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General election: employment watch – what are the Liberal Democrats promising on employment law?

In light of the UK’s next general election taking place on 4 July 2024, we’re taking a look at some of the key promises relating to employment law made by the leading political parties.

We’ve previously looked at Labour’s plan to extend equal pay protection to include disability and ethnicity and some of the recent Conservative announcements. Now that the Liberal Democrats have released their manifesto, this week we will look at some of their key employment law proposals.

The Liberal Democrats have proposed a number of changes to employment law, including setting a 20% higher minimum wage for zero-hour workers at times of normal demand to compensate for the uncertainty of fluctuating hours, making all parental pay and leave ‘day-one’ rights, doubling Statutory Maternity and Shared Parental Pay to £350 a week and requiring large employers to monitor and publish data on gender, ethnicity, disability, and LGBT+ employment levels, pay gaps and progression, and publish five-year aspirational diversity targets.

In particular, employment status and tax are areas which the Liberal Democrats are keen to reform. They’ve announced that they will establish a new ‘dependent contractor’ employment status in between employment and self-employment, with entitlements to basic rights such as minimum earnings levels, sick pay and holiday entitlement. On first reading and without more detail, our view is that this description sounds very similar to the current ‘worker’ status, but there is no acknowledgement of this in the manifesto. Linked to this, the Liberal Democrats will review the tax and National Insurance status of employees, dependent contractors and freelancers to ensure fair and comparable treatment, which will include a review of the Government’s IR35 reforms to ensure self-employed people are treated fairly (no further detail on this yet). They will also shift the burden of proof in employment tribunals regarding employment status from the individual to the employer, which will mean that individuals will now to be deemed to be employees unless a business can prove otherwise (rather than the current position, whereby the employee must prove employment status).

Another of the Liberal Democrats’ key proposals relates to their promise to ‘fix the broken Statutory Sick Pay (SSP)’. They pledge to remove the minimum earning threshold (currently £123 a week) to bring an extra one million workers – mostly women – within scope and will make payments available from day one of sickness absence, a significant change to the current position whereby employees must wait three days before becoming eligible for payment on the fourth. They will also align the SSP pay rate (currently £116.75 a week) with the National Minimum Wage. In recent years there have been various calls for an overhaul of the SSP system to better support employees who are too ill to work, and the Liberal Democrats’ proposals would significantly increase the support available to those employees and help provide a basic level of income protection. However, this is likely to come at a cost to employers, particularly small businesses, with a report by Zurich in February 2024 finding that SMEs picked up 76% of the 2023 long-term sick bill, totalling £24.7bn. Although the Liberal Democrats have pledged to support small employers with SSP costs, ‘consulting with them on the best way to do this’, it is unclear what this would look like in practice.

Should you wish to discuss any of the issues raised in this article, please contact Robert Forsyth.