The HR and employment issues that will shape the UK workplace in 2023

The year ahead could also see the government make major reforms to areas of EU law that have been retained on the UK statute book, which could have significant consequences for the relationship between employers and their workers.

Governance and reform

De-regulation

2023 should reveal the employment impact of the government’s promised cut to ‘red tape’, as well as the result of a wider review of all EU-derived laws. Ministers plan to repeal all EU-derived laws that were retained in UK statute after Brexit by the end of the year unless the legislation is specifically exempted following the review. If this process results in a rolling back of employment legislation, HR will be considering whether to retain policies or whether to leverage greater flexibility.

HR-led ESG

HR feeds into environmental, social and governance (ESG) strategy and makes a vital contribution to implementing law and sector-specific regulation. HR can also drive participation in voluntary schemes, initiatives and pledges, such as Real Living Wage and Disability Confident. HR data collection and benchmarking to monitor people-related ESG progress is a significant contribution.

HR can help guard against ‘social washing’ - making misleading, exaggerated, or unsubstantiated claims about the management of social risk or social issues. EU-wide employers will want to monitor proposals for detailed public workforce reporting under the EU Corporate Sustainability Reporting Directive. The new directive will oblige companies to regularly disclose information on the social and environmental impacts of their business activities.

D&I and wellbeing

Board and senior leadership

HR can work with nomination committees who oversee board recruitment to ensure a diverse recruitment pipeline. Governance initiatives have a particular spotlight on gender and ethnicity inclusion, and socio-economic diversity is gaining attention. New Financial Conduct Authority (FCA) rules require UK listed companies to set out whether they have met board diversity targets in their annual reports and the FTSE Women Leaders and Parker reviews will continue to scrutinise these issues.

Gender identity

HR will manage the response to the expression of gender identity in the workplace. The Scottish government’s proposals to change gender recognition protocols is a hot topic. The Bill will impact Scottish employers as employees could present gender recognition certificates under changed rules. UK-wide employers may want to consider how differing positions elsewhere in the UK may impact the workforce.

Harassment prevention

Initiatives need to stay fresh for all protected characteristics and react to new legislation. Draft legislation to regulate NDAs is awaited. Although the government backed a Private Member’s Bill to reinstate employer liability for third party harassment and introduce a positive duty to prevent harassment, it may be given insufficient parliamentary time for it to progress. Despite this, the Bill’s contents remain government policy.

The government also plans to create an offence of public sexual harassment in England and Wales, while the Scottish government is developing new criminal legislation to challenge “public misogynistic harassment”.

Positive action

Employers are considering using ‘positive action’ to avoid stalling on D&I targets. We await new government guidance. The analogous concept of ‘affirmative action’ in the context of higher education is currently being challenged in the US Supreme Court, a fact that will be of interest to employers in America.

Using data to reduce pay gaps

D&I data collection can provide a useful focus even when not legally required, especially around gender, ethnicity and disability. Once collected, HR can guide the business on transparency issues and provide a narrative for the results. The government will finalise its proposed standards to ensure responsible and accurate reporting of ethnicity data.

A review of the gender pay gap regulations is awaited and some EU-wide employers will be considering the likely impact of the EU's Pay Transparency Directive in 2024. Disability workforce reporting will attract renewed attention as the govt. responds to its 2022 consultation.

Supporting disabled workers

HR input may be needed if the government completes its review of the Disability Confident Scheme. Reviewing strategies about recruitment and retention of workers with long-term health conditions, including long Covid-19, may also be relevant.

Supporting older workers

Financial pressures have caused some workers to delay retirement or re-enter the workforce. As the ‘race for talent’ continues, the availability and experience of this workforce is invaluable. Considering initiatives to attract older workers and retention strategies focusing on flexible working, caring, re-training and wellbeing are on many HR team’s agendas. The Age-friendly Employer Pledge is interesting.

Family-friendly policies

The government has backed four family-friendly Private Member’s Bills to progress pre-existing policy commitments, including: a new right to paid leave for parents of babies requiring neonatal care; unpaid carers leave; giving pregnant women and new parents greater protection against redundancy; and flexible working.

There may be draft legislation on predictable shift patterns and a response to 2019 consultation proposing a right to reasonable notice of working hours and compensation for some cancelled shifts. The government may also respond to its 2019 consultation on reforming parental leave and family-related pay and leave.

Workers’ health

There is a shift towards a focus on physical wellbeing as well as mental health, noting tools such as the new CBI Work Health Index which also encourages benchmarking on this topic. Health and safety issues impacting women will continue to attract particular HR attention, including supporting those impacted by menopause and domestic violence.

Meanwhile, the idea of a four-day week continues to attract discussion and the Living Wage Foundation is calling for a living hours pledge to complement its real living wage scheme. Refining hybrid working may be a focus for HR where the business is still trying to find a sweet spot between workplace attendance and home working.

Data, the digital workplace and business protection

The ‘people analytics journey’

We have highlighted some D&I areas where data collection can be important, but data collection and analytics can also be useful when analysing other areas such as recruitment costs, training costs and turnover analysis. Many HR professionals are reviewing where they are in their ‘people analytics journey’.

New workplace ICO guidance

The Information Commissioner’s Office (ICO) work to update its employment practices code will continue as it issues topic-specific guidance for consultation. Draft guidance on monitoring and health have already been published. HR can refresh data protection policies and monitor the HR impact of the government’s proposal to replace the GDPR with a British data protection system.

HR involvement in AI

HR may want to revisit its role in the lifecycle of AI solutions that impact the workplace. HR input will be invaluable to manage discrimination risks and overall fairness.

Whistleblowing structures

HR, along with compliance teams, can be guardians of effective whistleblowing systems. Maintaining the integrity of whistleblowing procedures is even more important now that they often form part of market-facing ESG reporting. The government may progress its commitment to review the UK statutory whistleblowing regime, and HR will also need to pay attention to the EU Whistleblowing Directive.

Settlements and compensation

The Treasury will finalise proposed new administrative controls relating to public sector exit payments, particularly impacting exit payments over £95,000. In a recent case, the Employment Appeal Tribunal (EAT) made important comments on waivers, including the inability of a settlement agreement to settle unknown future statutory claims.

Draft legislation regulating non-disclosure agreements (NDAs) is expected this year. Restrictive covenants also remain relevant. HR can continue to review covenants to ensure business interests are protected. The government may respond to its consultation on non-compete clauses in the coming year.

Workforce reward and structure

Understanding workforce structure

Having a workforce structure that delivers value to the business, while also being consistent with wider company purpose, is an area of ESG focus. A government review will report on how the future labour market should be shaped, including how to build on good flexibility in the labour market and the gig economy.

Depending on the wider economic impact of 2023, consideration of restructuring may be needed. EU-wide employers may watch the progression of the proposed EU directive to protect the rights of platform workers. HR can identify new talent pools and consider whether 2022 retention strategies proved effective.

Employee engagement strategies

Industrial relations strategies will need be monitored and reviewed to minimise business disruption throughout 2023. Union and non-union engagement strategies are relevant to broader ESG interests. Monitoring for legal changes will include the upcoming Supreme Court decision on whether detriment protection protects employees from action short of dismissal if they take part in strike action.

The High Court is also set to will decide whether a judicial review challenging the repeal of the ban on the use of agency workers during strike action is lawful. Meanwhile, a new statutory code of practice in relation to some dismissal and re-engagement strategies will be published soon, and further trade union law reform – including minimum service levels for the transport sector – has been proposed by ministers.

Employment status

No change is expected with employment status, but new case law could impact IR35 assessments and assessments for employment law purposes around who is a worker or employee. It is always helpful for HR to keep status assessments up-to-date and consistently applied.

Cost-of-living concerns

Workforce responses to cost-of-living concerns will remain relevant in 2023. Financial wellbeing advice and support could be an HR focus as businesses seek cost-effective ways to support employees.

Salary and benefit changes

Increases to the national minimum wage, national living wage and statutory payments including maternity, paternity, adoption and shared parental leave pay will be implemented in April. A Private Member’s Bill reforming tips and gratuities will progress and may become law. The government has expressed a broad intention to reform Statutory Sick Pay (SSP). At the same time, free transport for late shift workers could also become law in Scotland.

Annual leave entitlements

The Supreme Court’s recent decision, clarifying that workers who are only employed during some weeks of the year but who have a contract which lasts for the full year are entitled to a full year’s statutory holiday entitlement, continues to have an impact. The government thinks it is appropriate to right this anomaly and has issued a consultation proposing a number of potential solutions (31-page / 288KB PDF). The Supreme Court is also set to hand down its decision on whether a series of pay deductions can be considered broken by a gap of three months or more.

Immigration and international mobility

Managing remote working risks

The radical shifts in working patterns, and especially the employee-led demand for remote and overseas working, continue to present challenges in reviewing and adapting policies and processes to manage the resulting employment law and tax risks. The recent Office for Tax Simplification report highlighted various areas where the existing regime is no longer fit for purpose and floated some fairly radical options such as a general employment allowance, and changes to the UK tax treatment of temporary working.

Reform is not expected imminently and the government’s approach is not clear, but this is an area to monitor. For now, HR has a role in working with tax and finance teams to assess how complex rules on tax relief for travel and subsistence expenses interact with new working practices, and whether that requires changes to expenses policies. Informal overseas working also requires careful monitoring and clear parameters put in place in order to minimise the risk of significant unexpected liabilities – plus careful consideration of the implications of any exceptions which are made.

Immigration

The UK unemployment rate remains low, pushing increased reliance on migrant sponsorship to fill vacancies. There has been a 128% increase in sponsored worker visas since 2019. The government continues with plans to revolutionise the UK border. While innovation should lead to quicker processing, pre-travel authorisation is anticipated at some point, similar to the US ESTA scheme. This would require applications by many who do not currently need to apply.

The Home Office plans to digitise immigration documents remain on course, with physical documents to be phased out by the end of 2024. This means that employers will see fewer and fewer people with immigration documents and will need to be confident with digital methods of checking right to work.