan would need to demonstrate how the business supports employees going through menopause. Labour will also develop guidance and the factors employers should consider when supporting employees going through menopause.

Flexible working

Labour plans to build on recent improvements to flexible working rights by making flexible working the ‘default’ working arrangement for all workers from day one, except where this is not reasonably feasible. It’s not clear what this will mean in practice, given employees now have a day one right to make a flexible working request. Labour has stated they want to improve opportunities for flexi-time contracts and hours that better accommodate working parents, which might imply this change is aimed more at helping families than a wholesale shift to flexible working for all businesses and workers.

Labour also plans to mirror developments in other parts of the world around ‘right to disconnect’ laws. These laws emerged following the rise in remote working during the Covid-19 pandemic. Right to disconnect laws tend to create a framework for employers and remote workers that protects their personal time and wellbeing when working from home or outside of normal working hours. Labour plans to introduce a similar ‘right to switch off’ in the UK, although it’s not currently known what this will entail, who will benefit and how it will be enforced.

Family-friendly rights

Labour’s New Deal proposes a package of improved protections that will benefit those taking leave for family reasons. These include:

New protections for pregnant women

It would be unlawful to dismiss a woman during pregnancy or within six months of her return to work, except in specific circumstances. Currently, it’s automatically unfair and discriminatory to dismiss an employee because of their pregnancy or because they took maternity leave. However, there is no restriction against dismissing pregnant employees or employees returning from maternity leave for reasons unrelated to their pregnancy or maternity leave. Although there have been recent developments to improve protections for such employees in redundancy situations, Labour’s proposals go much further and would make it very difficult to dismiss pregnant employees or those returning from maternity leave for reasons unrelated to their pregnancy or maternity leave.

A day one entitlement to take parental leave

Under current parental leave rules, the parent of a child can take a total of 18 weeks of unpaid leave up to the child’s 18th birthday, with a maximum of four weeks’ leave per year per child. Currently, employees can only take the right to parental leave where they have been continuously employed for at least one year, but Labour intends to make this a day one entitlement.

Bereavement leave

Labour plans to introduce a bereavement leave entitlement for all workers. Currently, a framework exists for parents to take bereavement leave following the death of a child, although it’s only available to employees. Employers tend to offer time off in other circumstances and to other categories of workers at their discretion on compassionate grounds. It’s not clear how wide the right would be under Labour’s proposals (eg the types of relationships to which it would apply) or whether it will be a paid right.

Carer’s leave

The previous government recently introduced a new unpaid time-off right for carers. Labour plans to review the implementation of this new right and explore the possibility of making this a paid right for carers to take time off, although it has stopped short of making a commitment to paid time off.

Redundancies and TUPE

Changes are expected around when collective redundancy consultation is triggered in large-scale redundancy situations. Currently, if an employer proposes 20 or more redundancies within a 90-day period, it must consult collectively with employee representatives or trade unions on how to avoid or limit the impact of redundancies. Case law in the UK has confirmed that this requirement is only triggered if the threshold of 20 employees is reached at one workplace (eg a single manufacturing plant or store). This has typically allowed employers to avoid collective consultation where staff are dispersed across multiple sites and the overall number of affected workers at each site is below the threshold of 20.

Labour’s proposals involve triggering collective consultation where that threshold is reached across the business as a whole. For example, a business with two sites with ten redundancies proposed at each site would, under Labour’s proposals, be required to consult collectively. This change will have a significant impact on how employers approach redundancies where the workforce is spread across different sites and will likely result in an increase in collective consultation processes. It’s also worth mentioning that businesses have to notify the Secretary of State of collective redundancies, potentially increasing the amount of administration on employers running multi-site redundancies.

Labour is also planning to make reforms to TUPE (the employment laws that apply on a business transfer or outsourcing). It states that Labour will strengthen the rights and protections for workers involved in a TUPE transfer. However, there are already extensive protections under TUPE (eg protection against dismissal and limits on changing terms and conditions) and Labour hasn’t been clear on exactly what would change. Potential areas of change might include restrictions on how employers assign employees in advance of a transfer, for example restricting so-called ‘employee dumping’, although this is speculative and we will need to see the detail from Labour in due course.

Trade unions and collective bargaining

The New Deal proposes a number of improvements to trade union rights, with implications for businesses operating in unionised environments:

Removal of restrictions on industrial action

Legislation passed by the previous government places restrictions on when lawful industrial action can take place (eg with longer notice periods, higher ballot thresholds and picketing restrictions). Labour plans to repeal these restrictions, together with abolishing minimum service levels in certain industries and restrictions on certain workers going on strike. This will make it easier for trade unions to organise industrial action, possibly on short notice.

Access to workplaces

Trade unions will be given a reasonable right of access to workplaces in a ‘regulated and responsible’ manner. The aim is to allow trade unions better access to workers for recruitment and industrial organisational purposes. An increase in access to the workplace might be of alarm to some employers, but the New Deal makes it clear that the right of access framework will be designed in consultation with both trade unions and businesses and with an underlying set of ‘clear rules’. If you have any concerns or questions about this development, our employment lawyers have extensive experience in trade union laws and are on hand to help.

Simpler statutory recognition

Labour plans to reform and simplify the process of statutory recognition (ie the legal process by which an employer formally recognises a trade union). This will involve removing the requirement for trade unions to show that at least 50% of workers are likely to support trade union recognition before the formal recognition process begins, and modernising final ballot rules.

Provision of union information

The New Deal proposes a new duty on employers to inform new joiners of their right to join a trade union and to periodically remind existing staff of this right. It’s expected that Labour will introduce this new duty by requiring employers to include information about the right to join a trade union in the section 1 statement of employment particulars given to employees at the start of their employment.

New rights for trade union representatives

The New Deal also proposes strengthening protections for trade union representatives and trade union officials when carrying out their work (eg protection against dismissal, intimidation and blacklisting).

Fair pay agreements in social care

The New Deal proposes a Fair Pay Agreement in the adult social care sector. This would allow workers and trade unions to negotiate better pay and working conditions in the adult social care sector. Employers operating in this sector should take note of these changes. If and when they come into force, they will likely involve minimum terms around pay and working conditions that would be set under collective bargaining processes, as opposed to something they set themselves as the employer. Collective bargaining agreements also tend to include terms around termination procedures and severance payments, so businesses operating in the care sector may wish to stay up to date on developments by subscribing to our newsletter to receive legal updates and details about upcoming events and webinars.

Collective grievances

The New Deal proposes a mechanism to allow employees to raise a collective grievance with ACAS. It’s not clear what this means in practice as employees raise internal grievances with their employer and not with ACAS. It’s likely that what Labour actually intends is for employees to be able to raise collective grievances with their employer, although it could mean employees will be able to start ACAS Early Conciliation (ie the first step when making an employment tribunal claim) on a collective basis.

Artificial intelligence

The risks of job automation from artificial intelligence are well-known. Labour’s New Deal intends to address these risks by protecting ‘good jobs’ and ensuring ‘good future jobs’. It intends to protect workers with rights and entitlements and safeguard workers against discrimination (which might imply algorithmic discrimination). Labour also plans more robust requirements around surveillance technologies that intrude on a worker’s privacy, for example requiring consultation and negotiation with trade unions and employee representatives on a high-risk technology.

Conclusion

Labour’s New Deal for Working People represents a new dawn for employment laws in the UK. If implemented as proposed, it introduces considerably improved employee rights and protections with consequences for how employers approach everything from administering statutory entitlements to dismissals and relationships with trade unions. We’re still in the very early days of the new Labour government and it remains to be seen if and when all of the proposals we’ve discussed will become law. You can stay tuned by attending our webinars and subscribing to our newsletter.

About our expert

Sally Gwilliam

Sally Gwilliam

Employment Partner
Sally joined the employment team in August 2021 as a senior employment solicitor and became a partner in October 2023. Sally qualified in 2004 at international law firm DLA Piper, and worked there for a further 11 years. There she gained excellent skills and experience in employment law working for medium and large businesses across multiple jurisdictions and on complex legal and strategic issues. Since 2015, Sally has worked for two smaller legal businesses where her client base changed to SMEs giving her a fantastic understanding of the differing needs and priorities of any size of business and in a wide range of sectors.


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