Policy paper

2010 to 2015 government policy: labour market reform

Updated 8 May 2015

This is a copy of a document that stated a policy of the 2010 to 2015 Conservative and Liberal Democrat coalition government. The previous URL of this page was https://www.gov.uk/government/policies/making-the-labour-market-more-flexible-efficient-and-fair Current policies can be found at the GOV.UK policies list.


Businesses say current employment laws are difficult to cope with and put them off taking on staff. This slows the growth of businesses and the economy.

Simpler, more flexible employment laws will make it easier for companies to hire and manage staff, while protecting workers’ basic rights. This should encourage employers to create new jobs, supporting enterprise and growth.


To make the labour market more flexible, efficient and fair the government is:

  • reviewing employment laws
  • introducing more flexible working practices for parents and older workers
  • setting and enforcing National Minimum Wage rates to protect workers from exploitation and businesses from unfair competition
  • making it easier for businesses to employ people and for employees to balance work and family commitments
  • providing better guidance on employment law
  • enforcing standards in employment agencies and employment businesses and recruitment agencies to better protect workers
  • researching the labour market to produce data on employment relations, the labour market and equality at work

We agreed to review employment law in May 2010 as part of the Coalition Agreement.

The Red Tape Challenge to reduce regulations launched in April 2011 and includes a review of employment law.

We’ve already:

  • extended the time you need to be employed to be able to claim for unfair dismissal from 1 to 2 years
  • introduced the Enterprise and Regulatory Reform Bill which will make changes to the employment tribunal system, including ensuring all employment tribunal claims go to Acas and introducing a simpler process
  • removed the compulsory retirement age, making it easier for older people to carry on working
  • launched a pilot scheme encouraging the use of mediation to resolve disputes
  • reviewed how employment rights are enforced

Who we are consulting

We’ve carried out consultations on:


We’ve carried out an impact assessment on the benefits of resolving workplace disputes. We estimate these changes will save businesses £40 million a year.

Appendix 1: encouraging modern workplaces and flexible working

This was a supporting detail page of the main policy document.

The government would like to make employment practices in the UK more flexible and family-friendly.

Flexible working allows employees to have a career that fits in with other commitments. By agreeing working patterns that suit both parties, employers are then able to hire and keep the skilled workers they need. This allows them to develop their business and increase productivity.

The Modern Workplaces consultation

We published the Modern Workplaces consultation in May 2011. The government responses on flexible parental leave and flexible working outlined plans to:

  • change the current system of maternity, paternity and adoption leave and pay
  • extend the right to request flexible working to all employees

Flexible parental leave

At the moment mothers are entitled to a long period of maternity leave and pay but fathers get much less.

The changes will:

  • allow fathers to play a greater role in raising their child, including the right to take unpaid leave to go to 2 antenatal appointments
  • help mothers return to work when they want to without losing leave entitlement
  • allow mothers to return to work temporarily for a busy period or an important project

Find out more about parental leave.

Flexible working for all employees

Flexible working benefits employees, employers and the economy.

At the moment only parents of children under 17 (under 18 if disabled) have the right to ask for more flexible working arrangements.

We plan to change the law to extend the right to ask for more flexible working arrangements to all employees (apart from those with the new employee owner status). This will help employees balance work and personal life and will help employers retain experienced staff.

All employees will be able to discuss changes to the way they work, and how the changes will work for the business, with their employer.

Find out more about flexible working.

Appendix 2: researching the labour market

This was a supporting detail page of the main policy document.

To help the government create good employment policies, we commission research on employment relations, the labour market and equality and discrimination at work.

Labour Market Analysis

Labour Market Analysis is a team of economists, social researchers and statisticians. They provide a range of surveys, research projects and analysis on the labour market.

Data from major surveys are available from the UK Data Archive.

Workplace Employment Relations Study

The Workplace Employment Relations Study is a national survey of managers and employees in Britain. It looks at:

  • how workplaces are managed
  • fair treatment
  • trade union membership

It includes responses from employers, employee representatives and employees.

Trade union membership statistics

The Department for Business, Innovation and Skills and the Office for National Statistics publish national statistics on trade union membership. The latest publication covering information up to 2012 includes estimates by:

  • age
  • sex
  • ethnicity
  • income
  • full and part-time employment
  • sector
  • nation
  • region

Appendix 3: reviewing employment law

This was a supporting detail page of the main policy document.

The Employment Law Review, led by the Department for Business, Innovation and Skills (BIS), started in 2010 and will end in 2015.

The review is looking at all employment laws to make sure they offer maximum flexibility for employers and employees. This should encourage employers to take on more staff, supporting enterprise and growth.

We want to reduce the burdens on businesses and help them manage all aspects of an employment relationship while protecting fairness for employees.

As a result of the review we have:

Resolving employment disputes

The Enterprise and Regulatory Reform Bill will make it easier and more efficient to resolve employment disputes by:

  • offering free conciliation with Acas to help resolve disputes before employees make a claim
  • making it easier to agree a settlement agreement to end an employment relationship
  • allowing judges to sit alone in employment appeal tribunals

See also the guidance on resolving employment disputes.

Dismissing staff

We asked for views on compensated no fault dismissals (NFDs) for micro businesses with fewer than 10 employees. Our response states that, as there wasn’t a strong case for NFD we’re not taking the idea further.

The employer’s charter

We need to make sure employment law both protects employees and allows businesses to operate effectively to support economic growth.

The employer’s charter aims to help employers understand exactly what they can and can’t do when managing staff. It includes details of what employers can ask employees and what businesses can do if there are problems.

See also the guidance on employment law.

Appendix 4: providing guidance on employment law

This was a supporting detail page of the main policy document.

The government is reviewing employment laws and is looking particularly at regulations that can put employers off hiring new staff.

As part of this review, we want to improve guidance on employment law to make sure it’s accurate and useful.

Guidance on the dismissal process

Ending an employment relationship can be time-consuming and stressful to both employees and employers. Employers say that one of their main concerns is that they find it difficult to dismiss under-performing staff.

We’d like to help by making guidance on the dismissal process simpler. Workers need to know what’s expected of them, and employers need to understand how to dismiss poorly-performing workers.

Acas has published a guide to the dismissals process aimed at small businesses.

Guidance on discipline and grievance

The Acas code of practice on discipline and grievance is a guide for employers and employees on dealing with problems at work.

Acas has published guidelines for smaller businesses.

Guidance on employment law

See also the guidance on employing people and working, jobs and pensions.

You can also get advice on workplace disputes and employment rights from Acas or the Pay and work rights helpline.

Appendix 5: introducing more flexible working practices

This was a supporting detail page of the main policy document.

The government has introduced more flexible working practices so that:

  • employees can work as long as they want to
  • fathers can share leave after a child is born

Phasing out the compulsory retirement age

In July 2010 we published a consultation on whether a compulsory retirement age of 65 was appropriate and necessary.

The government response to the consultation proposed a 6-month transitional period ending with full abolition of the default retirement age in October 2011.

Employers can still have a compulsory retirement age if they can justify it clearly.

We’ve also:

  • encouraged the use of flexible retirement arrangements where employees work part-time and get part of their pension
  • removed the need for employers to give a minimum of 6 months’ notice of retirement
  • removed the right of employees to request to work beyond their retirement age

See the guidance on retirement. Acas also provide guidance to help employers with conversations with their employees about retirement plans.

Additional paternity leave and pay

In April 2010 new regulations gave fathers additional paternity leave and pay.

Eligible fathers can take up to 26 weeks additional paternity leave. This leave can be paid if taken during their partner’s Statutory Maternity Pay period. It will be counted as unpaid leave if taken afterwards.

This gives parents more choice about how they share child care responsibilities. Mothers can return to work early, allowing fathers to take leave instead.

See the guidance on paternity leave.

Appendix 6: setting and enforcing the National Minimum Wage

This was a supporting detail page of the main policy document.

The National Minimum Wage (NMW) protects workers on a low income and is one of the most important workplace rights.

The NMW rates changed in response to the Low Pay Commission’s 2013 recommendations.

From October 2014 the hourly NMW rates increased for:

  • adults: from £6.31 to £6.50
  • 18 to 20 year olds: from £5.03 to £5.13
  • 16 to 17 year olds: from £3.72 to £3.79
  • apprentices under 19 or those in their first year: from £2.68 to £2.73

We also increased the accommodation offset from £4.91 to £5.08.

In October 2014, more than 1 million people benefitted from a 3% increase to £6.50, up from £6.31 for workers aged 21 and over, with different rates for other age groups and apprentices.

Enforcing the National Minimum Wage

The NMW is the lowest pay rate per hour that almost all workers are entitled to by law. You can view more information on who is entitled to the NMW. The vast majority of employers do pay it (or more), but a small number fail to do so, which is illegal.

The Department for Business, Innovation and Skills (BIS) sets NMW rates annually and makes supporting policy. HM Revenue and Customs (HMRC) is responsible for enforcing it.

We work together closely to make sure employers pay the right amount - see ‘Calculating the minimum wage’. HMRC’s experience of enforcing the NMW, helps to shape the strategy to provide a labour market that is fair for all workers, while encouraging businesses to develop and grow.

What we’re doing

We’re cracking down on employers breaking NMW law. You can find details in our updated enforcement policy document, which lets people know that employers breaking NMW laws will be caught and punished. Find out more about enforcing the NMW.

Employers failing in their duty to pay what their workers are due will be publicly named and shamed.

For pay reference periods after 7 March 2014, rogue employers now face an increased penalty of up to £20,000 in addition to the arrears due to workers. This penalty is now based on 100% of the wages owed which is an increase from 50%.

We are also amending legislation to set the maximum penalty for under payment so it can be calculated on a per worker basis to further deter employers from breaking National Minimum Wage law.

Pay and Work Rights Helpline

We have helped workers in many sectors, including cleaners, shop staff, apprentices, hairdressers and migrant workers to receive the wages they are entitled to. A single complaint is all that’s needed. The Pay and Work Rights Helpline refers complaints to HMRC.

Interns and apprentice complaints are fast-tracked for consideration. An intern promotion campaign offers advice and guidance on entitlement to the NMW to young people considering taking up an internship or unpaid work.

If workers are owed money, HMRC issue a notice of underpayment to the employer requiring them to comply with the law, normally using civil penalty powers, but prosecute in the most serious cases.

HMRC often use taskforces to investigate, working with other organisations. While we make it as easy as possible for employers to comply, we target enforcement at the highest risk areas such as errors with apprentices’ pay. Our actions are informed by complaints and pro-active assessments using the latest technology.

A total of 21,464 people called in 2013 to 2014, which led to 3,294 inquiries. We offer advice in 100 languages.

Complaints pay off

During the last 15 years we’ve identified more than £54 million which should have been paid in wages, and returned it to 229,000 workers.

Since April 2013 to March 2014, HMRC has:

  • investigated 1,455 complaints
  • sent 652 employers automatic penalty charges
  • fined 52 employers the previous maximum of £5,000
  • identified £4.6 million due, giving 22,610 workers an average £205 in back pay
  • continued our successful work in joint taskforces with the police, immigration enforcement staff at the Home Office and local authorities across the UK
  • targeted music industry job adverts in the run up to the Brit Awards

Other highlights included:

  • a social care provider who didn’t pay their staff for travelling time and other hours worked, was told to repay more than £600,000 in wage arrears to almost 3,000 workers
  • a major football club was ordered to pay arrears of about £27,500 to more than 3,000 workers, after it made deductions for uniforms and travelling time for staff working in hospitality
  • a recruitment agency was ordered to pay more than £167,000 to workers, including some it had classified as unpaid interns
  • a multi-outlet retailer, which required its employees to attend work before and after opening hours without pay, was ordered to repay almost £77,000 to more than 1,300 workers

The 4 cases outlined here were considered as part of the pre-October 2013 naming scheme and did not meet the naming criteria for that scheme. Any such cases investigated now would be publicly named under the revised naming scheme.


The Gangmasters Licensing Authority (GLA), is one of the partners that we work with and regulates firms that provide workers to the fresh produce supply chain. To get a GLA licence they must comply with the National Minimum Wage Act.

Appendix 7: enforcing standards in employment agencies and businesses

This was a supporting detail page of the main policy document.

The Employment Agency Standards Inspectorate (EAS) is part of the Department for Business, Innovation and Skills (BIS). It works with agencies, employers and workers to make sure that employment rights are complied with, particularly for vulnerable workers.

To make enforcement more effective, inspections have concentrated on businesses most likely to be breaking the law.

See further information about employment agencies.

People banned from running an employment agency

The EAS produces a list of people prohibited from running an employment agency or business due to misconduct or unsuitability.

Employment Agency Standards Inspectorate’s (EAS) list of people prohibited from running an employment agency or business