In the run-up to the General Election, political parties are announcing a number of policies that could affect employers in the future. It is interesting to note that over time, some policies across the political spectrum tend to converge (for example on the National Minimum Wage and the gender pay gap), so whatever the outcome of the General Election, variants of a number of the policies listed below may become law in future years.
Although the Conservative party has committed to end freedom of movement on Brexit day, under the transitional rules, subject to certain “tougher UK criminality thresholds at the border”, EU citizens would be able to come to the UK to live and work here without any formal application process. If those individuals wish to remain in the UK after 31 December 2020, they can apply for “temporary leave to remain” in the UK which, if granted, will allow them to continue living and working in the UK for 36 months from the date it is granted. From 2021 onwards, the Conservatives plan to introduce a points-based immigration system (similar that set out in the 2018 White Paper) post-Brexit but have no targets on numbers.
Labour have pledged to renegotiate Brexit terms to maintain very close ties to the EU and allow "a great deal of movement" between countries – although perhaps not free movement of people in the way it currently operates for EU member states. Any deal would then be put to a ‘people’s vote’. A Labour government would not set hard and fast immigration targets.
A majority Liberal Democrat government would revoke Article 50 to cancel Brexit. There would be no change to freedom of movement for workers.
None of the parties has suggested changes to the proposed expansion of the off-payroll labour rules to private sector businesses – although the Liberal Democrats have said they will ‘review’ the proposals. As the proposed legislation is seen by most politicians as ‘anti-avoidance’ rules it is expected that whatever colour the new Government is, the rules will take effect from April 2020 as currently planned.
National Insurance Contributions
The main political parties are not planning to increase NIC (although Plaid Cymru would increase the rates above the secondary threshold). The Conservatives intend to raise the annual NIC starting threshold for employees from £8,863 to £12,500 over the next parliament, with an immediate increase to £9,500 from April 2020: this will give a cash saving to employees of £104 (or around £85 taking inflation into account). To help small employers, they also plan to increase the Employment Allowance from £3,000 to £4,000.
Labour has pledged not to increase NIC rates but, over time, the Liberals say they would develop a new ring-fenced Health and Care Tax (offset by reductions in other taxes – presumably NIC) to pay directly for the NHS and social care.
Pay and benefits
Employers should be preparing for a significant increase in the National Minimum Wage (NMW) from April 2020. The Conservative party has pledged to increase it in stages to £10.50 over five years (a 5% increase per year) whereas the Labour party has pledged to increase it to £10 from April 2020 (a 21.8% increase). The Liberal Democrats propose a new ‘living wage’ rate for all public sector workers and to protect ‘gig economy’ workers in a number of ways, including setting a minimum wage for anyone on a zero hours contract at 20% higher than the NMW.
Labour says it would ban zero-hours contracts and unpaid internships as well as introduce policies to ensure that company Boards include workers and elected members (giving them greater influence over pay structure). A new cap would mean that public sector chief executives would not be allowed to earn more than 20 times the living wage (currently setting a ceiling of around £350,000). All employers would pay an additional ‘executive pay levy’ where any employee earns more than £330,000 a year.
Under Labour’s wage fairness plans, UK companies with more than 250 employees would need to transfer up to 10% of their shares to inclusive ownership funds. Dividends on those shares would then be shared between employees (capped at £500 per employee) and the balance paid to the Government. Labour also proposes to tax dividend income and capital gains at income tax rates: this could significantly reduce the net remuneration senior executives receive through share incentive schemes. On executive pay, the Liberals propose imposing a binding public vote of shareholders on a company’s executive pay policy.
Labour have also pledged to close the gender pay gap by 2030 by dropping the employee threshold for pay gap reporting to 50 employees and fine employers who do not report. It would also introduce disability pay gap reporting.
Labour’s pledge to reduce the standard working week to 32 hours by 2030 has received much attention, but its intention to create four new bank holidays and increase statutory maternity leave to 12 months (and paternity leave to 4 weeks) have received less coverage.
Labour propose to overhaul the apprenticeship levy to make it more flexible and train 320,000 apprentices a year, of which 80,000 would be through a "climate apprenticeship" programme. The Liberals also plan to expand the apprenticeship levy into a wider ‘Skills and Training Levy’ with 25% of the funds raised by the levy going into a ‘Social Mobility Fund’ targeted at areas with the biggest skills gaps. In addition, they intend to create new ‘Skills Wallets’ for every adult in England, into which the Government will put £4,000 at age 25, £3,000 at age 40 and £3,000 at age 55. Individuals and their employers will be able to top up the wallets, and individuals will be able to spend the funds on government-approved training courses.