On 17 July, the King addressed the 40 new bills that the Labour government proposed, focusing on its first 100 days in office. They span a range of categories, from employment and mental health, to transport and education. But what exactly do small business owners need to take away from this news?
In this blog, we will highlight the five key bills relevant to small business owners that are already underway, or set to come into force as early as in the coming months. These are the Employment Rights Bill, Race and Disability Bill, Skills England Bill, Pension Schemes Bill, and National Wealth Fund Bill.
The Employment Rights Bill
This is a key bill that will affect business owners in the near future. Here are the key changes you can expect:
National Minimum Wage (NMW) increase
Labour’s Plan to Make Work Pay aims to improve workers’ terms and conditions and make jobs more secure by raising the NMW to a ‘genuine’ living wage. The increase intends to reflect a real living wage that working people can live on.
Looking at HMRC’s projections, the first NMW increase is set to rise by at least 1.5%, from £11.44 to £11.61. The best-case scenario is an increase of 6.5% to £12.18. To achieve this, Labour promises to:
- Change the Low Pay Commission’s remit, so that the new minimum wage takes into account the cost of living
- Remove discriminatory minimum wage age bands, so that all adults benefit
- Work with the Single Enforcement Body and HMRC to ensure the genuine living wage is properly enforced
In addition, with the help of the Single Enforcement Body and HMRC, Labour plans to introduce regulations on travel time for relevant sectors with multiple working sites, so that workers’ employment contracts reflect this new law.
Flexible working will be the default
Where reasonably feasible, flexible working will be the default from day one for all working Brits. This will allow them to benefit from flexi-time contracts and hours, making it easier for people to align their working arrangements with their personal responsibilities.
Zero-hour contracts ban
To help improve job security and predictability, exploitative zero-hour contracts will be banned. Workers will now have the right to an employment contract that reflects the number of hours they regularly work, based on a 12-week reference period.
End of firing and rehiring
Generally, when employers and staff fail to reach an agreement on a contract change, the employer might propose firing and rehiring the employee under reduced terms and conditions. However, these situations are often poorly handled without proper communication or mutual understanding, causing employees to feel bullied into accepting the lower terms for fear of losing their jobs entirely. The Employment Rights Bill aims to end firing and rehiring practices to avoid such threats in the workplace and protect jobs.
Of course, businesses sometimes need to restructure and make certain changes to preserve the company’s health. If you consider firing and rehiring, this must be a last resort, where there genuinely is no other alternative.
Also, if you opt to fire and rehire an employee, you must do so on fair and transparent grounds. Rather than threatening workers into accepting new contracts or facing dismissal, you must communicate clearly and reach a common understanding.
Other proposed changes
The Employment Rights Bill contains the following additional changes that could impact your small business:
- Redundancy: Redundancy consultation will be based on the number of people impacted across the whole business rather than in one workplace.
- Self-employed: Self-employed workers, such as contractors and freelancers, will have the right to a written contract and extended health and safety rights.
- Parental rights: You will not be able to dismiss an employee returning from maternity leave within the first six months.
- Right to ‘switch off’: Labour promotes healthier working practices by introducing employees’ right to disconnect from work after business hours.
- Sick pay: The four-day waiting period for Statutory Sick Pay (SSP) will be removed so that all workers have an immediate right to sick pay. This is particularly noteworthy for small business owners, as it will increase your costs and could increase short-term absences.
- Unpaid internship ban: Employers will not be allowed to host unpaid internships unless they are part of an education or training course.
- Bereavement leave: Most businesses offer this, but all workers will now have a statutory right to bereavement leave under the Employment Rights Bill.
- Unfair dismissal: Employees will now have the right to go to an employment tribunal without the need to cite a protected characteristic from day one of their employment, instead of after 2 years’ continuous employment.
This bill will most affect small businesses that employ (or plan to employ) staff. In preparation for all the above changes, it’s essential that your HR managers, team leaders, and financial teams are all familiar and up to date with the pending changes to employment law and workers’ rights.
Your internal company policies should also be updated accordingly, as and when this bill passes into law.
The Race and Disability Bill
Despite the Equality Act 2010 prohibiting discrimination against employees based on their race or disability, inequality among these groups in the workplace still exists. To tackle this issue, the King announced in his latest speech that a draft legislation on race equality would be published. It will introduce a statutory right to equal pay for all employees, including the disabled and those from ethnic minority backgrounds.
One of the key changes that will come with this is the mandatory reporting of your company’s ethnicity and disability pay, a measure which will help expose disparity. Even though this will only apply to larger companies with more than 250 employees, we recommend that small business owners also comply and pay their staff fairly. Not only is this ethical, but it will help you prepare for the new regulations that could apply to you when your company expands.
The Skills England Bill
Together with the Education Secretary, Labour has introduced this bill to upskill the nation and plug the staggering skills gap in our workforce. Skills gaps are a significant growth barrier for many businesses in the UK. In fact, an analysis by the British Chamber of Commerce revealed that over 60% of organisations are facing talent shortages in 2024.
To turn this around, this bill will unite businesses with trade unions, mayors, universities, colleges, and training providers, to create a new training body, Skills England, and give young people equal and ample opportunities to jumpstart their careers.
This initiative is set to launch in phases over the next 9 to 12 months, starting with the appointment of the Chair and CEO of the board, who will assess the future skills the nation needs while building strong relationships with employers. Following this, the Institute for Apprenticeships and Technical Education’s (IfATE) function will transfer to Skills England, deliver levy-eligible and government-funded training for employers, and propose a support and development programme for those aged over 16.
In a recent press release, the Federation of Small Businesses (FSB) Policy Chair, Tina McKenzie, commented that “delivery is what counts,” and “[small businesses] want to see this new body overcome the real flaws in curriculum design which have been such a significant factor in apprenticeship decline.” If delivered correctly with small businesses are the forefront, these positive steps will help transform your access to talented staff that will drive your company forward.
The Pension Schemes Bill
Workplace pensions will undergo a major audit. The aim is to tackle waste in the pension system and boost savers’ pots by more than £11,000, potentially delivering even higher returns in the future.
This will primarily be achieved by helping people keep track of multiple smaller pots, over £50bn of which are at risk of being lost when you change jobs. This bill will bring these pots together to increase value for pension holders.
It will also introduce a ‘Value for Money’ test, which will ask pension providers to prove the value they deliver for customers. They will also need to offer retirement products and income solutions rather than just savings for those who have stopped working.
What this means for you
A key advantage of owning a limited company is the ability to make tax-efficient pension contributions. Directors can do this through personal and company contributions (if you have a private pension fund on top of your State Pension). Under this new bill, though, your average savings can increase even further.
In addition, your employees will enjoy greater savings for later life if your company offers a workplace pension scheme.
The National Wealth Fund Bill
The UK Infrastructure Bank (UKIB) and the British Business Bank have come together under this new bill to boost investment in infrastructure projects like ports, heavy industry, and manufacturing. To kick-start this, UKIB will allocate £7.3bn of additional funding to attract support from private investors, with the aim to generate around £3 of private funds for every £1 it invests.
SMEs in these growth sectors will have significantly greater access to crucial funding to help their companies expand, tackle climate change, and create thousands of jobs across the UK.
Summary
There’s a lot for small business owners to take in from Labour’s proposed bills. From the 40 that were announced a few weeks ago, the five key bills you should be prepared for are the Employment Rights Bill, Race and Disability Bill, Skills England Bill, Pension Schemes Bill, and the National Wealth Fund Bill.
Many of these are already in motion, paving the way for plenty of exciting changes for you as a business owner, for your company, and for your employees. We hope this article has helped you understand the potential law changes that could affect you soon. If you have any questions, please post them below, and we will get back to you.
