Last month, we were given an insight into what we might expect as part of the UK Labour Party’s manifesto when their National Policy Framework appeared online. The leaked document collates policy pledges and submissions from various Labour groups before it is discussed and voted on at the party’s National Policy Forum in the summer.

In the document, we saw a range of proposed legal rights aimed at improving employees’ work-life balance, transparency and pay equity, which together make up a broader package of employment reforms dubbed a 'New Deal for Working People'. Many of the policies are not new and match the Labour Party’s public stance, as they build on their Employment Rights Green Paper launched in 2021, which committed them to introduce new employment laws within the first 100 days of government.

However, the document amounts to the most comprehensive articulation yet of what Keir Starmer’s government would pursue if his party wins the next election, and there were a handful of eye-catching proposals with wide ranging implications for employers and employees alike.

A new deal for working people

Fair pay agreements and collective bargaining

One of the key policies the earlier green paper outlined was the introduction of sectoral collective bargaining, a policy that would give workers the right to negotiate fair pay agreements through sectoral collective bargaining. The idea is to empower workers to organise collectively through trade unions and, crucially, strip away rules that curtail their ability to strike.

This has been something unions have long been calling for, as it gives workers a mechanism to voice their views and encourages problem solving through dialogue with both businesses and workers. Collective employee voice and working with representatives can make a real contribution to an organisation’s climate and performance. The recent strike action shows that trade unions still have a legitimate influence in workplaces and organisations need to take them seriously and engage constructively with all forms of employee representation. This echoes the CIPD’s own research on collective employee voice.

However, whilst similar arrangements have recently been introduced in Australia and New Zealand, it has not been without opposition from business groups. Whilst most agree that the move will deliver more money for workers in the short term, there are concerns that it could lead to layoffs and businesses closing. This may be the reason that the proposal has been caveated in the latest policy documents, stating that the new sector-wide collective bargaining agreements will not include 'many parts of our economy'. This may be in part due to the Labour Party’s commitment to being seen as the party of businesses, and thus a compromise position designed to keep both business as well as unions onside.

Despite the potential watering down of the party’s earlier stance, taken together, it suggests Starmer's government would look to heighten union powers to empower workers to collectively secure fair pay, terms and conditions and crack down on unscrupulous employers who exploit their workforce.

Banning zero-hours

Perhaps one of the biggest changes would be a ban on controversial 'zero-hours contracts' and ensuring anyone working regular hours for 12 weeks or more has the right to a regular contract.

This comes after it was revealed that zero-hours contracts hit a record high in the final quarter of 2022.The Office for National Statistics (ONS) recently released its latest labour market statistics, which found that there were 1,133,441 people employed on a zero-hours contract in October to December 2022 – the highest total on record.

However, recent research from the CIPD found that the majority of zero-hours workers see more benefits than flaws in this type of contract, with many reporting better work-life balance and wellbeing than other workers. Zero-hours contracts don’t necessarily lead to insecure work, and when used responsibly, can offer genuine two-way flexibility. CIPD guidance on employing atypical workers provides some pointers, such as regular reviews of both employment status and the suitability of specific contracts.

Day one rights on the job

Labour’s package of reforms also includes far-reaching plans to improve employment protection and the qualifying period for basic rights to give employees rights at work from day one. The change in policy would see employees granted sick pay, holiday pay, protection against unfair dismissal and parental leave from the first day of employment.

They will also extend the qualifying period for basic rights to ‘workers’ as well as ‘employees’, by ‘consulting on a simpler framework that differentiates between workers and the genuinely self-employed and evaluate the way flexibility of ‘worker’ status is used and understood across the workforce’.

Over the years, different inquiries and reviews have considered whether worker status should be removed, and the CIPD has long called for its abolition – calling instead for a switch to the legal presumption to being an employee. Labour’s plans to create a simpler two-part framework where all but the self-employed are considered workers would simplify the current three-tier framework and align it with the two statuses for employment taxes.

Unfair dismissal

The party also details their proposals to extend unfair dismissal protection and the removal of the cap on compensation awarded to claimants if successful at tribunal. At present, employees can usually only challenge a dismissal if they have been with their employer for two years. This change in policy would see employees granted protection from the first day of employment and would outlaw 'fire and re-hire' practices - a practice of changing employment terms by way of dismissal and re-engagement, typically in situations where it is not possible to obtain employee or trade union consent to the changes.

The CIPD recently submitted a response to the UK Government’s consultation on a new Code of Practice on dismissal and re-engagement, which we believe has the potential to improve protection for workers and highlight the serious risks of firing and rehiring as well as raising awareness of these minimum standards of fairness and the importance of compliance.

Taken together, the combined impact of removing the qualifying period and the cap on compensation will likely result in dismissals becoming more complex and potentially expensive, as well as leading to an increase in claims made to employment tribunals. Many employers may need to change their approach to recruitment, management, and dismissal in order to adapt to these changes.

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