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Recrutiment & Employment Confederation
Insight

Where did the Employment Bill go?

Government and campaigns

Patrick Milnes avatar

Written by Patrick Milnes Campaigns Advisor

In December 2019 the government announced its intention to publish an employment bill to protect and enhance workers’ rights in the UK labour market. The employment bill was going to address a number of key issues including regulation of umbrella companies, the creation of a combined single enforcement body (SEB), changes to employment rights and other elements to improve clarity and awareness of rights for workers. It was going to provide a huge step forward for employers and workers by modernising the compliance and enforcement framework.

This all sounded pretty good for the UK labour market, but now, more than two years after the employment bill was announced, it has seemingly vanished without a trace. Despite commitments to produce the bill from government ministers as recently as last summer, reports now suggest that they no longer intend to do so. This leaves large parts of the workforce and employers at risk of exploitation due to unclear, ambiguous, or insufficiently regulated rules around workers’ rights.

One of the key areas that the bill was supposed to address was the need for greater regulation of umbrella companies. We had expected to see new legislation to address the rise of umbrella companies offering questionable tax alternatives following the expansion of IR35 last year. However, without an employment bill and the regulation it would have brought, it will be much harder to police the practices of umbrella companies. This leaves employers and candidates at risk of being exploited by unscrupulous umbrellas offering low tax solutions to people on their payrolls that often sound too good to be true (because they are).

The regulation (or lack thereof) of umbrellas also links to the rise of other staffing solutions seemingly outside the scope of existing regulation that could have been addressed in the employment bill. Over the past few years certain online services have sprung up which claim to be neither employment business nor employment agencies - despite operating in a way that suggests they fall within one of these legal definitions. There has also been a rise in ‘joint employment models’, which often see umbrella companies partnering with employment businesses to split employment responsibilities between them. This, unsurprisingly, leads to confusing situations for the worker. The employment bill was an opportunity for government to introduce regulation to provide clarity and tackle these new and complex models. Without the bill, government will miss that vital opportunity.

The employment bill was also going to lay the foundation for the SEB. This was going to a be a one-stop shop for labour market enforcement, combining the existing remits of the Employment Agency Standards Inspectorate, the Gangmaster's Labour Abuse Authority and HMRC's National Minimum Wage team. The SEB would have made it easier for workers to raise concerns over compliance breaches, but the lack of an employment bill creates doubts about the future of the SEB. And without a SEB, it will be more difficult for workers to report suspected breaches because of a lack of clarity about which organisation they should go to.  

The employment bill would have also been an opportunity for the government to tidy up several pieces of outdated legislation that are no longer reflective of modern working practices. A good example of this is around holiday pay. The regulations on holiday pay were enacted in 1998 (making them just two years younger than Nadia Whittome, the current MP for Nottingham East) and were not drafted with modern temporary working practices in mind. Because of this, confusion around their application can lead to accidental non-compliance by employers in a very complex and constantly evolving area of law. Government guidance in this area has been overruled by subsequent legal cases and the employment bill would have allowed for the opportunity to modernise the legislation to give employers and workers clarity around holiday pay entitlements.

Holiday pay is just one area where the legislation hasn't kept up with modern practices and there is a raft of other employment law that is similarly out of touch with modern working. Since these laws were drafted the number of people doing temporary work has increased and gig work, contracting and freelancing are all commonplace. Two in five people in Britain have done temporary, contract or freelance work during their life but the rules do not reflect this. Legislation that is out of date leads to square pegs (temp workers) being put into round holes (laws that were designed for permanent employees) and increases the chance of accidental non-compliance because of this. The employment bill would have provided the perfect opportunity to update legislation, but without it these issues will continue and may get even more confusing.

It seems clear that the employment bill had the potential to make widespread and necessary changes to the UK labour market. What remains unclear is why a government so committed to levelling up the UK economy might be allowing it to vanish from their agenda like the crew of the Marie Celeste. The need for reform and regulation in the UK is apparent and reviving the employment bill would be a way for the government to address this easily and effectively.