Will Labour’s reforms affect wages?

 

Statutory sick pay is the minimum that employees must be paid while they are sick. Employers may choose to go above the minimum, with arrangements set out in employment contracts. 

 

Currently, statutory sick pay is only available to those earning an average of £123 per week (this level is updated with inflation), and only once an employee has been ill for more than 3 days in a row (including non-working days). 

 

The Employment Rights Bill will change these criteria. It will remove the minimum earnings limit making all employees eligible. Statutory sick pay is currently £116.75 per week. The bill suggests that employees earning less than that would be entitled to a prescribed percentage of their normal earnings. There is an open consultation about this proposal. You can offer your feedback here. 

 

Statutory sick pay will also be available from the first day of illness. This means employees who only get statutory sick pay will no longer suffer financially during the first few days of illness. 

 

This could have positive effects, with employees less likely to attend work while unwell, reducing the risk of passing their illness to other staff. Rather than work through illness with reduced capacity, and potentially make their illness last longer, employees will be financially able to take time to rest and recover properly. This could make employees more productive while they’re at work. 

 

However, if there is no loss associated with taking time off, employees may be more inclined to call in sick when previously they would work through it. This could be the case in bug or minor illnesses. Some people have raised concern that employees will take advantage, costing their employer. 

 

If so, dishonesty and excessive sick leave can be dealt with through performance management, capability or disciplinary measures. Employers can begin preparing by making sure their relevant policies are effective and offering suitable training for managers. Employers will need to consider the risk of disability discrimination, as they already should when dealing with such issues. 

 

 

The current minimum wage varies depending on the age of the worker, with different rates for under 18s, those aged 18 to 20, and those aged 21 or over. The government will remove these age bands, creating one single minimum wage for all workers. 

 

This will be achieved using existing powers, so could happen before the Employment Rights Bill is passed. However, the government has not given a time scale. 

This will cost employers more, especially those who rely on younger workforces and have a high turnover – for example, roles that are convenient for students. 

The simpler system may make accounting slightly easier. 

 

 

The Employment Rights Bill will require employers with more than 250 employees to produce and publish an equality action plan. The plan must show the steps they are taking regarding gender equality, particularly the gender pay gap and supporting employees with menstrual problems or disorders, and through the menopause. 

 

Separate regulations will provide details about the required form and content of plans and the consequences for failure. Regulations will also set how often these plans must be published or revised, though this will not be more than once every 12 months. 

 

The Equality (Race and Disability) Bill will extend pay gap reporting to ethnicity and disability for employers with more than 250 staff. Through this bill, the government also intends to ensure that employers can no longer use outsourcing of services to avoid paying equal pay and implement a regulatory and enforcement unit for equal pay. We don’t have much detail about the Equality (Race and Disability) Bill, other than that it should be introduced to parliament by the end of July 2025. 

 

This adds some administrative burden for employers, but only larger companies. Employers will also have to update how they calculate their pay gap, to account for outsourced services. 

 

Openness around pay gaps may benefit firms who perform well on matters of diversity, helping to attract and retain talented staff.