As the 2024 General Election comes to a close and the Labour Party secures a win, employers and business owners are now looking collectively ahead at the weeks to come.

One of the party’s most substantial manifesto pledges was employment reform, with a particular emphasis on the introduction of strengthened statutory rights for employees – a move which the new Government aims to make during its first 100 days.

What does this mean for employers?

The manner of dismissal

Labour has promised to significantly reduce the scope of circumstances in which employers can ‘fire and rehire’ – the practise of firing employees and then rehiring them on different (and often worse) terms.

Tackling this issue, it says, will introduce increased job security and protection for employees, while also making the law clearer on the practice for employers.

The only scenario in which it will be permitted is where the employer has no other option to ensure the viability of the workforce.

For this reason, it will be important for employers to ensure that, where they may be considering a restructure, they build in time to properly communicate with their employees and explain why action is necessary.

Employers should plan carefully if there are alternatives to fire and rehire, given the risks that may now be associated with this practice, and the proposed new code of practice (which we anticipate that the Labour Party will replace in due course).  We’re likely to see employers adopting a more cautious approach when the measure comes into effect, particularly in cases where there is a genuine need to restructure the workforce, and when this must be communicated effectively.

This is also not the only major change being proposed. Plenty of employers will also be impacted by the introduction of a day-one right to claim ‘ordinary’ unfair dismissal by employees – currently only permitted after two years’ service..

Unfair dismissal claims

Unfair dismissal is already a natural point of contention for employers since a claim implies wrongdoing on their part. With unfair dismissal a day-one right, we’re likely to see a sharp rise in claims, particularly as employees and employers are generally more likely to part ways unexpectedly within the first few months of working together and establishing the right fit.

Employers would likely attempt to counteract the effect of this by increasing both the use and duration of probationary periods for new starters or extending the current probationary period of existing staff – an act which would require careful contractual negotiations from both parties.

Employers are also likely to extend probationary periods beyond current industry standards, which can range between two and four months, up to six to twelve months for senior-level positions.

If the right to claim unfair dismissal is available only once the employee has completed the probationary period, then employers would likely be stricter with monitoring of probationary periods.

They’ll need to ensure that they properly communicate to their employees the reasons for not passing these and addressing performance issues promptly.

The rationale behind this would be to enable employers to properly assess the suitability of an employee for their organisation which would likely decrease the risk of employment issues arising further down the line.

A radical change in working relationships

The requirement to address disciplinary issues in a fair manner is now even more important because the risk of not doing so could be significant from a very early stage.

With unfair dismissal a day one right, employers will certainly need to ensure that they have stringent recruitment processes in place, with adequate training given to hiring managers and decision-makers regarding how they can best assess the suitability of a candidate during this process.

Recruitment processes may also become longer and stricter, in order that they can test different strengths and fit during the process.

Further into the relationship, employers will need robust policies in place to deal with disciplinary or performance issues in a fair and transparent manner and managers should receive training on how to carry out such processes.

However, despite challenges, overhauls which result from this policy may lead to positive cultural changes in the workforce which will probably lead to an increase in productivity.

Employers may also look at whether there are alternative models of employment – for example – taking on self-employed contractors rather than employed staff. However, Labour has also commented that they will consult on a move towards a ‘single status of worker’ in contrast to the current differentiation between worker/employee. This means that workers who currently do not have the right to bring an unfair dismissal claim may now acquire the right to do so.

Ultimately, the changes will undoubtedly lead to an increase in the number of tribunal claims brought against employers as employees seek to exercise their new protections. The removal of the two-year qualifying period for unfair dismissal claims would also result in even higher use of settlement agreements to settle matters where both parties are already in dispute.

What’s important is that employers do the same to ensure that, if they are seeking to terminate employment, this is done fairly in order to reduce the risk of legal claims.

For advice on upcoming changes to employment law, please contact our specialist Employment team today.

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