Proposal 1 – making employment protections a “day one” right

The Labour Party hopes to boost productivity by removing barriers to moving jobs. The New Deal commits to giving workers basic individual rights from day one, including protection against unfair dismissal, the right to take parental leave and an entitlement to statutory sick pay.

Potential impact

Making unfair dismissal a day one right is the aspect that will concern employers most and which could potentially deter job creation. Dismissing an employee with more than two years’ service fairly for performance concerns can be a lengthy and time-consuming process. If the same process has to be followed for a new hire who does not meet required standards, employers may be reluctant to create new roles.

The Labour Party is clearly aware of that tension, saying that it will still be possible to operate probationary periods with clear and transparent rules and processes. That implies that a fair performance management process could be shorter for someone during a probationary period, even if unfair dismissal becomes a day one right.

Another way to strike the balance between an open labour market and sufficient protection for employees would be to reduce the current two year qualifying period to six or twelve months. However, at this stage Labour seems to be focussed on day one rights. The qualifying period can be changed by order – see s209(1)(c) and 209(5) of Employment Rights Act – so could be a quick win for a new government, which is always a focus in the first 100 days.

In election mode, the priority for Labour is to show its commitment to labour reform. This requires a fairly simple message which isn’t weakened with too many caveats, because otherwise it would be too easy for critics to dismiss as meaningless. The message Labour is giving is important not only in winning votes, but also in retaining the support of trade unions who have been pushing for substantial labour reform for as long as Labour has been in opposition.

In government, Labour will need to look at the detail more closely, and this will require much closer attention to the tension described above. However, given the importance of labour reform to Labour’s political identity, it is likely that job creation will be highlighted in other policy areas, for example through investment and skills training, so that the simple and important narrative around employee protections can be retained.

Proposal 2 – simplifying union recognition processes and giving trade unions a right to access workplaces

The New Deal paper says it will simplify the process of trade union recognition and the law on statutory recognition thresholds. It will give trade unions a right to access workplaces to recruit and organise members, provided they give an employer appropriate notice.

Potential impact

At the moment, a trade union can apply for statutory recognition if the relevant employer has at least 21 workers and the union can show that it has the support of a majority of workers in the proposed bargaining unit. The Central Arbitration Committee (CAC) will often conduct a ballot to check a union’s level of support before ordering an employer to recognise it. If a ballot is held, the CAC will order recognition if a majority of those voting vote in favour, and at least 40% of workers in the relevant bargaining unit vote in favour.

The New Deal says that unions will no longer have to show the relevant degree of support before making an application, and that a Labour government would remove the need for 40% of the bargaining unit to vote in favour. A majority of those voting would suffice. Particularly when coupled with the new union right to access a workplace and a suggested obligation on employers to notify and regularly remind workers that they have a right to join a union, this should make it easier for unions to secure statutory recognition. 

The role of trade unions within the Labour Party largely represents the Left of the party. As the party has sought to win support from the political centre-ground, it has spoken much less about this historic connection. Labour’s association with the unions is an important one, for funding and for keeping the Left onside, but it is also often used as an attack narrative by other parties, particularly during and after major industrial action.

This means that policies which provide greater freedoms and powers to trade unions are politically important to Labour, but also a little more risky. In the midst of what looks likely to be a major Labour majority, this is unlikely to cause any damage, but in due course and as those greater freedoms and powers are used, Labour may find it is regularly required to defend these moves.

Proposal 3 – introducing a single status of worker

The Labour Party takes the view that having three categories of employment status – employees, workers and the self-employed – drives “bogus” self-employment. It has said that it will consult “in detail” on introducing a single status of worker that will only differentiate between workers and the genuinely self-employed.

Potential impact

This would be a big shift and has the potential to undermine the flexibility of the UK labour market. Currently, although workers are entitled to the minimum wage, holiday pay and working time limits and are covered by the Equality Act, they do not benefit from protection against unfair dismissal, do not receive redundancy pay and generally cannot take maternity or other family-related leave.

In practice, it’s difficult to see how extending protection against unfair dismissal to all workers would operate, especially for workers who do not have guaranteed hours of work. Although it is not entirely clear, the Labour Party no longer appears to be suggesting that all zero-hour contracts would be banned.

The tax system would also presumably need to be reformed to ensure that all workers were taxed as employees. Proposals to align national insurance rates for employed and self-employed workers proved unpopular and controversial when suggested by Philip Hammond in 2017.

Key here is Labour’s commitment to consult “in detail”. This provides employers with a good opportunity to share differing perspectives. However, in doing so, it is important to recognise the political drivers of this and therefore to provide consultation responses which acknowledge a desire to bring about change. Responses should focus on application in practice, and where there could be detriment to individuals, employers and wider areas of public interest. The other point about committing to consultation is that it is not a commitment to implement. From experience, this also signposts towards a much slower process.

Proposal 4 – extending redundancy consultation obligations

The New Deal says that it will strengthen redundancy rights and protections, including by making redundancy consultation conditional only on the number of individuals dismissed, not where they work.

Potential impact

This proposal has not received much attention but if it goes ahead, employers are likely to need to conduct collective redundancy consultation with trade unions or employee representatives much more often. At the moment, collective consultation obligations are triggered if an employer is proposing 20 or more redundancies at one establishment within a period of 90 days. “Establishment” typically means a physical workplace. In future, it appears that the duty to consult collectively for either 30 or 45 days will apply if there are going to be 20 or more redundancies across a business as a whole within 90 days.

Employers with multiple workplaces will need to have systems in place to monitor relevant dismissals on a rolling basis to identify when they trigger consultation obligations. Dismissal processes will take longer and consultation about discrete redundancy exercises in different locations over a three month period will be difficult to run in practice. Given that protective awards can be up to 90 days’ actual pay per employee, the proposal represents a clear financial risk for employers, without much obvious benefit for employees.

Proposal 5 – making flexible working the default

Flexible working will become “the default from day one for all workers, except where it is not reasonably feasible”. A Labour government would “build on” the current baseline – making a flexible working request became a day one right in April 2024 – “to ensure flexibility is a genuine default”.

Potential impact

Again, it’s not entirely clear what the New Deal is proposing, but the suggestion seems to be that the existing right to request flexible working will be strengthened. Employers can refuse a request for flexible working for one (or more) of various statutory reasons. These are so broad that they cover most reasons why an employer might want to refuse a request. As long as the employer has followed a reasonable procedure when considering a request, and has not based its decision on “incorrect facts”, a flexible working tribunal claim will fail.

It seems that employers will still be able to refuse a flexible working request if it is not reasonably feasible to agree to it. So the right to request flexible working will not become a right to demand it.

However, it’s possible that a future Labour government would extend tribunals’ powers by allowing them to consider whether an employer had good reasons for refusing a request, or whether it would have been possible to accommodate it with proper thought and adjustments to the employee’s role or working practices. That would allow tribunals to second-guess an employer’s refusal in a way that they can’t at the moment – assuming that the employee does not or cannot bring an indirect discrimination claim, where the tribunal’s powers to challenge an employer’s decision are much wider.

Labour is not committing to anything on flexible working that is materially different from where things currently stand. If there are shifts in the powers of tribunals so that they can second-guess an employer’s refusal, there will be policy questions to be considered around who can fairly determine the various tests, including ‘cost to the business’ and ‘quality of work’. Some will argue that these should be questions for the employer, only, to answer.