Caroline Harwood, partner and national head of employment tax at BDO, says that while many of Labour’s proposals from its ‘new deal’ remain unchanged, some have been watered down. She outlines what employers need to look out for.
Following the general election and the formation of a new Labour government, employers may be wondering what changes they can expect during the course of the next parliament.
While we await further details, previous publications including ‘Labour’s plan to make work pay’ published on 24 May 2024, which superseded ‘a new deal for working people” published in September 2022, provide an indication of the likely direction of travel.
The key themes of the new deal were to improve productivity, strengthen protections for workers from day one and deliver family-friendly workers’ rights, creating more and better jobs “that are closer to home” to improve choice. This includes immediate rights to protection from unfair dismissal, sick pay, and parental leave.
The pendulum swung somewhat in the make work pay plans to “boost wages, make work more secure and support working people to thrive, delivering a genuine living wage, banning exploitative zero hours contracts, and ending fire and rehire”.
Watered down
Many of the proposals remain unchanged from the new deal but some have been watered down. For example, one key feature of the 2022 proposals was new legislation within the first 100 days of a Labour government to put an employment status test on the statute books with new legislation which “will create….a single status of ‘worker’ for all but the genuinely self-employed”.
This has been diluted somewhat to a promise that a Labour government “will move towards a single status of worker and transition towards a simpler two-part framework for employment status”.
This refocus and a slower timetable for the introduction of a new statutory status test would be welcomed by employers and advisers alike giving them time to participate in consultations and prepare themselves for further changes in monitoring and assessing the status of workers in the labour supply chain.
NLW revision
Other areas of note for employers include further revision of the national living wage regulations with increases to minimum payments to achieve a “genuine living wage”. A further review of the tips and troncs rules taking effect from 1 October 2024 is also planned to “strengthen the law to ensure that hospitality workers receive their tips in full and workers decide how tips are allocated”. The hospitality sector may have to prepare for higher wage bills and more reform to the tips regime.
The extension of workers’ rights remains in line with earlier proposals (such as extending the time limit for bringing employment tribunal claims to six months) and employers should look out for new rules to ban zero hours contracts, and whether there is also an impact on agency rules and managed service companies.
New requirements around plans to close the gender pay gap may also emerge alongside the obligation to publish ethnicity and disability pay gaps for firms with more than 250 staff.
Longer term project
A pledge to ‘transform the apprenticeship levy’ may end up being a longer term project and one hopes that the government will listen to input from businesses through a detailed consultation before finalising any new version.
The impact on employers from a change in government will be significant and wide-ranging. In-depth consultations on major changes, particularly on employment rights and worker consultations will be very valuable to enable employers and their advisers to clarify the impact on business, productivity and the labour market. One hopes that the plan to establish a single enforcement body to enforce worker rights may eventually simplify regulatory burdens for employers.
New rules are likely to come with associated costs and a stringent penalty regime for those failing to comply with new employment tax obligations and it seems very likely that failures to operate PAYE correctly could see liabilities passing up the chain of engagement much as we see today under the IR35 regime.
Employers would be well advised to stay on top of the proposals affecting the world of work and to make sure they take advice on the potential impacts on their business model.
