Employment law changes in 2023

By Sue Tumelty on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

What employment law changes do you need to be aware of in 2023?

We can all see the world changing around us – cultural and workplace norms, the geopolitical landscape and the growing use of technology.

Over recent years we have seen the employment landscape changing too, to accommodate the expectations of the workforce and the needs of business owners.

>See also: Fire and rehire – what you need to know

For smaller businesses, it can be hard to keep up with what’s going on, especially as the lobbying and consultation is usually done with the requirements of larger businesses in mind.

So it’s essential for the owners of small companies is to be aware of what’s coming down the pipe and, crucially, to plan accordingly. I hope this article, laying out the likely employment law changes in 2023, will help you navigate this year’s changing employment waters.

Of course with most legislation – particularly that which is proposed – there is usually politics at play. It’s therefore worth bearing in mind that much of what is proclaimed and advocated may be for show rather than in genuine expectation of imminent implementation.

Still, there’s no harm in staying abreast of what’s being discussed.

Employment law changes coming into force in 2023

Before we start talking about what’s in the pipeline, it’s worth mentioning a few important changes which are happening during the first part of this year.

Firstly, on April 1 there are new increases to the National Minimum Wage coming into effect. These were announced last November and apply for the new tax year.

The rates are as follows:

• for workers aged 23 and over, a National Living Wage of £10.42 an hour
• for those aged from 21 to 22, £10.18 an hour
• a development rate for workers aged 18 to 20 of £7.49 an hour
• a young workers rate for workers aged between 16-17, of £5.28 an hour
• the same rate, £5.28 per hour, for apprentices

It’s vital to get pay right – all employers are legally obliged to pay staff in accordance with the current legislation. Penalties for non-compliance can be severe: fines of up to £20,000 per employee; public listing by HMRC which can cause reputational damage; and bans on being company directors.

Mistakes are easy to make, including missing birthdays, incorrect classifications and failure to pay full hours worked. It’s important to tackle mistakes head on and not run the risk of an expensive loss at tribunal.

Changes to maternity and sick pay

The next pay increase to remember is for statutory maternity, paternity, adoption, shared parental and sick pay. These increases come into effect on Sunday April 2 and are as follows:

• a rise of £156.66 to £172.48 a week for the payments mentioned
• also on this date, statutory sick pay rises from £99.35 to £109.40 per week

>See also: Statutory maternity pay UK

Coronation bank holiday

Finally, don’t forget the extra bank holiday to mark the new King’s coronation. The holiday, on Monday May 8, will be two days after the ceremony itself.

Employers should remember that this bank holiday will be in addition to the standard annual eight bank holidays which we have each year.

As an employer, you may be wondering whether this bank holiday will apply to your employees, and the answer is that it will depend on what your terms are for bank holidays in your contracts of employment.

Contracts which refer to a specific number of bank holidays, or which contain clauses requiring bank holidays to be taken at different times of the year, mean you are not obliged to let your team have time off for the Monday after the Coronation. If you do, the time could be unpaid.

Of course, you may choose to grant the day off, with pay, as a goodwill gesture – a good way to create a positive team dynamic around the holiday. Whatever you decide, communicate with your staff early so that they can plan ahead. And I’d also suggest letting them know that this is a one-off occasion, so as to manage their expectations for future events.

Confirmed legislative changes for 2023

The main piece of new law for small business owners to be aware of is the Retained EU Law (Revocation and Reform) Bill 2022. Currently, EU law takes priority over UK law if there is a conflict between the two. This is going to stop after December 31 this year, allowing the Government to change all the EU laws we have retained since Brexit.

Of course, this has wide-reaching ramifications – so much so that there’s already some doubt over whether this new law will be postponed, perhaps until as late as 2026. There is much speculation about which employment acts will be affected, such as those regarding agency workers’ rights, Working Time Regulations and TUPE, which affects staff transferring between businesses. But there are no details as yet.

Over the coming months we’ll see more suggested changes to the law around how people are employed. It’s important to recognise that some UK rights already go beyond what EU law requires, such as holiday entitlement and enhanced maternity leave.

Flexible working requests

Employers should also be aware of confirmed plans to make changes around flexible working requests. You will need to consult about options with your employees, who will have the right to make two flexible working requests within any 12-month period. You’ll have two months to respond to these requests – currently the law says three months.

Finally, a new code of practice has been issued regarding fire and rehire procedures. Although not legally binding, a tribunal could make a 25 per cent increase in any award if it feels the code was not followed.

Proposed new employment law in 2023

In reaction to the strikes we have all experienced in some form or another this winter, you may have heard that the Government has introduced the Strikes (Minimum Service Levels) Bill to Parliament. This would supersede a previous bill on minimum service levels in the transport sector – the new bill will be wider in scope than the one it replaces, giving the Government the power to set minimum service levels for health, border security, education, fire and rescue and transport services, as well as the decommissioning of nuclear installations and management of radioactive waste and spent fuel.

The bill applies to England, Wales and Scotland and would make a strikes unlawful, removing unfair dismissal protection from strikers and exposing unions to fines if they do not comply with employers’ working requirements when notified.

There’s politics at play here, clearly, and there is no certainty around implementation. It’s likely to be in the news a lot though, so it’s worth keeping an eye on.

Zero hours contracts

Earlier this month the Government also started a consultation on how pay should be calculated for workers with irregular or zero hours contracts. This follows the Supreme Court’s decision in the case of Harpur Trust v Brazel and Unison in July last year 2022.

The court decision brought a part-year teacher’s holiday pay into line with the Working Time Regulations 1998. However, it created an anomaly between the way that holiday pay for irregular hours workers is calculated, compared to how it is carried out for part-time workers on regular hours.

It’s a concerning judgment for employers, as it means some part-year workers are eligible to receive more holiday entitlement than part-time workers who work the same number of hours each year. The Government’s consultation will look at how to tackle the disparity.

What’s being proposed is a different method for calculating holiday pay, to try and ensure a consistent calculation for holiday entitlement while giving employers a clear and easy-to-follow method to use. In the meantime, until the ruling is superseded, employers must calculate holiday pay correctly.

Those are the main changes to employment law in 2023 that we know about for now.

However, with a general election coming up next year, during a likely recession, with one main party under pressure and another looking to capitalise, we can expect to see many more proposals and bills being discussed.

Of course, business owners may not be specialists in these matters or have the time or inclination to get down into the detail. They are important issues though and, even though many of these proposals are still at an early stage, it’s important to plan ahead and be cognisant of the risks for non-compliance. If in any doubt, seek professional advice.

Sue Tumelty is founder and executive director of The HR Dept

Further reading

Dismissing staff on long term sick leave

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