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New UK Coalition Government – Prospects for Employment Law

United Kingdom
Written by
Lewis Silkin, widely recognised as the UK’s leading specialist employment law practice.
This article highlights the potential employment reforms if the UK Coalition Government

The outcome of the UK’s general election on May 6 was a Conservative/Liberal Democrat coalition government headed by the Conservative Party leader David Cameron (prime minister) and Liberal Democrat leader Nick Clegg (deputy prime minister).

Coalitions are unusual in the UK – the last one being during the Second World War – so there is a real sense of the country entering uncharted political waters. It is too soon to be certain what the new administration’s priorities will be in terms of potential employment reforms. However, a few clues can be gleaned from the Coalition’s programme for government, outlined below.

Business generally. The Government has promised a deregulatory, ‘one-in, one-out’ regime for new regulations. It plans to review employment and workplace laws “to ensure they maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive”.

It is difficult to read between the lines and predict what this might mean in practice, but one suggestion mooted by commentators is that the qualifying period for unfair dismissal rights might be increased from one to two years. On the other hand, the Government supports the UK’s national minimum wage “because of the protection it gives low-income workers and the incentives to work it provides”.

Equality. The Government intends to “promote equal pay and take a range of measures to end discrimination in the workplace” although details are as yet unclear. Both the Conservatives and the Liberal Democrats support equal pay audits, but in different ways, so a compromise is likely to be reached on this.

There is also a commitment to undertake a fair pay review in the public sector to implement the principle that the highest-paid person in an organisation should not be paid more than 20 times the lowest paid person. In addition, the Coalition will “look to promote gender equality on the boards of listed companies”.

So far, the Government has made no specific mention of the Equality Act 2010, a major piece of legislation enacted by the previous Labour government shortly before the election. The Act is an attempt to recast diversity law in the UK as a coherent whole by bringing the various strands of discrimination law together, with most of its provisions due to come into force this October. However, some of the Act’s more contentious measures are likely to be either overhauled or be shelved indefinitely.

Families and children. The Government says it will encourage “shared parenting from the earliest stages of pregnancy – including the promotion of a system of flexible parental leave”. What this will mean in practice remains to be seen, but the reference to the ‘earliest stages of pregnancy’ might reflect the Liberal Democrats’ pre-election commitment to allow fathers time off to attend ante-natal appointments.

Employer organisations have already warned of ‘serious concerns’ over the Government’s stated intention to consult on extending the right to request flexible working to all employees.

Retirement age and pensions. The Government has committed itself to phase out the UK’s ‘default retirement age’ – the provision that allows employees to be forcibly retired when they reach the age of 65 – although the timescale is unclear. A review of the timetable for increasing the state pension age (currently 65 for men and 60 for women) has also been announced.

The Government intends to simplify pension rules and regulations to “help reinvigorate occupational pensions, encouraging companies to offer high-quality pensions to all employees”. It also plans to explore the potential to give people greater flexibility in accessing part of their personal pension fund early.

Europe. The Government has a significantly less pro-European stance than the previous Labour administration. It wants “no further transfer of sovereignty or powers over the course of the next parliament”, and has committed to work ‘in particular’ to limit the application of the EU Working Time Directive in the UK.

Another general aim is to end the so-called ‘gold plating’ of EU rules, so that British businesses “are not disadvantaged relative to their European competitors”. The Conservatives have previously identified the UK regulations implementing the Part-time Work Directive, the Fixed-term Work Directive and the Agency Workers Directive – amongst others – as likely candidates for review. The Agency Workers Regulations 2010 are therefore likely to be amended some time before October 2011, when they are due to come into force.

Financial services. In the context of banking reform, the Coalition will push forward with “detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector”. It is not yet clear what the fate of the UK’s Financial Services Authority will be, although control over ‘macro-prudential regulation’ and ‘oversight of micro-prudential regulation’ are to be given to the Bank of England.

Immigration. The Government plans to introduce “an annual limit on the number of non-EU economic migrants admitted into the UK to live and work” and says that the coalition partners will consider jointly the mechanism for implementing such a limit. No further details of the plan have yet been published, but it could potentially create major difficulties for UK-based companies needing to recruit specialist staff from abroad. The annual cap is also likely to apply to intra-company transfers, e.g. a US multinational seconding an executive to work in its UK business.