Implications of Labour's win for the recruitment services sector

If the new Labour Government can achieve and sustain the economic growth and stability it promises, there will be increased demand for recruitment services. But what else does Labour intend to do that may benefit the sector?

Rights in the workplace

There will be stronger regulation of the labour market. Labour made a number of pledges on employment rights in its manifesto which we discussed here. Labour manifesto pledges on employment | Latest (mishcon.com)]. Chief among them is the pledge to introduce an Employment Rights Bill to Parliament within the first 100 days of the new administration. The King's Speech on 17 July 2024 confirmed that the Government will bring in legislation that will "introduce a new deal for working people to ban exploitative practices and enhance employment rights". The Government has promised to consult with businesses and unions before finalising the detail, but the Employment Bill will:

grant basic 'day one rights' to all workers, including protection against unfair dismissal and access to parental leave and sick pay;
ban the use of 'exploitative' zero hours contracts; and
ban the practice of 'fire and rehire'.

The recruitment services sector will be keen to understand:

recruitment services sector will be keen to understand:
how the proposed 'day one rights' might impact their engagement of the workers they supply to their clients on temporary assignments;
how probationary periods will operate if unfair dismissal protection can be claimed from day one; and
what the Government means by 'exploitative practices' and how this might apply to the sector.

A single enforcement body, the Fair Work Agency, will be set up. This new watchdog will have the power to inspect workplaces and bring action against companies which breach workers' rights. If the remit of the Fair Work Agency is to include ensuring compliance with the recruitment industry regulatory regime, recruitment services companies will be keen to know whether this new Agency will have a more 'aggressive' approach to compliance than the current recruitment industry regulator, the Employment Agency Standards Inspectorate, which aims to help recruitment services companies with compliance rather than take immediate action against those in breach of the recruitment industry regulatory regime.

IR35

There are no plans to abolish the off-payroll working rules/IR35, but if Labour follows through on its pledge to consult on employment status, this may provide the opportunity to review these tax rules.

Equality

Labour pledged to strengthen women's rights to equal pay and protection from maternity and menopause discrimination, as well as sexual harassment. The Government will also introduce the Draft Equality (Race and Disability) Bill, which will extend pay gap reporting requirements to include disability and ethnicity pay. If agency workers are brought into scope, this will be an additional administrative burden for large employers. The Bill will also give disabled people and those from ethnic minorities the right to equal pay, with the aim of making it easier for people from those groups to bring claims to enforce their rights.

Business regulation

Although the King's Speech confirmed that "stability will be the cornerstone" of the new Government's economic policy and "securing economic growth will be a fundamental mission", there were no specific business announcements. We will no doubt have to wait for the Autumn Budget for announcements on any business and tax reforms. However, Labour's commitment to retain corporate taxation at the level of the previous Government will help recruitment services companies budget for the short term and may assist with the burden of any increased costs associated with changes to workers' rights.

Labour's pledge to take action on late payments to ensure SMEs are paid on time will benefit the recruitment services sector. The sector would also welcome action on long payments whereby clients must pay invoices within a set period.

Abolition of the apprenticeship levy

Welcome news for the recruitment services sector is the proposed abolition of the apprenticeship levy charged to large companies. The apprenticeship levy will be replaced by a flexible growth and skills levy administered by a new body, Skills England. If the scope of the levy is widened to include agency workers, this would greatly benefit the sector, enabling recruitment services companies to provide training not only for their employees, but also for the workers they supply to clients on temporary assignments.

Artificial intelligence

As a sector that embraces and uses artificial intelligence, the recruitment services sector will welcome Labour's pledge to support the development of AI and create a new Regulatory Innovation Office. Recruitment services companies will be keen to input into consultation on regulation in this area and provide insight on how the sector uses AI in the recruitment process.