10 predictions: The future of workforce law

Following decades of growth and significant acquisitions, many organisations are now challenged to manage fractured HR and compensation policies due to an accumulation of divergent terms that were not harmonised as new entities were acquired. These include terms of employment on, for example, vacation, work hours and work location, as well as terms of compensation, such as variable compensation plans, benefits, and salary ranges.

Similarly, global entities need to streamline payroll, HR policies and procedures across countries to reduce redundancies, which is proving to be a tremendous undertaking for global HR teams. The lack of uniformity also complicates efforts to adopt a flexible work environment that would allow the organisation to move people among business units or new jurisdictions.

KPMG professionals predict that the HR and Global Mobility teams of organisations that grew by rapid acquisitions will invest considerable time and effort in the coming years aligning the array of different rules and plans across their organisations.

As operations and HR teams attempt to harmonise their employee policies, they will need to proceed with caution. Among other things, they need to stay attuned to the risks of constructive dismissal in some jurisdictions. They must also be ready to manage the long-term impact on collective bargaining negotiations. Depending on the sise and scale of the need, it could take many years to bring all of the organisation’s policies into line.

Across North America, the European Union and other regions, many countries are adopting regulatory frameworks to ensure women are compensated on equal terms to men for work of equal value. More regulations are expected in the future as pay reporting becomes mainstream. Similarly, many legal and management teams are expected to devote significant attention to increasing pay transparency requirements in the coming years. As with gender pay equity rules, pay transparency laws aim to improve fairness and engagement by providing open information about compensation rewards for specific roles and responsibilities, as well as clear salary ranges for newly posted opportunities.

While the legislation will certainly urge organisations to do better in providing equality and transparency in pay, many companies are already voluntarily moving in that direction. As new rules and expectations take hold, legal teams are working with global organisations to identify and manage compliance and reputational risks in this dynamic environment.

In the coming years, pay equity metrics, policies and practices will continue to take on growing importance for organisations. This will require legal teams to work closely with management on complex job evaluations to improve pay equality across different occupations. Some roles have been traditionally disproportionately occupied by women or men (e.g. in caring, teaching and law enforcement professions), so these analyses need to ensure gender pay parity across job types by comparing, among other things, education and experience requirements, physical and mental effort, and working conditions. Failing to comply with equity and transparency laws could open the organisation to costly financial claims. It could also damage its brand in the public eye and weaken its appeal to potential recruits.

Compensation is a highly sensitive topic. Companies need to be ready to manage the implications of pay transparency to ensure people trust that they are being paid fairly for what they do. Gaining that trust means organisations need to be open, transparent, and accountable when it comes to their pay policies, publishing more detailed job profiles with clearly mapped roles, pay grades and expectations.

Like other workplace changes emerging amid the growing organisational emphasis on ESG, gender pay parity and transparency will likely become mainstream. The work to secure equivalence will leave organisations in good shape, with much better global job evaluation tools and comprehensive job architecture systems than exist today. Similarly, open salary information will help attract and screen new recruits. Closing any gaps in pay will advance the organisation’s ESG agenda by, for example, improving employees’ well-being and sense of worth, and showing accountability for its employment practices.

Supply chains are another area coming under scrutiny as part of regulators’ growing focus on organisational accountability in the ESG space, with new transparency laws being adopted that aim to ensure organisations engage in due diligence when it comes to their supply chains. Australia, the UK, European Union, US and Canada have or plan to introduce requirements for organizations to report details about the goods and services they import and/or produce. These laws largely follow changing sentiment in financial markets, with strict ESG policies being applied to investments and more ESG conditions being imposed on transactions and contracts.

This evolving international system of rules sets new and increasingly strict standards for disclosing and conducting diligence around suppliers’ human rights policies and practices on, among other things, sexual harassment and forced labor. When it comes to many of these new rule systems, public exposure is designed to serve as a deterrent. Failure to comply can lead to significant reputational harm when reported to the public by a regulator. Global organizations are expected to make significant investments in technology in the coming years to gain the required depth of visibility to monitor compliance with standards and policies across their supply chains.

Legal teams will need to work alongside management to ensure their organisation can verify their suppliers’ policies and how closely they are followed. The risk of deliberately fraudulent supplier attestations will need to be considered and addressed, along with the possibility that suppliers in some jurisdictions might not have the mechanisms in place to meet detailed reporting rules. To ensure that that this reporting is a meaningful exercise, organisations need to make sure their suppliers understand the standards being reported on and install accountability measures to verify their suppliers’ compliance with those standards.

In the long run, the visibility and attention being paid to suppliers’ activities will likely cause a shift toward more sustainable, responsible approaches to business activities in both source and destination jurisdictions. The new system of regulation will lead suppliers to compete based on the quality of their compliance, and the most cost-effective compliant ones will win the most success.

As generative artificial intelligence (AI) advances in the workplace, legal professionals at all levels will enjoy huge efficiencies. With the right guardrails in place to guard against inadvertent waiver of privilege, confidentiality breaches and other risks, the next few years will see AI deployed to support the work of lawyers across the spectrum of legal services — from drafting routine contracts and applying data and analytics to measure contract performance, to tracking and monitoring compliance with pay equity and transparency laws, and beyond.

To a degree, many time-consuming aspects of legal practice are ideal for AI applications. Anything that follows rules can be translated into algorithms. While earning a law degree requires considerable time, effort and intellect, most day-to-day legal work is often performed by junior lawyers before being reviewed by a more experienced supervising lawyer.

AI will make it easier to advance the digitalisation of routine legal activities and ultimately take over a significant amount of time-consuming work at the expense of tasks that draw more directly on lawyers’ specialised expertise. In other words, AI will open ways for lawyers to increase their productivity and support them as they move to work of higher value.

As this happens, AI will also change the legal market’s traditional value proposition. Consumers of legal service will see no reason to pay by the hour for legal work that AI can complete in seconds. Instead, they will make choices based on the level of service and value of solution they receive from lawyers who are able to employ the resources of AI to best serve their clients’ needs.

For standard services, for example, legal service buyers may value the service experience and speed of delivery above other considerations and therefore choose an online legal provider over a traditional law firm.

Ultimately, it will be up to legal practitioners to employ AI resources to their advantage to provide the higher levels of service that their clients will come to expect as AI advances and becomes more readily available. By automating lower-lever legal work where possible, legal teams can improve the value and quality of the legal services they provide, and focus on delivering strategic solutions to their clients’ legal issues.

Historically, times of growing economic disparity have led to increasing union activism, particularly in North America. As 2023’s summer of strikes in the US and Canada has shown, current conditions — with high inflation, threats of recession and downsizing — are setting the stage for heavier unionisation. This is especially true in the private sector, which has largely seen a decrease in unionization rates over the past 20 years. Whether unionisation drives will continue to increase over time could largely depend on the depth and breadth of any economic downturn to come, particularly if different groups of workers are disproportionately affected.

The impact of pay transparency of executive salaries on workers’ attitudes may exacerbate such trends where disparities are significant. To the extent that executive salaries continue to grow at rates exponential to those of other workers, employee dissatisfaction may also climb, leading to more activism and fiercer collective bargaining.

Legal teams across many industries can expect intensifying labor negotiations as a result. Legal teams will increasingly need to be prepared to advise organisations on how to avoid missteps in this environment, especially where significant downsizing or other restructuring is anticipated.

The coming years will see the legal industry grapple with demographic challenges across generations. In Western countries, the Baby Boom generation of people born between 1946 and 1964 are leaving the workforce in rising numbers. New entrants to the workforce are increasingly forgoing years of specialised legal training in favor of more variety and balance in their early careers. Younger legal professionals are increasingly rejecting the traditional pressure to produce ever more chargeable hours, and many of them want to work shorter hours at a more moderate tempo.

Technology will help enable a lower-pressure legal culture and bridge some of the skills gap for lower-level legal work. Legal educators and training organisations can then increase the appeal of legal programs by focusing on higher-order, more interesting legal concepts. The mix of legal teams will likely change, with fewer full-time legal specialists and more part- or flex-time specialists in technology, legal operations management and other non-legal areas. A growing ability to remotely hire legal talent from anywhere may also ease these challenges, particularly by opening recruitment opportunities in developing countries with higher proportions of youth or working-age populations.

With older talent retiring and new talent in short supply in many traditional legal markets, legal firms will be paying more attention to succession planning in the coming years or they risk losing a sizeable portion of their existing business. As senior lawyers exit legal practice, their firms need to ensure that sound plans are in place to smoothly manage the hand-off of trusted client relationships to the next generation. In part, this could mean moving to a team-based approach to client service, rather than funnelling all services through one lead partner, to sustain client relationships over the long term.

One legacy of the pandemic is a focus on the obligations of employers in the health and wellness area, especially where their employees’ mental health is concerned. Many employees are looking for more balance and less stress where work is concerned, and they now expect more attention to career and life satisfaction in the workplace.

With the corresponding decline in traditional stigma surrounding mental health issues, more workers can be expected to speak up about their needs. Legal teams will be increasingly called upon to work with management teams to the complexities associated with legal requirements to accommodate and manage, for example, the needs of neurodiverse employees and workers with substance abuse problems, as well as harassment and bullying claims.

At the same time, people will be more empowered to seek self-help, and they will have resources available to work through mental health issues independently of further assistance from their employer.

Working remotely used to be rare, but after the pandemic, it has become a permanent feature of the workplace. In some industries, including the legal sector, employees are demanding more freedom and flexibility over where they do their jobs. Organisations in some sectors are putting in place policies to encourage these arrangements to build their employer brand in highly competitive talent recruitment markets. Legal firms and other employers will also increasingly capitalise on their new ability to source potential recruits from virtually anywhere.

During and after the pandemic, legal teams were challenged to manage the huge range of legal compliance risks from taxation, labor and other laws, especially when the work is done across borders. Governments have only pursued the competitive advantages of easing conditions to attract remote employment in limited ways, if at all, so it appears that these risks will persist into the future.

As employers craft more variations on flexible work arrangements, such as international roaming programs and unlimited vacation plans, legal teams will need to work with management to ensure systems are in place to govern the underlying policies and practices so they continue to produce benefits without unacceptable risk.

Following the “Me Too” movement of the late 2010s and even more so with the post-pandemic focus on employee health and wellness, today’s workers are far more inclined to speak out and report experiences of unacceptable behavior. Organisations are increasingly challenged to understand their legal obligations to investigate alleged incidents such as harassment or discrimination in the workplace. Not taking action when the law requires it can expose the organisation to costly claims and reputational damage.

As toxic work environments continue to draw public attention, employers face a growing need to invest time and effort into addressing risks involved in resolving such issues as, for example, providing training to supervisors on when certain behavior crosses the line from performance management to bullying.

While the current situation is fraught with risk, the volume of cases being worked through now will likely lead to the development of clearer, more comprehensive guidelines. In the coming years, a much more substantial body of case law will emerge in these areas to help clarify and navigate these cases.

Tomorrow’s legal teams will have a wealth of experience and knowledge at their fingertips to determine when internal investigations are warranted, how to conduct them internally within the law and when to involve independent third parties. This will allow for the development of well-defined protocols, policies and manager training programs so that most harassment and discrimination claims will be handled by business units rather than the legal function.

Changes in compensation patterns will keep legal teams busy, advising the business, for example, on the implications of stock option plans.

In particular, many organisations are revisiting their company pension plans. More stringent regulatory mandates have pushed up compliance costs and heightened the need for improved data analysis and reporting capabilities.

Demographics are also playing a role in changing compensation patterns around pensions. Ageing populations are creating significant funding challenges, while younger generations are more interested in the social impacts of funds invested on their behalf. As in many other areas, younger generations are looking for personalized, flexible options where compensation and benefits are concerned, and they may be willing take less salary in exchange for contributions to social welfare funds.

This means the standard one-size-fits-all company pension will likely be rare in the future. As more companies opt to terminate their existing pension plans, HR teams will rely on legal professionals to advise on the legal implications of winding up, as well as any alternative post-retirement compensation arrangements that organisations may adopt.