How the Government’s ‘Plan to Make Work Pay’ will impact the recruitment sector and gig economy

As the dust settled on the general election and the new Labour Government got to work on making the changes promised in its manifesto (including those announced in the King’s Speech), we met with a group of recruitment sector and wider gig economy leaders to start the discussion on what the planned changes will mean in practice.

Here, recruitment law and workforce solutions specialists Simon Whitehead and Hannah Morrison share the sector’s initial response and explore the potential challenges that might lay ahead.

A ban on exploitative zero-hour contracts

Labour’s promise to ban exploitative zero-hour contracts was met with plenty of discussion. Although the previous Conservative government had already drafted legislation to introduce the right to predictable working hours, this looks like it will be scrapped — the King’s Speech announced that the right to predictable hours will be introduced within the new Employment Rights Bill. It’s proposed that workers who have been on an assignment for more than 12 weeks will be able to request a contract that reflects the average hours they’ve worked over the previous 12 weeks — a reduction from the proposed 26 weeks included in the Conservative legislation. 

There was no detail in the King’s Speech as to the basis on which a business could refuse such a request. The Conservatives’ draft legislation anticipated that a business could refuse a request on similar grounds to a flexible working request, including the burden of additional costs and insufficient available work. So far, it hasn’t been confirmed that this would apply under Labour’s proposal. 

The practicalities of how the right to predictable working hours could be implemented in a sector that exists because of the need for flexible (and unpredictable) labour was heavily debated. We also discussed the proposal that businesses will have to give ‘reasonable notice’ to change shifts and ‘proportionate compensation’ for cancelling or curtailing shifts. It’s not yet known what ‘reasonable’ and ‘proportionate’ will mean in this context but given that end-clients sometimes change their temporary labour requirements by the day or even the hour, this will require careful management to avoid costly compensation payments. 

Protection from dismissal — day-one rights

The introduction of protection from dismissal from day one of employment was an area of concern, especially because at this stage, it’s unclear whether the use of the term “workers” in the King’s Speech was deliberate or if the right to claim unfair dismissal will still only be available to employees. 

The Government plans to review and consult on whether temporary worker status should be abolished further down the line, with a two-tiered model of employment and self-employment being proposed in its place. However, the extension of day-one unfair dismissal rights to workers could render this review and consultation largely redundant because there would no longer be any material difference between the rights of employees and workers. It’s thought that this change may drive the sector away from using temporary workers in favour of employees, especially if the ability to use probationary periods to manage early terminations is introduced in the Employment Rights Bill. As a result, the draft Employment Rights Bill is keenly awaited so that businesses know how they need to adapt to comply with the new legislation.

Potential impact on the permanent recruitment market

The general consensus was that protection from dismissal from day one isn’t expected to have a significant impact on the permanent recruitment market as it’s unlikely to lead to a surge of people looking to move jobs after the new law is introduced. 

Instead, it could result in employers adopting a more conservative and cautious approach to hiring and even have a negative impact on diversity and inclusion efforts — an area that the recruitment sector has struggled to address in recent years — where employers may be less willing to hire candidates from non-traditional academic backgrounds or who don’t have proven recruitment experience over fears of complex dismissal processes (should performance not meet expectations). It will be important to understand how the probationary period can be used under the new law before coming to any conclusions. 

Simplifying the trade union recognition process

We currently have insufficient detail on how changes to trade union law will impact the recruitment sector. However, it’s acknowledged that requests for trade union recognition are increasing among flexible workforces and simplifying this process will increase this trend. However, if trade union laws are amended to reflect the modern workforce, this process may become easier to manage.

Removal of age bands

The removal of age bands in the National Living Wage caused some concern, as this could push up wage costs in circumstances where end clients in some sectors are already sensitive to the wage increases we’ve seen over the last few years.

Compliance and enforcement

Overall, it’s clear that compliance throughout the labour supply chain will become even more important, from ensuring workers receive National Minimum Wage and holiday pay to addressing tax evasion schemes.

The Government’s proposed new Single Enforcement Body — the Fair Work Agency — will need to ensure that those businesses willing to ignore the higher compliance requirements are dealt with effectively to ensure fairness and equality across the supply chain. Enforcement will need to be properly funded to be effective.

What’s next?

It’s clear that the new Employment Rights Bill will need to be introduced carefully to avoid undermining the economic growth that the new Government needs to deliver. It will be important to continue to discuss the changes as more details are known so that businesses can plan and adapt their models.

Talk to us

Our recruitment and workforce solutions team supports over 600 clients ranging from volume recruiters supplying many thousands of workers to head-hunters and trade bodies. 

If you’re interested in being invited to our next event, please contact Simon Whitehead and Hannah Morrison.

If you’d like to discuss how these proposed changes may impact your business, talk to us by completing our contact form below.