There is speculation about whether a change in policy focus is imminent, and how employment law and HR might be affected.

September 2022 has been unusually eventful, not least due to a change in Prime Minister and Cabinet. Speculation is rife about whether a change in policy focus is imminent, and how employment law and HR might be affected.

It is still very early days for the Truss administration. However, the ‘mini-budget’ delivered by Chancellor Kwasi Kwarteng on 23 September (which was much bolder than that name suggests) has given some indication of the Government’s plans.

Retained EU law

On the campaign trail, Liz Truss pledged to prioritise the review of ‘retained’ EU law and to decide what should be kept and what scrapped. She promised a ‘bonfire of red-tape’ and a significant scale-back of any EU regulations deemed not to support UK growth.

The day before the ‘mini-budget’ (22 September) the Government published the Retained EU Law (Revocation and Reform) Bill in the House of Commons. Dramatically, this states that all retained EU legislation – and EU-derived subordinate legislation – will automatically cease to apply on 31 December 2023 (a mechanism known as ‘sunsetting’) unless specific steps are taken to retain it. Effectively, the Bill sets a deadline for the review, and the retention or repeal of EU law currently in force in the UK.

The Bill will also provide domestic courts with greater discretion to depart from previous judgements of the EU courts and will specify that EU law will no longer take supremacy over UK law.

Any EU regulations that are kept on the UK statute books after 31 December 2023 will become ‘assimilated law’ and will have the same status as other domestic legislation.

In terms of employment law, potential targets for reform or repeal might include:

  • The Working Time Regulations (and specifically the 48hr limit on working time which Liz Truss and Jacob Rees-Mogg are both said to oppose)
  • Holiday pay (where there is potential to simplify the current complex regime built on EU case-law)
  • The Agency Workers Regulations (which are perceived as cumbersome and restrictive)
  • TUPE (specifically restrictions on changing/harmonising contracts following a transfer)
  • Various aspects of health and safety law which are EU-derived and sometimes perceived as onerous.

Reports suggest that the Truss administration is not planning to make any sweeping changes to equality law at this stage. However, this remains a real concern for unions and other employee bodies, as the UK’s anti-discrimination regime is largely EU-derived and perceived to be at risk.

Key employment law changes

  • IR35: In an unexpected move, the Government has announced that the reforms made to the IR35 ‘off payroll’ working rules in 2017 (for the public sector) and in 2021 (for the private sector) will be repealed from 6 April 2023. This means that where a worker provides services through an intermediary (such as a ‘personal service’ company), they will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs. The reforms had shifted this burden to the business engaging the worker.
  • National Insurance contributions: The recent 1.25% rise in National Insurance contributions will be reversed with effect from 6 November 2022. The Chancellor also announced the proposed creation of ‘investment zones’, which would see employers in designated areas pay much lower, or even zero, NICs for many employees. However little further detail about these plans is available.
  • Other tax changes: The 1% cut in the basic rate of income tax will be brought forward to April 2023 (12 months earlier than planned) and, in what was perhaps the mini-budget’s ‘headline’ announcement, the additional rate of income tax for employees earning over £150,000 (currently 45%) will be abolished completely from the same date.

Industrial action

As part of the mini-budget, the Chancellor also outlined further legislation intended to make lawful industrial action more difficult. Proposed actions include:

  • Setting ‘minimum service levels’ during industrial action to make sure critical infrastructure keeps running during a strike
  • Raising ballot thresholds so that 50% of union members would have to vote in favour of a strike. This would make it much more difficult for a union to obtain a strike mandate (but notably would not have prevented recent RMT rail strikes taking place).
  • Requiring unions to take all pay offers to a member vote, ensuring that strike action only takes place when ‘negotiations have genuinely broken down’
  • Increasing the minimum notice of strike action a union must give employers from two weeks to four weeks (to give employers more time to prepare).

These new measures follow closely on the back of controversial recent changes, namely the lifting of the ban on using agency labour to cover for striking workers and the four-fold increase in maximum fines that can be levied on unions if industrial action is found to be unlawful.

Comment

To many, the deadline of 31 December 2023 to review all retained EU law feels unnecessarily rushed, especially given other pressing challenges facing the administration, such as the cost-of-living crisis and rising energy prices. However, importantly, the Bill includes a mechanism to extend the ‘expiry date’ of specified pieces of legislation until 2026, if government departments require additional time.

The Government’s turn-around on IR35 is likely to be welcomed by most employers, as recent changes were complicated and unpopular. However, many employers worked hard to prepare and will be frustrated by this abrupt policy change.

As ever, the proposed changes to the law on industrial action and the ‘right to strike’ have proved particularly divisive. It is currently unclear whether the proposals around ‘minimum service levels’ will be confined to transport networks or will apply more broadly. Further, concern has already been expressed that the requirement to put pay offers to employees will simply double the administrative burden, for employers as well as unions, rather than meaningfully reducing the likelihood of strike action. In any event, the scene appears set for conflict as the UK braces itself for an economically challenging winter.