Draft legislation that did not receive Royal Assessment prior to the end of May 2024 will not become law unless adopted by the new government.
The following legislation has received Royal Assent but requires new regulations by the new government before they are implemented in England, Scotland and Wales. These are:
- The Paternity Leave (Bereavement) Act 2024 received Royal Assent on 24 May 2024. The Act gives bereaved fathers and partners an automatic day-one right to paternity leave (in place of the usual 26-week minimum service requirement) if the mother, or a person with whom a child is placed or expected to be placed for adoption, dies. A bereaved parent of an adopted child or intended parent of a child born through a surrogacy arrangement, will also fall within the scope of the new provisions. The Act will require regulations to be made under it to be brought into force.
- A requirement for employers to give all tips and gratuities to workers, without any deduction. The House of Lords approved the draft statutory Code of Practice on the fair and transparent distribution of tips on 24 May 2024. Regulations are now needed to bring the code, and the remaining provisions of the Employment (Allocation of Tips) Act 2023, into force. It had been expected that they would come into force on 1 October 2024, but this will depend on the new government. The Act and Code applies in England, Scotland and Wales.
- The Code of Practice (Dismissal and Re-engagement) Order 2024 was approved on 28 May 2024. The Order brings into force the statutory Code of Practice on dismissal and re-engagement on 18 July 2024. It will not apply where the prospect of dismissal and re-engagement has been raised by the employer before this date. The draft Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024, which would allow an uplift or reduction in compensation if the Code is not followed, was also expected to come into force on 18 July 2024. Whether these provisions come into force depends on the outcome of the general election (the Labour Party has committed to banning fire and hire unless this would mean a company is no longer viable).
- A new right for workers to request a more predictable working pattern for workers without fixed hours, such as zero-hour contract workers, was expected in September 2024. This was brought in under the Workers (Predictable Terms and Conditions) Act 2023, which received Royal Assent last year.
- A new proactive duty for employers to prevent sexual harassment at work, under the Worker Protection (Amendment of Equality Act 2010) Act 2023. This received Royal Assent last year, with an expected implementation date in October 2024.
- The Neonatal Care (Leave and Pay) Act 2023, which gives parents the right to take up to 12 weeks of paid leave if their baby requires specialist care after birth, which is due to come into force in April 2025.
- Plans to lower the pensions auto-enrolment age from 22 to 18 under the Pensions (Extension of Automatic Enrolment) Act 2023, which received Royal Assent last year. A Department for Work and Pensions consultation on implementing the new measures was expected.
If, as the polls currently suggest, the Labour Party is successful in forming a new government following the UK general election on 4 July 2024, it has promised in its ‘Plan to make work pay’ Green Paper published in May 2024 to introduce a new Employment Bill to Parliament within 100 days of forming a new government, which they have hailed as “the biggest upgrade of workers’ rights” in a generation. This legislation would apply to employment in England, Scotland and Wales, given that employment law is a devolved matter in Northern Ireland.
A bill must of course pass through a number of stages in Parliament before it becomes law; so the short answer is that the first 100 days of a Labour government could well see a new Employment Bill that would eventually become law; the first stage would be the content of the King’s Speech announcing the legislative programme, which we expect quickly after the election. While there’s still some ambiguity about how Labour would implement many of their policies, measures will be subject to thorough consultation; FSB’s policy team in Westminster will be responding to these and engaging with policy makers and officials to ensure our members views are taken into account when decisions are made.
In Northern Ireland, the Department for the Economy will be consulting through summer 2024 on an ‘Employment Bill’ that will seek to make a series of changes to legislation. The FSB NI Team will be engaging with members to ensure these proposals are fit for purpose.
Unfair dismissal: A day-one right
The qualifying period for claiming unfair dismissal has changed over the years (there is currently a two-year eligibility period in Great Britain and a one-year eligibility period in Northern Ireland, in order for employees to claim that they have been unfairly dismissed in most cases). There is no qualifying period in the UK for employees to claim their dismissal is automatically unfair or discriminatory.
Labour has proposed making the right to claim unfair dismissal a day-one right for employees. It is not yet clear whether this proposal would mean employees could, for example, be dismissed following a lighter-touch procedure during their probationary period than for those who have passed any probationary period the employer has set. Clearly, employers will not want to follow a series of formal written warnings or longer dismissal process where it quickly becomes clear that the employer has made the wrong hire and an employee is not suitable for their role. A potential day-one right to claim unfair dismissal means that employers will want to ensure that conversations with employees about performance or other concerns are documented and that probationary periods are used and managed properly. This is current best practice, particularly given the claims dismissed employees can bring, such as discrimination, which do not require any minimum length of employment service.
Day-one sick pay and parental leave pay
This policy has potentially the biggest impact for small business employers. Currently Statutory Sick Pay (SSP) is available to those who earn at least £123 per week, or £533 per month. SSP is paid to qualifying workers at a rate of £116.75 a week (at a pro-rated day rate). SSP cannot be reclaimed by employers. Labour proposes abolishing the lower earnings limit so that SSP is universally available to all workers regardless of their earnings and would also remove the current 3-day waiting period (SSP is generally not payable for the first three days of sickness absence). The removal of the earnings limit would affect businesses that employ low paid part-time earners, as well as introducing the need for employers to pay staff sick pay for ad-hoc very short-term, one or two-day absence periods.
Labour would also remove the current 26-week qualifying period for statutory parent leave pay, such as maternity pay to make this a day-one right also.
Zero-hour contracts
Labour has promised to legislate to ban “exploitative” zero-hour contracts. This will affect businesses that rely on staff, such as ‘zero-hour’ workers, being entirely flexible as to hours they work and where the employer does not guarantee any minimum number of hours of work under the contract. Contracts will have to guarantee future hours of work, based on those that are regularly worked calculated over a 12-week reference period; although it is not clear if this would apply only where the zero-hours worker requests this. The ban would not prevent employers from continuing to use temporary (fixed term) contracts of short duration, such as contracts for businesses that are seasonal. Consequently, where a business has work that fluctuates, this would instead mean either using temporary (fixed term) contracts with guaranteed hours, or casual hours contracts where a minimum number of hours are guaranteed to the worker. Effectively, once contractually agreed, those minimum guaranteed hours would still need to be paid even if the work is not available, so would be a premium for the employer to pay to retain that level of flexibility. Additionally, these contracts would need to provide reasonable notice of shift cancellations and compensation to the employee ‘that is proportionate to the notice given’ where shifts the worker has accepted are cancelled. It may be the case that Labour departs from a policy of an outright ban on zero-hours and instead builds on the rights already introduced in legislation (which were due to come into force in autumn 2024, following the passing of new regulations) giving those on insecure contracts the statutory right to request a contract with fixed hours based on the hours they have been working over a reference period (and the employer the statutory right to reject it).
Minimum Wage
Another big headline is Labour’s commitment to the introduction of a “real living wage” by changing the Low Pay Commission’s remit to account for the cost of living, alongside median wages and economic conditions, rather than focusing on inflation only, when setting suggested rates; although this would be a longer-term change given the recent more significant rise in National Minimum Wage rates for employers in April 2024.
Employment status
UK employment law recognises three categories of workers: 1) those that are employees with full employment rights, 2) those that are workers with worker rights such as the right to be paid at least the National Minimum Wage and the right to paid holiday and sick pay and 3) those that are self-employed. In contrast, taxation legislation does not recognise the intermediary ‘worker’ status and individuals are taxed either under PAYE as an employee or on a self-employed basis.
Labour is proposing to scrap the current ‘worker’ category and give workers full employment rights so that there is no longer a distinction between workers and employees for employment law purposes. This would give workers a right to parental leave pay including maternity pay, as well as redundancy pay, the right to request flexible working and protection against unfair dismissal. They would also transfer their employment when a business or service provision changes hands under the TUPE Regulations. Whilst Labour is silent on this, the proposed legislative change to employment law would make it likely that this would be harmonised with the taxation regime so that workers (who are not already on the employer’s payroll) would be taxed under the PAYE and employer/employee National Insurance regime.
However, this proposal would be subject to consultation and would be very complex to implement, so would be a longer-term potential change after 2024. Previous governments since the 2017 Taylor Review have consulted on simplifying the test for worker status, but it has proved to be particularly complex.
Employment tribunal claims
Most tribunal claims must be brought within three months of the act complained of, or dismissal. Labour proposes extending the period of time within which claims must be brought to six months. This would likely increase the number of claims against employers (given the bigger window of opportunity for bringing a claim). However, given the current employment tribunal backlog and shortage of employment tribunal judges, this may mean that claims would take longer to reach a hearing. Labour has also proposed removing the cap on compensation for ordinary unfair dismissal claims (which is currently capped at one year’s gross salary or £115,115 for employees in Great Britain, whichever is the lower).
FSB’s manifesto for small businesses ahead of the UK general election
FSB has published its General election manifesto, highlighting what SMEs would like to see from the party that wins power at the general election.
FSB has found that 90% of small business owners are concerned that business taxes could rise under the next government, while 92% are worried that the new government could increase the costs and risks associated with employing people.
FSB’s manifesto sets out more than 150 proposals including:
- creating a Small Business Act, which would improve the operating environment for small businesses in the UK, including measures to combat late payments and improve standards of service from bodies such as HMRC
- increasing and automatically uprating the Employment Allowance annually in line with any increases to the National Living Wage
- tasking the Low Pay Commission with considering the full range of employment costs for employers when setting the national living wage
- implementing a statutory sick pay rebate for small employers
- avoiding any new or increased costs on small businesses’ payrolls or additional policies like increased employer auto-enrolment contributions
- capping overall visa and related costs per employee at £1,000 for small and micro-businesses, and piloting a remote visa for remote areas such as the Scottish Highlands
- setting a cross-government target to increase the number of SME apprenticeships in each year of the next parliament
- reintroducing a £3,000 incentive for SMEs hiring an apprentice under 25 years old
- introducing a Kickstart-style scheme to support people with long-term health conditions who have found it difficult to access work
- reintroducing school-age work experience at Key Stage 4 and including employability skills in the school curriculum
- developing new apprenticeships in emerging areas, such as basic use of AI