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Labour market reforms in the UK: background summary

The UK government’s labour market policy, under the Conservative/Liberal Democrat coalition government from 2010-2015 and the Conservative government from 2015, has concentrated on a number of key areas, such as unfair dismissal, the use of early conciliation to resolve workplace disputes and the operation of employment tribunals.

Three main reforms

  • On 6 April 2012, the qualifying period for claiming unfair dismissal was increased from one to two years. The government rationale for this was to streamline the workings of the employment tribunals system (see below). However, this has resulted in a decrease of employment rights for workers.
  • Individual employees may seek to resolve workplace disputes informally through dispute resolution mechanisms that their employer has in place or they may seek redress through the tribunal system. Since 6 May 2014, any individual wishing to make a claim to an employment tribunal must first notify the UK’s conciliation service ACAS in order to provide an opportunity to resolve their dispute through the early conciliation process and without the need for a claim.
  • Since July 2013, fees have been introduced for individuals wishing to bring cases to an employment tribunal. There is an initial £250 fee when submitting a discrimination claim, and £950 for having a hearing. Some people on benefits or on a low income are entitled a reduction in or exemption from fees. This has resulted in a decrease in the numbers of claims being brought to employment tribunals. Of particular concern to many has been the decline in the number of sex discrimination claims, which fell by 83% in the year following the introduction of tribunal fees.

Two recent reforms

  • Two further pieces of legislation have come into force recently, covering strike ballots and minimum income.

    Trade Union Act

  • A new piece of legislation, the Trade Union Act 2016, came into force in May 2016. The Conservative government, elected in May 2015, proposed changes to legislation on strike ballots. The government states that the new legislation will ensure that strike action only ever takes place on the basis of clear and representative mandates, will improve the transparency of trade unions, and require reasonable notice of strike
  • The main provisions of the Act are as follows:
    • A strike ballot must have a simple majority of those voting;
    • In addition, at least 50% of eligible workers must vote in a ballot in order for the ballot to be valid; in the case of certain ‘important public services’ including health, education of those under 17, fire, transport, nuclear decommissioning and border security, at least 40% of eligible workers must vote;
    • the length of notice that trade unions are required to give before a strike can be held is doubled, from seven to 14 days, unless the employer agrees that 7 days is enough;
    • a 6-month time limit (which can be increased to 9 months if the union and employer agree) for industrial action. Previously, action could be taken indefinitely, provided that the dispute remained live
    • a requirement for a clearer description of the trade dispute and the planned industrial action on the ballot paper
    • changes to the rules governing picketing, including a requirement to appoint a picket supervisor
    • a provision that payroll deductions for trade union subscriptions are only administered where the cost is not funded by the public
    • greater accountability relating to the use of public money for facility time (time off for union officials to carry out their union-related duties)
    • new powers for the Certification Officer to investigate and take enforcement action against trade unions for breaches of statutory duties.
  • The legislation has caused controversy and strong opposition from trade unions. The Trades Union Congress (TUC) has stated that although trade unions had succeeded in diluting parts of the original Bill, the new Act “represents the most serious attack on unions witnessed in a generation”. Frances O’Grady, TUC General Secretary, stated that  “While we are pleased to have secured significant changes [to the original Bill], it still remains very bad and divisive. This legislation, even in its amended form, poses a serious threat to good industrial relations and is completely unnecessary”.
  • However, the UK’s main employer organisation, the CBI, has welcomed the Act. Katja Hall, CBI Deputy Director-General, has stated that the CBI has long called for the modernisation of the UK’s industrial relations laws, to better reflect the country’s current workforce and workplace practices. She stated in a press release: “The introduction of thresholds is an important, but fair, step to ensure that strikes have the clear support of the workforce. Placing time limits on ballot mandates is an important measure to ensure industrial action is limited to the original dispute and not extended to other matters”. 

National living wage

  • The UK’s new statutory national living wage (NLW) came into force on 1 April 2016. It will be phased in over the course of four years and will eventually reach 60% of median earnings in the UK by 2020. The NLW is based on the National Minimum Wage (Amendment) Regulations 2016, which were adopted on 26 January 2016.
  • The NLW will only apply to workers aged 25 and over and will be paid at a rate of GBP 7.20 an hour. This is GBP0.50 more than the current adult rate of the UK national minimum wage. Workers under the age of 25 will continue to be eligible for the national minimum wage, which is differentiated according to age.
  • The UK’s Low Pay Commission (which already advises the government on the national minimum wage), will recommend annual increases to the NLW.
  • The government expects, following an impact assessment, that around 1.7 million workers will benefit from the NLW in 2016 and that a further 4.2 million higher-earning workers will benefit from the knock-on effects of this. It is thought that the greatest impacts will be felt in the retail, hospitality and healthcare sectors.
  • The TUC has welcomed the NLW, stating that it has been campaigning for higher minimum wages for a long time. However, the CBI stated that while it supported a higher-skilled and high-waged economy, it is fearful of employers’ ability to pay the NLW. The CBI's former Director-General John Cridland stated: ‘Delivering higher wages can only be done sustainably by boosting productivity. Bringing politics into the Low Pay Commission is a bad idea.’