What accountants and payroll teams need to know about a potential Labour Government

We don’t have an election date yet, but it is overwhelmingly likely that there will be one next year.

And the polls and recent by-elections results suggest the most probable outcome is a Labour Government.

Nothing in politics is ever a sure bet, but it does make sense for accountants to start getting an idea about what changes Labour is keen to make should it win the election. Here are some of the key policy proposals the party has made lately which will be of interest to accountants and payroll teams.

Giving workers all of their rights to sick pay and other benefits on day 1 – including contractors

In July of 2021 deputy Labour leader Angela Rayner said the party wanted to change the definition of “worker” in law so that all workers got all their rights and on day 1 of a new job, including dependent contractors and people Labour said were in “bogus” self-employment.

For regular workers, this would mean no more waiting a set amount of time to be eligible for benefits like sick leave or maternity cover. These rights would start on day 1.

And for dependent contractors this would be a huge change. This would mean contractors currently covered by IR35 rules – people the Government somewhat considers employees, even if they aren’t on payroll – would get the exact same rights as employees.

This announcement was made in the midst of the pandemic when there was a lot of concern about contractors not getting sick leave and the like. It will be interesting to see if Labour recommit to it, but it is likely that the party will want to do something on the vexed question of when a contractor is a contractor and when they are essentially an employee.

Audit reform

Both the Government and Opposition are keen to push through corporate governance and audit reforms along the lines of the Sir John Kingman report from 2018. The Government promised to enact these reforms last year, which notably replace the Financial Reporting Council with a new statutory regulator, but this hasn’t yet happened. Labour promised in September of 2023 to get on with it.

Far more pay gap reporting

Currently, businesses with more than 250 employees have to report on their gender pay gap data.

Labour wants to strengthen this requirement so that more reporting is mandatory and a business has to set up an “action plan” to address gender pay gaps.

It has also urged the Government to introduce similar mandatory reporting requirements for ethnicity pay gaps. Much like gender pay gap reporting looks at the difference between what male and female workers make, this reporting would look at what Black, Asian, and Minority Ethnic (BAME) workers make compared to white workers, particularly in similar roles.

None of these are iron-clad

It should be noted that a huge number of policies get proposed in Opposition but then watered-down, delayed, or abandoned altogether once a party comes to Government – or even before they publish a manifesto ahead of the election. Quite a few of the various ideas that shadow cabinet members have been talking about will undoubtedly be dropped. But getting an idea of what they are proposing is a good way to at least understand the likely direction of travel ahead of the election manifesto being released.

So we’ll all know a lot more next year. But in the meantime getting an idea about the potential challenges these changes might bring up is a good idea. Modern cloud-based payroll software like our Employment Hero suite will be able to react to these changes quickly and keep you on top of compliance, and generate the new pay gap reports you may need simply. Clients will be very interested in these changes too – so it makes sense to get your head around them early.

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