The Employment Rights Bill could cost businesses £7.4bn over the next decade as the government published its impact assessment and launched four consultations on the landmark legislation.
The government’s economic analysis says the Employment Rights Bill will have a positive direct impact on economic growth, according to documents published today.
As the wide-ranging Bill for workers’ rights returned to Parliament today, the government said that 10 million working people across the country would benefit. It said the Bill is expected to help people in the most deprived areas of the country by saving them up to £600 in lost income from the hidden costs of insecure work.
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The Bill aims to support employers, workers and unions, boosting productivity, creating better working conditions and moving more people into secure work while improving living standards.
Deputy prime minister Angela Rayner said: “Successful firms already know that strong employee rights mean strong growth opportunities. This landmark legislation will extend the employment protections given by the best British companies to millions more workers.
“We said we would get on and deliver the biggest upgrade to rights at work in a generation and the growth our economy needs – and that is exactly what we are doing.”
Speaking in the House of Commons today, business secretary Jonathan Reynolds, said: “From our very first day in office, this government has moved to restore security for working people. That principle runs throughout this legislation and ensuring that employee rights are fit for a modern economy, empower working people, and contribute to our central mission of economic growth.
“Make no mistake – a pro-worker economy is a pro-business economy. This legislation will deliver a new deal for working people. It will help fix our broken labour market. And it will tackle the poor pay, poor working conditions and poor job security that have been holding our economy back.”
Extra red tape
But Ben Smith, senior associate at law firm GQ Littler, focused on the £7.4bn cost to business over the next decade detailed in the economic analysis. He said: “The direct cost of these regulations is significant – in the short term it may be painful for businesses to absorb this extra red tape, particularly as much of the cost will be additional upfront administrative costs to understand and prepare for the new employment law landscape.
“We may see some businesses struggle to manage the immediate financial impact. Changes to statutory sick pay (estimated to have direct costs of £400m annually) and introducing the right to guaranteed hours (estimated at £100m-£1bn of annual direct cost) are going to be significant ongoing costs for employers.”
He said smaller companies and those running on tight margins are likely to find adapting to the new rules – and the associated costs – particularly tough.
“The government are clearly gambling on those new costs being outweighed by the benefits to business of increased productivity and a happier workforce, with upgrades to workers’ rights also having wider value to society and broader economic benefits,” he added. “While that may prove to be correct, those benefits are going to be longer-term outcomes that may be difficult for businesses to quantify or even identify.”
Most of the changes in the Employment Rights Bill will not come into force until 2026, so businesses have time to plan ahead. Smith added that the government’s plans may change significantly during the consultations, so there is an “opportunity there for businesses to raise concerns about costs.”
Employment Rights consultations launched
The government is currently seeking views on the following four areas (click on links for further details):
- Statutory Sick Pay: The waiting period for SSP will be removed as well as the Lower Earnings Limit, to ensure SSP is available to employees from day one of their sickness absence and is available to all employees, regardless of their earnings. This consultation seeks views on what percentage rate should be paid for those earning below the current rate.
- Zero-hours contracts for agency workers: The government wants to end “one-sided flexibility” for all workers. This consultation aims to understand how zero-hours contract measures in the Employment Rights Bill can best be applied to agency workers without causing unintended consequences.
- Industrial relations: The government is consulting on several changes to the industrial relations framework, hardwiring a series of fundamental principles including collaboration and accountability, and enabling trade unions to represent and deliver on behalf of their workers.
- Fire and rehire and collective redundancy remedies: This consultation asks for views on increasing the maximum period for the protective award in cases where employers haven’t complied with collective redundancy rules, and adding interim relief to collective redundancies and unfair dismissals in fire and rehire scenarios.
Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), said: “The government consultations on the Employment Rights Bill offer a crucial chance for business and labour market experts to engage on the detail of how the proposals will impact flexible work.
“In particular, we welcome the opportunity to offer feedback on how agency work interacts with zero-hours contracts. We asked for this and the government have listened.
“In delivering the government’s plan to Make Work Pay, we must ensure the views of the full range of workers are taken into consideration and that the protections and opportunities currently afforded to many, for example to agency workers, are in no way jeopardised or put into conflict with future legislative changes.”
The government has also published 10 factsheets today on the Employments Right Bill, covering topics including zero-hours contracts, the new Fair Work Agency and unfair dismissal.
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