United Kingdom: employment law proposals - an update

In brief

The UK's political upheaval and fiscal policy changes are much-publicised. But where do we stand on recently proposed changes to employment law as Rishi Sunak starts his premiership? One of the Truss government's tax proposals - repealing IR35 changes - might have had a significant effect on contractor workforce planning. However, this was abandoned and the current IR35 rules will remain. Conversely, for the time being, the government is pursuing its plans to limit the disruption caused by strike action in the transport sector. Similarly, the removal of the cap on bankers' bonuses is still on the agenda. Also on the horizon is the potentially ground-changing proposal to scrap all retained EU law, which in theory could include TUPE.


In more detail 

In its mini-budget, the Truss government set out several reforms to employment law and employment taxation (United Kingdom: Mini-budget - Employment and employment tax aspects - Baker McKenzie InsightPlus). The new chancellor, Jeremy Hunt announced a U-turn on most of the key tax measures on 17 October 2022 (United Kingdom: New Chancellor reverses many of the Mini-Budget's tax measures - Baker McKenzie InsightPlus). This article summaries the current state of play in relation to the matters of most interest to employment law and HR practitioners.

IR35 changes - reversed: The IR35 regime remains in its current form. This means we retain the reforms that were introduced in 2017 (for the public sector) and 2021 (for medium and large organisations in the private sector), which are technically referred to as the off-payroll working rules. These rules, in essence, place responsibility on an end-user client to determine whether an individual would have been an employee for tax purposes but for the existence of an intermediary (typically a personal service company).

Strike action reform - going ahead: The legislative process has commenced for a Transport Strikes (Minimum Service Levels) Bill. As the name indicates, the Bill is aimed at ensuring that a minimum level of service is maintained during strike action. The Bill proposes a mechanism whereby the government designates in-scope transport providers and then a process by which the employer, in consultation with the union and other affected bodies, sets out the minimum service. If strike action is called, the employer would be able to issue a work notice to the union listing the people who need to work in order to provide the minimum service. The union would then need to take all reasonable steps to ensure it did not induce or encourage any of the named members of staff from participating in the strike. Failure to do so would leave the union open to a claim for damages and, potentially, an application for injunctive relief.

The Truss government also proposed that trade unions will be required to put pay offers to a member vote before they can take strike action. We do not yet know whether the Sunak government will continue with this proposal.

Removing bankers' bonus cap - going ahead: The scrapping of this cap survived the widespread U-turns announced on 17 October. It remains to be seen whether financial institutions will make moves to reduce or remove fixed pay and allowances in preference for discretionary, variable bonuses.

Ending retained EU law - going ahead?: around the same time as the mini-budget, the Truss government published the Retained EU Law (Revocation and Reform) Bill. On 25 October 2022, notwithstanding the change of prime minister on the same day, the Bill progressed through its second reading in the House of Commons. In summary, it would end nearly all EU-derived secondary legislation by December 2023, unless a government minister actively chooses to retain it. In the employment law sphere, by way of example, this affects significant portions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), collective redundancy consultation and aspects of working time rules such as the calculation of holiday pay. It seems unlikely that the government would simply drop long-established rules such as TUPE and in such a relatively short space of time, but this is very much an area to watch. At the time of writing, news reports are emerging that the Sunak government might be reconsidering the Bill, or its timescales, due to the amount of civil service time that would be required to review all EU-derived law.

Contact Information
Stephen Ratcliffe
Partner at BakerMcKenzie
James Brown
Knowledge Lawyer at BakerMcKenzie

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