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The Coalition Government: Employment Implications

07 July 2010 #Employment

On 20 May 2010, the new Coalition Government published its Coalition Agreement, setting out key policy plans. The plans are stated as being based on central principles of "freedom, fairness and responsibility" and cover a breadth of issues from banking to immigration.

In addition, on 25 May 2010 the Queen delivered her speech to both Houses of Parliament, outlining the Coalition Government`s priorities for the coming parliamentary year. Whilst we are yet to be provided with details in relation to the policies and how they will work in practice, a number of the plans should be noted for their employment implications. We set out some key areas to note below.

The Government sets out its intention to make society more family friendly. Shared parenting will be encouraged from the earliest stages of pregnancy, and this will include a system of flexible parental leave. As yet we do not know exactly what this will be.

In addition, the government plans to extend the right to request flexible working to all employees. It is not yet clear whether the Government intends to introduce this immediately or on a phased basis.

The policy document also states an intention to promote equal pay and take a range of measures to end discrimination in the workplace. Little information is provided as to how this will be achieved; however the Government says that it will undertake a fair pay review in the public sector to implement its policy that the highest paid person in an organisation is paid no more than 20 times the lowest paid. The Government also intends to look to promote gender equality on the boards of listed companies.

There will be a phasing out of the default retirement age; however we do not yet know when this would happen. A review will also be carried out to look at when the state pension age should start to rise to 66. This will not happen sooner than 2016 for men and 2020 for women.

A number of key tax measures are set out by the Government. This includes substantially increasing the income tax personal allowance (currently £6,475) from April 2011. The long-term objective is to raise the personal allowance to £10,000 and this will be prioritised over other tax cuts. The increase in the employee National Insurance Contributions threshold (previously proposed by the Conservatives in their campaign) has been dropped, to fund the increased personal allowance. However, there will be a block on next year`s 1% rise in National Insurance contributions by employers and the employer`s contributions threshold will go up by £21 a week. The Chartered Institute of Personnel and Development (CIPD) and the Confederation of British Industry (CBI) have reportedly welcomed the block on the 1% rise in employer NICs at a time when the economy remains fragile.

The banking system is to be reformed and this is to include "robust action" to tackle "unacceptable bonuses". Again, the nature of this reform and exactly what robust action means is unclear.

There is also a plan to end all existing welfare reform programmes and create a single welfare-to-work programme, with benefit payments being made more conditional on willingness to work. The Government is also planning to introduce a cap on non-EU migrants being allowed to work in the UK. However, the CIPD reportedly opposes the proposed cap on immigration, warning it could lead to higher wage costs.

Finally, the Government intends to establish a commission to look at creating a British Bill of Rights, incorporating and building on obligations under European Convention on Human Rights.


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