Demographic changes and the war on talent – a catalyst for workplace diversity and inclusion

Lucy Gordon
Walker Morris, Leeds
Lucy.gordon@walkermorris.co.uk

Introduction

The UK has been experiencing a ‘war for talent’ since the pandemic. The effects of Brexit, including reduced net migration to the UK, combined with significant shifts in workplace expectations, mean that major skills shortages remain in sectors such as healthcare, hospitality and construction. The UK has an ageing workforce, and one of the difficulties in reducing this trend is that making roles in these sectors attractive to younger generations is a challenge when they are typically regarded as being low-paid, and hard work. At the same time, work offered in these sectors can be unreliable, and there is a danger that younger workers are being exploited as a result of their lack of experience. The UK is seeing a seismic shift in the expectations of the workplace in younger generations, and those employers who do not embrace change are falling behind in securing the best talent.

Alongside this, sweeping legislative changes are on the horizon, which propose to bring the biggest shake up to UK employment law for a generation. Will these changes help to close the gap between workplace expectations and workplace reality, or will they generate new problems for employers to resolve?

Current UK workforce demographics

The latest figures^[1] show that, of the UK workforce, 32.3 per cent are aged 50 or over. In total, 85.8 per cent of 35–49-year-olds are in employment, whilst youth unemployment is rising, with 14.5 per cent of those aged 16 to 24 being unemployed.

Against this backdrop, having vacancies attractive to and available for younger workers should be a key priority for employers.

Proposed changes to employment law

The UK Labour party was elected to government in 2024 and the introduction of the Employment Rights Bill (ERB) in October 2024 is driving significant change in employment law. The ERB proposes substantial and wide-ranging changes to areas of employment law that typically impact younger workers, such as zero-hour contracts and flexible working. A greater focus on diversity, equity and inclusion (DEI) in the workplace will pose a fresh challenge for employers, who must be responsive to the new employee-friendly rights, in order to remain culturally relevant and legally compliant.

The gig economies and zero-hour contracts

Zero-hour contracts have traditionally been viewed to be unfavourable for employees, in that in the UK, they are symbolised by a lack of any obligation on the part of the employer to offer any hours of work from week to week. The employee is not usually required to accept work if it is offered, but the government considers that many zero-hours workers do not realistically have the ability to turn down work. This means that employees typically have fluctuating incomes and a lack of financial security, alongside the juggle of accommodating work at short notice if it is offered. Such contracts can be seen as exploitative on the part of the employer, and this is at least the view of the current UK Government, particularly in light of the fact that most zero-hours workers are not compensated when employers cancel shifts with little or no notice.

Zero-hour contracts are usually deployed in low paying roles, for example, in the healthcare, hospitality, retail and entertainment industries. A recent Work Foundation analysis^[2] shows that 21.4 per cent of the UK workforce is in ‘insecure’ work and young workers (aged 16 to 24) are almost six times more likely to be engaged on a zero-hour contract than older workers. This does not just include students, as young workers who are non-students are still nearly four times more likely to be on a zero-hour contract than any other age group. Another survey carried out by the Office for National Statistics found that 65 per cent of zero-hour contracts in 2023 were given to young people.

Zero-hour contracts are rife in the gig economy. Apps and tech-platforms have been developed to enable businesses to engage freelance workers on short notice. Employers using gig-economy apps have been criticised for the exploitative and immediate nature of the engagements. The platforms that advertise these roles will often refer to looking for ‘young people’ to fill these roles. Young people tend to therefore bear the brunt of these contracts as they lack experience and have little option but to take these start-out jobs and accept a one-sided arrangement.

For these reasons, the government is proposing to ban zero-hour contracts in the UK, and to instead introduce a concept of guaranteed-hours contracts, whereby anyone engaged on a zero-hour or low hours contract (yet to be defined) is, after 12 weeks, offered a guaranteed-hours contract for the average number of hours worked in the past 12 weeks. The proposals could offer welcome certainty for young workers typically engaged on such contracts, but by contrast, they strike fear into the heart of many employers with seasonal demand fluctuations.

However, there are benefits to zero-hour contracts that critics may often overlook. The flexibility for zero-hour workers to pick and choose shift patterns at short notice has traditionally been their main appeal. For young workers in full-time education or for those with other commitments, zero-hour contracts can offer an opportunity to work outside of demanding full-time contracts and this may enable them to be economically active when this would not otherwise be possible.

Already, UK employers are seeking options to circumvent the proposals if they are introduced. The requirement, as currently drafted, would be to make an offer of guaranteed hours to the employee, but this does not need to be accepted. We can already foresee unscrupulous employers putting pressure on employees not to accept offers made, to allow them to continue with flexible arrangements.

Working flexibly/remotely

Following the flexibility to work from home during the Covid-19 pandemic, many employers continued the hybrid working trend, but recently, businesses such as Amazon and Boots the Chemist have shifted towards requiring their employees to return the office more regularly (and in some cases full-time). Young workers who have only ever known a post-Covid workplace are not accustomed to full-time attendance in the office, and this is resulting in more resignations and people searching for more flexible options.

All employees in the UK have a legal right to request flexible working and this was made a ‘day 1’ right in April 2024. The right is currently to request flexible working, and the onus is on the employee to demonstrate that it can be accommodated. However, under the ERB, the proposal is that flexible working should be the default position, with the burden on the employer to show that it is not able to accommodate the request. The intention is that this makes it harder for employers to refuse requests.

We can therefore expect that businesses will see a rise in flexible working requests over the coming years. Employees have generally relished the opportunity to work from home and enjoyed the work–life balance this has brought them. A global survey found that 60 per cent of people prefer either hybrid working or full-time working from home.

Should employers insist on reverting to a five-day traditional in-office policy, they could seriously risk retention rates and become less competitive and attractive to a diverse talent pool, particularly younger workers.

Diversity, equality and inclusion

For some years now, diversity, equality and inclusion (DEI) have been buzzwords for UK employers. It has become acceptable, and in most circumstances expected, that UK employers foster a culture of DEI in their workplace. For the UK, the trend has, until very recently, continued to grow, and the DEI approach has been bolstered by legislation such as the Equality Act 2010.

According to Glassdoor, 77 per cent of employees consider a company’s culture before applying for a job, demonstrating how vital an employer’s culture is for applicants. More interestingly though, and as a complete shift from traditional expectations in the recruitment of employees, the same Glassdoor study revealed that 56 per cent of employees believe that a company’s culture is more important to job satisfaction than salary. This is heavily influenced by the views of younger workers, who tend to value culture and diversity above financial reward.

However, changes in DEI approach, most notably influenced by the changing attitudes in the US, are already starting to infiltrate into UK employers’ strategies. Walmart, McDonalds and Meta have all announced plans to reduce their DEI initiatives and goals, and UK employers are looking to the US to see how these developments impact on employee recruitment and retention.

Despite the US’s change in approach, the UK continues to push for cultural shifts. The election of a Labour government in 2024 signalled a marked desire by the UK to continue the DEI offering in the workplace, and Labour has confirmed that this approach will continue in the coming years.

The ERB provides for a new obligation on larger employers (250 or more employees) to publish an equality action plan showing the steps that they are taking in relation to their employees with regard to matters related to gender equality and to publish prescribed information relating to the plan. Additionally, the gender pay gap, will continue to be reported on. The ERB also proposes the introduction of ethnicity and disability pay gap reports. All of this should be music to the ears of younger workers, but will it stay this way?

Conclusion

During any war for talent, employers should be considering what cultural incentives they can offer to employees. Younger UK employees tend to be less motivated by money and promotion, and more by culture and flexibility. Changes to UK employment law will, in some cases, align with these motivations, but could cut across young people’s desire for flexibility with too rigid approaches in relation to guaranteed hours contracts.

Labour’s proposals may give businesses the push required to focus on improving workplace rights, from flexible working to DEI. If a business remains stagnant, it will not encourage a range of diverse talent that will be needed to allow it to grow and thrive in a competitive, rapidly changing landscape.