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Election 2019: people and skills

One of the big areas that employers may find is affected by the outcome of the General Election is around people and skills, as changes in the labour market fuel the battle for talent.

While the different parties may have different approaches, they share some common goals, and we expect to see changes whatever the result. Understanding where the big differences and common ground lie will help you begin to prepare your business now.

We set out five key areas in which the election result could lead to significant changes:

Increased wage costs

All parties are committed to a national minimum wage of at least £10 per hour. We can expect this to filter up through all wages.

Organisations should use this as an opportunity to review their reward packages. Even though this will mean additional cost to the business, this can be mitigated through reviewing benefit packages as a whole and ensuring the best value offer is in place.

Workers' rights

The Conservatives can be expected to bring forward the proposals already set out in the Queen's Speech for an Employment Bill that enhances protection for agency and zero hour contract workers, and supports flexible working.

Labour has announced plans to create a new Workers’ Protection Agency with powers to fine employers who fail to take satisfactory measures to close pay gaps; increase statutory maternity pay from 9 to 12 months; give all workers the right to choose flexible working hours from day one; ending the UK’s Working Time Directive opt-out (thereby enforcing a maximum 48 hour working week for everyone) and ban zero hour contracts. Labour is also considering a four-day week.

Labour’s approach to the Workers Protection Agency will focus employers on the need to review their approach to diversity and inclusion. To be able to show progress, employers should develop a real understanding of where their organisation is now and use this to develop a holistic diversity and inclusion strategy. They then need to commit resources to ensure that the strategy is put into action and change happens.

Recruitment and retention

With free movement ending under its Brexit plans, the Conservatives have said they would introduce a points base immigration system – scrapping existing immigration targets and replacing this with skills and salary thresholds, and prioritising English speakers. Labour has also said it would ban overseas only recruitment.

Employers can expect it to be more complicated and expensive to recruit overseas workers, particularly in lower-skilled roles. Continued uncertainty and economic slowdown may also mean people are less willing to move between jobs, and domestic and international talent may look to work overseas.

Employers should use this opportunity to review their employee value proposition and their brand within the labour market. This will help to attract potential candidates from talent pools they have not previously explored, ensuring they are distinguishing themselves from the competition. Strategic workforce planning will become increasingly key in identifying the skills and talent required ahead of imminent needs or vacancies that impact operations.

Reward: Pay and pensions

The Queen's Speech in October included a number of pension reforms. These will enable the introduction of collective defined contribution pensions schemes, making it easier to transfer between pension schemes, and introducing the pension dashboard, enabling individuals to see all their pensions in one place. We can expect these reforms to proceed after the election.

The Conservatives have committed to not raising Income Taxes over the course of the Parliament and will instead focus on raising the threshold for National Insurance to £9,500.

Labour has a set of proposals for raising tax for higher earners, including reducing the 45% threshold from £150,000 to £80,000, introducing a 50% rate above £125,000 and an ‘excess salary levy’ for salaries over £330,000.

A change in Income Tax thresholds and rates will impact how significantly salary and bonuses are considered by workers as part of the complete reward package. There could be a need for employers to distinguish themselves through the full employee lifecycle, for example by offering additional skills development. Alternatively, it could mean that a bigger emphasis is placed on salaries, especially for higher earners, and organisations will need to understand how they compare to the market and the cost impact of this.

Employer Ownership and collective bargaining

Labour has announced plans for a significant shift in the role and power of employees and trade unions. For those employing 250 or more people, Labour will introduce requirements for workers on boards and an employee ownership fund, building up to 10% of shares held by employees (with any profits over £500 per worker being taken by government). Sectoral collective bargaining (setting minimum pay and conditions for each sector) and union recognition would also be introduced.

What does this mean for business?

Regardless of the election outcome, more change is coming to the workforce. The competition for top talent combined with addressing skills shortages mean that this will continue to be a complex strategic priority for all organisations. Gaining a complete understanding of your people strategy and the key cost and value drivers within this will prepare you to be able to respond more quickly and effectively.

Actions you can take now include:

  • Talent attraction, retention and development policies and processes: identify which skills are required for your business and ensure you have the right strategies in place to recruit, develop and retain people with these skills
  • Reward strategy: what impact would different approaches to income tax have on your reward model? Identify the impact of different scenarios and how you would need to develop your strategy
  • HR function and change: ensure your HR function is structured, resourced and skilled to deliver against your people strategy throughout and after these changes. Is your organisation prepared and supported to manage these changes in a way that maintains operations and an engaged workforce?
  • Cost forecasting: assess your forecasts based on possible cost drivers
  • Cost reduction: undertake a strategic review of your operating model to identify any unnecessary spend

 

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