Employment Law under the New Coalition Government

United Kingdom

The Prime Minister and his deputy Nick Clegg unveiled their Coalition Agreement, “The Coalition: our programme for government”, on 20 May 2010. It expands the initial agreement reached in the Conservative/Liberal Democrat coalition negotiations on 11 May 2010. However, it lacks significant detail. The new Coalition Government states it will “review employment and workplace laws, for employers and employees, to ensure they maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive.” What this will mean in practice is currently unclear.

The Coalition Government has stated that it will end the “gold-plating” of EU rules, so that British businesses are not disadvantaged relative to their European competitors. This may mean regulations (such as the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”)), which go beyond what is required by their EU Directives, face amendment. It also suggests that the impact of the Agency Workers Regulations 2010 may be limited. In line with this approach, David Cameron has also pledged in the Queen’s Speech yesterday, that through the introduction of a European Union Bill no further powers will be transferred to the EU without a referendum.

Both the Conservatives and the Liberal Democrats featured various employment law issues in their manifestos. In the full article we discuss some of these issues and how they have been addressed, if at all, in the Coalition Agreement. Most notably absent from the Coalition Agreement is any discussion of the Equality Act and regulations affecting agency workers.

Work and families

The Coalition Agreement states that the Coalition Government plans to extend the right to request flexible working to all employees and that it will consult stakeholders on how best to introduce this. Further, the Coalition Government plans to encourage shared parenting from the earliest stages of pregnancy, including the promotion of a system of flexible parental leave. There is no discussion as to when or what course of action will be taken to achieve this. Prior to the election, the Liberal Democrats wanted to provide all fathers with time off for antenatal appointments. Although this policy is not expressly adopted in the Coalition Agreement, it may transpire that the proposals for shared parenting from the early stages of pregnancy would include this.

Default retirement age

The Coalition Agreement briefly covers pensions and welfare. It includes an agreement to phase out the default retirement age (“DRA”) and to hold a review to set the date at which the state pension age will start to rise to 66 (although this is not likely to be earlier than 2016 for men and 2020 for women). The decision to phase out the DRA, rather than abolish it immediately, will allow the Coalition Government more time to consult with stakeholders on the issue. It is not clear when such consultations, or the proposed phase out, will begin but any change is not likely to take effect until 2011 to allow employers to prepare. The Queen’s Speech announced the Pensions and Savings Bill, which will legislate for the phasing out of the DRA and set a timetable for raising the state pension age, depending on the outcome of a review. The Bill will also restore the link between earnings and the state pension from 2012.

Agency workers

The Agency Workers Regulations 2010 are likely to be subject to some adaptation. Whilst in opposition, the Conservatives opposed the Regulations and David Cameron even put forward an early day motion seeking to revoke them. The UK’s European obligations under the Agency Workers Directive means that the Coalition Government will be obliged to introduce some form of legislation to protect agency workers. However, the Coalition Government may seek to water down the current version or delay its impending implementation date of October 2010.

Equality Act 2010

The Equality Act, which is yet to come into force, was the subject of much discussion in the lead-up to the election. The Conservatives in particular stated during the Commons debates that they would review the Act’s provisions in relation to both the socio-economic duty on public sector authorities to promote equality in strategic decisions and the circumstances in which positive action will be permitted in recruitment processes. However, there has been little or no mention of the Act since the formation of the new Coalition Government. Although the Coalition Government has stated that it is committed to “ending discrimination in the work place”, the Act itself is not referred to. This may suggest the Coalition Government now intends to leave the Act largely intact. The socio-economic duty on public sector authorities is likely to be delayed beyond the current October 2011 implementation date.

Equal pay

The Coalition Government has pledged to promote equal pay. Both parties have expressed their desire to compel employers to carry out equal pay audits. The Conservatives have suggested that all those employers who have been found to have discriminated on the grounds of gender should have an equal pay audit, whereas the Liberal Democrats went further by seeking to impose such audits on all employers with over 100 employees.

A fair pay review will be undertaken in the public sector to implement a “20 times” pay multiple. This is the principle that the highest paid person in an organisation is not paid more than 20 times the lowest paid. The Coalition Agreement confirmed that the salaries and expenses of the highest paid public sector workers will now be published online and anyone paid more than the Prime Minister (currently £142,500) in the centrally funded public sector will be required to have their salary signed off by the Treasury.

National minimum wage

The Coalition Government has indicated its support for the national minimum wage due to the protection it gives low income workers and the incentives to work it provides. Prior to the election, the Liberal Democrats proposed a single national minimum wage for all workers over 16, except for those on apprenticeships, but there is no indication that this will now be introduced.

Remuneration in the financial sector

The Financial Reform Bill declared in the Queen’s Speech will put in place the Coalition Government’s plan to shift responsibility for macro-regulation of the banking system from the Financial Services Authority to the Bank of England. This will abolish the tripartite regulation system introduced by the Labour Government in 1997 where responsibility was shared between the Bank of England, the Financial Services Authority and the Treasury. The Queen’s Speech stated, “Legislation will reform the framework for financial services regulation to learn from the financial crisis.” There was no mention of the banking levy which was discussed by both parties in their manifestos.

National Insurance

The Coalition Government has confirmed that the 1% increase in National Insurance (“NI”) for employers, which was planned for 2011, will be scrapped. The Queen’s Speech confirmed this, stating that a National Insurance Contributions Bill will be implemented with the effect of blocking the 1% rise. The increase in NI for employees will still be implemented but will be partly offset by higher personal allowances. The Coalition Agreement states, “we will announce in the first Budget a substantial increase in the personal allowance from April 2011, with the benefits focused on those with lower and middle incomes. This will be funded with the money that would have been used to pay for the increase in employee National Insurance thresholds proposed by the Conservative Party.”

Human Rights Act 1998

In line with the Conservative manifesto, the Coalition Government has pledged to establish a Commission to investigate the creation of a British Bill of Rights that incorporates and builds on all of the UK’s obligations under the European Convention on Human Rights. This Commission will also be charged with ensuring these rights continue to be enshrined in British law, and protect and extend the freedoms of the UK people. The Commission will seek to promote a better understanding of the scope of such obligations and liberties.

Perhaps the speed of the completion of the Coalition Agreement, ahead of the Queen’s Speech, goes some way to explain its generality. It is also evident that the deficit reduction programme takes precedence over any of the other measures in the Agreement. Whilst it is clear that there will be changes in employment law, more time will be needed for the details to be fleshed out. The emergency budget on 22 June 2010 may provide further information.

To view the full Coalition Agreement, “The Coalition: Our Programme for Government, please click here. Each party’s manifesto can be found here (Conservative) and here (Liberal Democrat).