“Smarter Regulation” Bill To Reform UK Employment Law

16 May 2023 – The Government has announced their intention of reforming the UK employment law. Through the “Smarter Regulation” bill Downing Street wants to remove red tape for businesses.

After Brexit, the UK Government announced its intention to review all EU laws that are currently part of the UK’s statute book with the aim of either revoke or reform them in order for the UK economy to thrive.

Even though the Government has recently scrapped its own deadline to finish this process by the end of this year, it is pushing on with reforming regulations that originated from the EU.

The newest regulatory reform announcement deals with employment law. The Government said the reforms aim at making it simpler, easier and more cost-effective for businesses.

Regulation Shouldn’t Be First Choice

In its announcement, the Government sets out its view on how the current regulation framework needs to be reformed to ensure it achieves its aim of growing the UK economy.

In the current framework, regulations are brought in first and then their impact on businesses is analysed. The Government believes that this approach inhibits its ability to steer the course in a way that will deliver the economic growth that is wanted and needed.

Rather than regulation being the first choice, the Government wants departments to consider non-regulatory measures first. Only if these are proven not to be viable, regulations can be considered.

The new framework also proposes that any regulations should be scrutinised at the early stage of the process. And once regulations are in place, they need to be evaluated early and consistently to ensure they achieve their aims.

The Government also wants to ensure that growth is at the heart of all regulatory decisions. To achieve this it wants to work with regulators to enable them to drive growth.

“Smarter Regulation” To Reduce Burden For Businesses

The Government states that the current amount of regulations is too burdensome for businesses. The announcement also states that many regulations are unnecessary.

One area the Government sees unnecessary regulations is working time reporting. Currently, employers have to record the working time of their employees to ensure workers are not made to work more than the maximum of 48 hours per week allowed by law.

While the 48-hour working week limit will stay, Whitehall believes keeping records of working times for each employee is too time-consuming for employers. Therefore, this requirement will be scrapped.

Another part of the current working time regulations that the Government wants to reform is how holiday pay is calculated.

Rather than paying employees who didn’t take their full holiday entitlement at the end of the financial year, the Government proposes rolled-up holiday pay.

This means workers get an additional amount every month with their basic salary, whether they are taking time off or not. But when they do take their holidays, they won’t be paid for the time they are off.

While this change would make the calculation of holiday pay less complex for small businesses, it would also mean that current employment contracts would need to be changed.

Other proposed changes will reform regulations for business transfers. Currently, when a business is sold to a new owner, employers can only consult employees through employee representatives. If there aren’t any in place, these need to be elected.

The Government recommends scrapping this requirement for employers with less than 50 staff and transfers that affect fewer than 10 staff. This would allow small businesses to consult with affected staff directly.

The bill also includes changes to non-compete clauses. The Government wants these limited to a three-month period, to ensure UK businesses can stay competitive and innovative.

Proposed Bill Is Watering Down Employee Rights

Critics of the “Smarter Regulation” bill accuse the Government of watering down employee rights. By removing the need to record employees working time, the Government allows bad employers to over work their staff without consequences.

[The Government’s supposed changes are] a gift to rogue employers looking to exploit workers and put them through long, gruelling shifts without enough rest.

Paul Nowak, General Secretary of the Trades Union Council

The suggested rolled-up holiday pay has also drawn criticism, as encouraging employees not to take time off. The way rolled-up annual leave pay works, employees would have to carefully budget and save for periods they want to go on holiday.

This could cause stress and be detrimental to worker’s mental health and wellbeing. The practice has also been ruled illegal in 2006 for these reasons.

While some of the proposed reforms in the “Smarter Regulation” bill will help small businesses by reducing the administrative burden and related costs, the health and wellbeing of staff should always be at the centre. So any small business should consider carefully before making changes to their practices.

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The Business4Beginners news team consists of several writers who each have their own unique experience in businesses. By keeping their fingers on the pulse, they bring you the latest in news and trends impacting small UK businesses.
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