Insights

to help you make informed decisions about your wealth
Menu
Archived article
red rose

Labour bid

19 May 2017

In a move to win the centre ground, Theresa May announced plans to boost workers’ rights – small business owners should take note.

For small businesses, even the best-intended and most carefully drafted of workplace regulations can have far-reaching consequences, potentially limiting flexibility and adding new risks and costs to investment plans. Last week, the prime minister listed several measures that her new government would implement after the election.

The announcement followed a leak of major points in the Labour Party manifesto. A recent ComRes poll found that several of those key points resonated strongly with voters, among them banning zero-hours contracts and increasing Income Tax for those earning more than £80,000.1

Theresa May’s pledges came at the weekend. The prime minister described them as “the greatest extension of rights and protections for employees by any Conservative government in history”. They include a number of changes to employer responsibilities and employee rights, although the measures will certainly not all have the same impact:

  • The statutory right to request leave for training purposes
  • The right to paid child bereavement leave
  • The right to a year of unpaid leave to care for a family member
  • The possibility of criminal charges for bosses who break pensions rules
  • The continuation of all workers’ rights currently guaranteed under EU law
  • The improvement of rights for ‘gig economy’ workers
  • The obligation of companies to publish data on racial pay gaps and gender pay gaps
  • An increase in the National Living Wage (currently £7.50) in line with median earnings

A few of those are much less radical than they were meant to appear, and can be quickly discounted as relatively mild in terms of their impact on employers.

The continuation of all workers’ rights currently guaranteed under EU law offers predictability to employers and employees alike, and prevents the kind of post-Brexit deregulatory shift favoured by the Tory right – but simply amounts to no change.

The increase in the National Living Wage is likewise underwhelming in terms of actually offering change, as it amounts to £8.75 by 2020, according to the Institute for Fiscal Studies.2 George Osborne had promised a rise to £9 by 2020 (and that was before the recent spike in inflation), while the Labour Party manifesto has pledged a new level of £10.

On improving rights for workers in the ‘gig economy’, meanwhile, the prime minister has promised a review (headed by Tony Blair’s former policy chief) but, as yet, nothing more.

New obligations

Nevertheless, a number of the measures bear much closer scrutiny by small business owners, as they could yet have significant cost implications. It is the raft of new rights to take extended leave from work that is likely to have the greatest impact.

May wishes to provide employees with a statutory right to request leave for training purposes. The devil will inevitably be in the detail – such as what training would qualify – but the potential for employees to chart their training plans, rather than for employers to grant them training opportunities, inevitably makes planning more difficult for business owners.

Perhaps still more important was the pledge to give employees the right to take a year of unpaid leave to care for a family member. Given the high price of care, many employees may see sense in forgoing their salary in order to care for a parent personally, while others will simply want to do so for personal reasons. Earlier this week Craig Beaumont, head of external affairs at the Federation of Small Businesses, said that a small business, when faced with this kind of temporary employee absence, might well struggle to find a one-year replacement, especially if that business only employed two or three staff as it was.

A 12-month period of unpaid leave would likewise be offered to parents who had lost their child. However, many employees could not afford to take 12 months’ unpaid leave. Besides, as Beaumont argued earlier this week, many small businesses already operate far more like a family than a typical corporation – compassionate leave is already a natural part of the culture.

The prime minister mentioned two measures that target employers directly. One is that an employer could face criminal charges for breaking pension rules, should The Pensions Regulator deem a court action justifiable. Furthermore, all companies would be obliged to publish data on racial pay gaps and gender pay gaps. Some small businesses may choose to act sooner rather than later on this, in order to reassure their staff.

Not all they seem

Yet many groups that favour increased employee rights have criticised the announcement, because they believe most workers would never be able to test them at tribunal anyway. In 2013, the government introduced a cost for taking cases to a work tribunal. This tends to mean paying £250 to make the initial claim and then a further £950 hearing fee, should the claim make it to court.3 Since those costs were introduced, claim applications have dropped 80%.4

Finally, a number of measures have been quietly dropped or neutered. The call for workers on boards survives, but in a watered-down form. No measures were announced on tackling excessive executive pay, despite what Theresa May had pledged after her accession to the leadership. Moreover, unlike Labour, she has not promised a ban on zero-hours contracts.

Nevertheless, if the Conservative Party wins the election, the potential for extended employee absences will rise, assuming that the pledges do indeed translate into policy. Small business owners may need to factor such risks into their financial planning.

 

http://www.comresglobal.com/disaster-politics/, accessed 18 May 2017
2 https://www.ifs.org.uk/publications/9205, accessed 16 May 2017
3 http://www.stammeringlaw.org.uk/employment/complaints_fees.htm, accessed 16 May 2017
4 http://www.tayloremmet.co.uk/blogsite/employment-law-and-the-general-election-the-proposals/, accessed 16 May 2017

Feedback

We value your opinion

We are always looking for ways to improve our service, so if there is something you think we could do better, or that you think we are doing really well, we would love to hear from you.

The only thing we ask is that you do not include any personal information, like account numbers, in your email. If your matter is urgent, needing our personal attention, please contact your local office.

You may be contacted to follow up on your comments.

Complaints

If you wish to complain about any aspect of our service, we will do what we can not only to meet, but exceed your expectations of a swift and thorough resolution. More details of our complaints procedure can be found here.