Ben Willmott, Head of Public Policy, considers the Labour Party’s proposals to introduce ‘day one’ employment rights.
As we look ahead to a general election, one of the big issues coming into sharper focus for employers is the Labour Party’s plan to strengthen employment rights.
This is set out in its green paper A new deal for working people and includes a range of proposals that could significantly affect employment practice.
Current employment regulation
Before considering the plan, it is useful to consider the UK’s employment rights framework and how it compares internationally. Analysis by the OECD finds that employment regulation in the UK is towards the bottom of the league in terms of the protections it provides to individual workers.
This relatively light touch labour market framework is associated with a high level of permanent employment by OECD standards. There is also little evidence that employment in the UK is becoming structurally more insecure, given that the proportion of non-permanent employment has remained at about 20% for the last two decades.
However, as Labour’s green paper highlights, many workers continue to be treated unfairly and face discrimination as well as difficulties in accessing justice and receiving compensation if their employment rights are breached.
Day one employment rights
To help address this, the Labour Party wants to remove the two-year unfair dismissal qualification period and the associated cap on compensation awards as part of its plan to establish day-one employment rights. This qualification period has previously been set at six months and 12 months at different times in the last 50 years. However, removing it altogether would be a first.
Go Dutch?
A key concern for employers is how this change would affect probation periods, which allow employers to assess a new recruit’s performance and suitability for the post during a set period as part of their contract. One option would be to follow the Netherlands, where there is no qualification period for unfair dismissal after the probation period has expired.
Adapting to such a change is likely to be easier for large employers with HR functions than for SMEs, particularly micro and small firms with limited or no access to specialist HR support.
It’s also important to ensure that any bold legislative changes don’t have unintended consequences, such as acting as a disincentive for employers to recruit new staff. Therefore, it’s crucial that any future Labour government consults meaningfully with employers and other stakeholders on its proposals, considers the likely business impact and seeks to find solutions and compromise where necessary.
New single worker status
This applies to Labour’s plan to create a new status of ‘worker’ for all but the genuinely self-employed. The CIPD believes the simplest way to clarify and reform employment status would be to abolish worker status as it currently stands and have a two-tier framework that aligns with our tax system.
Right to disconnect
A new Labour government would also need to consult on its plan to introduce a right for employees to ‘switch off’ and not be contacted by their employer outside normal working hours in order to tackle ‘always on’ working cultures. This change would need to be introduced with necessary flexibility to enable employers to contact employees where unforeseen circumstances leave no alternative. The introduction of a right to switch off would see the UK follow the example of a number of EU countries such as France, Italy and Spain.
However, there is a question mark over the effectiveness of this type of policy as it fails to address the underlying issues that can often drive an organisation’s ‘always on’ culture. These include heavy workloads and unrealistic targets as well as poor leadership and people management practices. There’s no doubt that action is needed to tackle persistent ‘always on’ cultures in some UK workplaces. A more effective approach though would be to improve enforcement of employers’ existing obligations under health and safety law to risk assess and manage the causes of stress at work.
Better labour market enforcement
Improving labour market enforcement more broadly through the creation of an adequately resourced Single Enforcement Body is another key part Labour’s plans to strengthen employment rights. Evidence suggests that labour market enforcement in the UK is inadequate, both through the employment tribunal system and the various enforcement bodies.
CIPD research suggests that a more effective enforcement system would need a much stronger focus on supporting employer compliance with more resources and an enhanced role for Acas. Simply boosting the number of inspectors won’t be sufficient.
Bolstering the labour market enforcement system should be the top priority for a future Labour government if its objective is to strengthen employment rights and prevent exploitation of insecure workers.
Zero hours contracts/fire and rehire
It should certainly be set ahead of its plans to ban zero-hours contracts, which would negatively affect the majority of zero-hours workers who appear to benefit from their flexibility. A better approach would be to develop a statutory code of practice to help ensure zero-hours arrangements are used responsibly, underpinned by improved enforcement.
Similarly, on ‘fire and rehire’, it would make sense to see if the newly launched code of practice on dismissal and re-engagement has a positive effect before legislating to outlaw this practice. Used as an absolute last resort, ‘fire and rehire’ can prevent the need for redundancies and, in certain circumstances, even help businesses stay afloat.
Ultimately, any plans to strengthen employment protections need to be considered carefully to ensure they don’t undermine the benefits of the UK’s flexible labour market for both workers and employers. Finding the right balance is a key challenge for Labour.
