What will a Labour government mean for businesses in the Technology sector? An employment and immigration perspective

In light of Labour’s landslide victory in the general election, we look at what this may mean for employers in the Tech sector, focussing on employment and immigration issues. Labour’s promise to introduce legislation to implement its ‘Plan to Make Work Pay’ within 100 days of entering government is likely to result in significant changes for UK businesses and once further details of proposed changes are announced, employers must move swiftly to adapt to avoid cost consequences.

Employment

Labour has promised some significant changes to employment law.

Labour plan on moving towards a single employment status of ‘worker’ rather than continuing to distinguish between ’employees’ and ‘workers’. Everyone, other than the genuinely self-employed, will be workers. Linked to this, all workers will be entitled to basic employment rights from day one. So, benefits like sick pay, parental pay, and unfair dismissal protection will be granted to workers from their very first day of employment. This is a huge shift from the current position. Labour has confirmed this change won’t prevent fair dismissal (for reasons such as conduct, redundancy or capability etc.) or the use of probationary periods with fair and transparent rules and processes. It’s not clear how any specific rules around probationary periods would work, but it would be prudent for employers to ensure their contracts contain a probationary period clause. It’s also likely that recruitment processes will need to be more robust as hiring the right candidate will become even more important. Given the regular use of freelancers and contractors in the Tech industry, it will be vital that businesses are correctly classifying the individuals they engage. Wrongly classifying someone as a self-employed freelancer when they are in fact a worker, could not only lead to historic liabilities, but also means they will be entitled to enhanced employment protection from day one. This means the risks are higher even for short term arrangements. Undertaking an audit to review current arrangements can help identify any risk areas and steps can then be taken to regularise the relationship.

Pay gap reporting will increase under a Labour Government, with large firms being required to develop, publish and implement action plans to close their gender pay gaps. The gender pay gap in the Tech industry is significant, with Women In Tech reporting the sector had a gender pay gap of 16% in 2023 (significantly higher than the national average of 11.6%), and women only occupy 23.5% of top-paying jobs.[i] Labour will also extend reporting obligations to include publication of ethnicity and disability pay gaps for employers with more than 250 staff. The Tech Talent Charter’s annual report found that based on a sample of over 113,000 tech employees, just 6% are disabled, compared to 23% of the wider UK workforce.[ii] Whilst Labour’s additional reporting obligations will result in higher costs for employers and potentially more claims, it will encourage more time to be dedicated to addressing the issue.

There is likely to be increased regulation of new technologies, including automation and AI. Labour is particularly keen to protect ‘good’ jobs and ensure that jobs, rights and protections keep pace with technological change. Labour will consult with workers, trade unions, businesses and experts to evaluate how to promote best practice in safeguarding against issues associated with AI and new technology (including invasion of privacy through surveillance technology, spyware and discriminatory algorithmic decision making). It therefore seems likely that there will be increased scrutiny and regulation of technology at work, and it’s also likely that businesses will need to engage with unions or other elected employee representatives on this issue.

There are plenty of other changes we haven’t got time to mention in detail here, but flag for completeness:

• Flexible working rights will be strengthened, and flexible working will be the ‘default’ from day one for all workers, except where it is not reasonably feasible. While flexibility tends to be firmly on the cards for most in the sector, this could call into question policies such as Dell’s, where it’s reported that fully remote employees have been told that they will not be eligible for career advancement unless they transition to a hybrid onsite role.[iii]
• Stronger collective rights – although not a heavily unionised sector, Labour’s plans to empower trade unions by strengthening the existing framework, simplifying the recognition process and introducing enhanced rights (after consulting with unions and businesses) for union officials to access workplaces could still impact employers in the Tech industry. It is clear Labour will place increased importance on collective rights, including introducing a duty for employers to inform all new employees of their right to join a union and include this in their contract.
• Labour will increase the time limit within which employees are able to make an employment claim from three months to six months. This, coupled with the introduction of day one rights and single worker status is likely to result in increased tribunal claims. Given the tribunal service is already struggling to meet demand, this is likely to result in even further delays. This could result in increased costs for employers across all sectors.

Immigration

Immigration has been another hotly debated topic as part of the election campaign, with an anti-migration rhetoric front and centre for most parties. Labour has promised to “reduce net migration” [iv] by ensuring that the UK has a “fair and properly managed immigration system”.  The underlying suggestion being that “bad bosses”[v] have been allowed to unscrupulously breach immigration and employment rules to plug skills gaps with overseas workers.

Although reporting some improvements in skills shortages in 2023, “54% of digital leaders say skills shortages prevent them from keeping up with the pace of change [in] the tech sector”[vi].  As all businesses feel the pressure to digitally modernise in order to stay competitive, it is anticipated that the Tech sector’s skills shortages and reliance on overseas talent will remain an issue for the foreseeable future.

So, what do Labour’s promised immigration reforms mean for an industry that is immediately reliant on overseas workers?

Unfortunately, the Labour Manifesto is light on details and we’re yet to receive a more comprehensive breakdown of its immigration plans now the party is in government.  We’re thus left with some broad headlines and educated speculation:

• At present, Labour has advised that it has no plans to cap immigration. This, of course, is positive news and means that the Tech sector can continue to recruit from a larger international talent pool.
• During the campaign, Labour promised to instruct the Migration Advisory Committee (the MAC) to review the increase to the Skilled Worker visa salary thresholds, which the Conservatives put in place in April 2024 if it won the election. There is no mention of this in the Manifesto. These salary increases ‘priced out’ most graduate level roles in the Tech sector, meaning that only senior specialists could be sponsored by UK companies.  Given Labour’s firm promise to reduce net migration, it is hard to see that it would be willing to make material reductions to the existing salary thresholds or reintroduce the Shortage Occupation List’s salary discounts, even for sectors such as Tech that are suffering from serious and immediate skills shortages.
• Labour has confirmed that it is not planning to engage with the EU to extend the Youth Mobility Scheme (YMS) to include European countries. The YMS allows people from 12 different countries to come to the UK to live and work for up to 2 years, depending on their nationality and age. This is unfortunate as access to junior European talent pool may well have offered a cheaper way for Tech companies to engage graduates and allow them to gain vital experience.
• Labour intends to impose greater responsibilities on companies that employ migrant workers to train and upskill the settled workforce. In its Manifesto, the party promises to “establish Skills England to bring together business, training providers and unions with national and local government to ensure [that the UK has] the highly trained workforce needed to deliver Labour’s Industrial Strategy. Skills England will formally work with the [MAC] to make sure training in England accounts for the overall needs of the labour market.” This certainly sounds like a positive and important long-term strategy for developing and retraining those already in the UK to meet the evolving needs of the Tech sector. However, this does nothing to meet the sector’s immediate labour shortages.
• Labour has confirmed that companies that are found (1) not to be doing enough to upskill the settled workforce or (2) breaching employment and/or immigration rules, will be banned from sponsoring workers. It is unclear from the existing information whether this would in fact mean a revocation of an existing Sponsor Licence and thus the curtailment of existing sponsored worker’s visas.

The long term training strategy and the tougher sanctions on exploitative employers should offer long term solution to the Tech sector labour shortage.  However, at present, the government does not appear to have a detailed strategy to support the Tech industry to plug those immediate skills gaps.

Should you wish to discuss any of the issues raised in this article, please contact Robert Forsyth (Employment), or Lynsey Blyth (Immigration).

[i] Women in Technology | The gender pay gap in tech: how do we close it? – Women in Technology

[ii] Diversity in Tech Report (techtalentcharter.co.uk)

[iii] Dell Latest Company To Punish Remote Workers – Startups

[iv] Kickstart economic growth – The Labour Party

[v] Labour’s pledge to cut work visas worries business (ft.com)

[vi] Digital Leadership Report 2023 | Nash Squared