REBA Inside Track: Labour’s plan to make work pay
With a new administration comes new ideas and plans for change, Sir Keir Starmer and the Labour party is no exception.
Throughout its campaign, the Labour Party often used the phrase ‘Make Work Pay’. This is centred on the idea that through greater in-work security, better pay and autonomy in the workplace, employees’ lives can be improved and the country can gain from the economic benefits.
But what does this mean for employers and their reward and benefits strategies?
Pay changes
Labour’s Plan to Make Work Pay outlines the government’s intention to work with business and trade unions to improve work, and the intention to consult on how to put plans into practice before legislation is passed.
A cornerstone of Labour’s plan is to ensure work is secure, flexible and pays a fair wage that meets cost of living needs.
This will be achieved by changing the remit of the Low Pay Commission (LPC), which currently makes recommendations on the National Minimum Wage based on median wages and economic conditions. Labour wants to expand the body’s remit to better reflect the true cost of living. It also intends to remove age bands within the minimum wage structure, so all adults are entitled to the same amount.
Food for thought
Although there is no timeframe for these changes, employers should consider the potential impact of higher minimum wages on their workforce. The Real Living Wage offers a good guide of what a minimum wage linked to cost of living might look like.
Currently the National Living Wage is £11.44 an hour. While the Real Living Wage, which is based on living costs set by the Living Wage Foundation, is £12 an hour. This could lead to a huge increased wage bill for employers, along with higher pension contributions and the knock-on impact to other pay bands.
A clear focus on equality
Continuing the focus on pay, Labour intends to decrease the gender pay gap, and will widen the conversation around pay gaps to include ethnicity and disability.
Although many large organisations already have strategies for narrowing the gender pay gap, Labour intends to make it a requirement for large firms to develop, publish and implement action plans to close their gender pay gaps.
Outsourced workers will also need to be included in gender pay gap and pay ratio reporting.
Ethnicity and disability pay gap reporting has been tabled for several years. However, for the first time, Labour plans to make this mandatory for employers with more than 250 staff, mirroring the rules around gender pay gap reporting in a bid to better address these workplace inequalities.
Food for thought
With this greater scrutiny on pay, coupled with the upcoming EU Pay Transparency Directive that comes into force in 2026, reward professionals will need to closely consider how they report and communicate about pay within their organisation.
This may now be a good time to review pay structures, assess available pay data and conduct pay audits with these changes in mind.
Other employment-related plans to watch out for:
- Strengthening of sick pay legislation by removing the lower earnings limit to make it available to all workers and removing the waiting period;
- Basic rights from day one to parental leave, sick pay, and protection from unfair dismissal;
- Large employers with more than 250 employees will be required to produce Menopause Action Plans, setting out how they will support employees through the menopause;
- Banning zero hours contracts and fire and rehire practices
- The creation of a Single Enforcement Body to ensure employment rights are upheld;
- A modernisation of HMRC and a crackdown on tax avoidance HMRC and change the law to tackle tax avoidance by large businesses and the wealthy;
- Closing the loophole in the private equity industry where performance-related pay is treated as capital gains.
