How will Labour's ‘New Deal for Workers' impact hospitality?

After 14 years in opposition, the new Labour government has moved quickly to put its stamp on UK economic policy. Chancellor Rachel Reeves recently announced a £22bn black hole in the public finances, opening the door to “difficult decisions”, including cuts to infrastructure projects and winter fuel payments, with wider changes expected in the Autumn budget.

But how do Labour’s announcements affect hospitality? And what do the promises in the Labour manifesto and their New Deal for Workers tell us about what we can expect over the next Parliament? Here are our top things to watch.

The Employment Rights Bill

The King’s speech setting out Labour’s legislative agenda before the new parliamentary session contained significant changes around employment, tallying with their manifesto pledges, that the hospitality sector will have to adjust to. The Employment Rights Bill is likely to make swift progress through Parliament, though it will likely take longer to actually come into effect.

Zero-hours contracts: Intended to significantly improve working lives, a key part of the bill is the intention to ban zero-hours contracts. Though it garnered a swathe of headlines, it is actually not a blanket ban and only applies to exploitative contracts. The requirement will be for employers to ensure a predictable number of hours for zero-hours contract workers, reasonable notice of working pattern changes, and compensation for cancelling shifts. It will mean employers will have to forward plan their work schedules better and try to avoid last-minute changes to shifts.

Unfair dismissal: Also significant will be the changes to employees’ rights to claim unfair dismissal. Currently this can only be done after two years’ employment, but the proposal is for that right to be given on day one. It’s a controversial policy as some say it will lead to a greater number of disputes and claims, putting employers under greater financial strain.

Flexible working: Additional pressures will be put on employers with the need to accommodate flexible working, if requested by staff. Changes to paid parental leave, currently standing at 18 weeks, were also mentioned, though without specifics. The right to claim sick pay will also change, with the bill giving the right to claim on day one, rather than day four, of sick leave. Workers will also be given increased rights over dismissals, with a ban on firing and rehiring on lower pay, while women will be protected from dismissal for six months after returning from maternity leave. 

Flagship manifesto policies

Minimum wage: There are several flagship Labour policies, announced in their manifesto, that will also affect the hospitality sector. A key one here is a rise in the minimum wage, bringing it up to “a real living wage”. 

While no figures for the increase have been given, critically, age bands would be removed so every adult would receive the same rate, meaning those between 18-20 years old would likely benefit from a significant increase. Currently at £11.44 for 21+ and £8.60 for 18–20-year-olds, those in the younger bracket would receive a £2.84 raise at current levels, leading to a significant cost to employers. 

Apprenticeship Levy: A positive for employers is the promised changes to the Apprenticeship Levy, with the government giving more flexibility in how businesses spend money on and implement apprenticeships. Intended to “tackle skills shortages”, the newly formed Skills England body will foster collaboration between national and local government, businesses, unions and training providers, providing support and guidance to help develop the skills needed in each region.

Labour’s growth agenda

Labour’s New Deal for Workers seems to be particularly beneficial to young workers. According to think tank the Work Foundation, those under 25 are almost six times more likely to be on zero-hours contracts. Combined with the rise in the minimum wage, Gen Z will be pleased with the measures that also give them more money, as well as greater worker rights and freedoms.

However, the proposed changes may not be as good for young workers as they first appear. The lower rate of pay for those aged between 18-20 currently provides more opportunities for unskilled workers to enter the workforce, and removing it creates greater competition for jobs. For employers too, there are a lot of changes to accommodate, some of which may prove particularly costly for those with a young workforce. This presents further challenges to a sector still reeling from Covid and high inflation.

As ever, effective consultation will be key to ensuring changes can be implemented fairly to both workers and hospitality businesses, so both can thrive under Labour. Both sides will need to be kept happy for Sir Keir Starmer’s growth agenda to be more than a political slogan and instead be the catalyst for a healthy UK economy in the years ahead.

And with the increase on costs businesses are likely to see, getting the most for your money and spending your money a little differently will also be more important than ever. So, it’s important to work with your insurance broker to ensure you have the correct cover, whilst getting the most out of your budget and insurance.