(qlmbusinessnews.com Tues. 22nd Oct, 2024) London, UK —
Cost of New Labour Employment Rights Reforms Revealed: What UK Businesses Need to Know
Labour’s proposed reforms to workers’ rights could cost UK businesses as much as £5 billion a year, according to an analysis by the government. These changes, aimed at enhancing employee protections, are expected to have a particularly strong impact on smaller businesses, which employ around 13 million workers.
Despite the high figure, the analysis suggests the £5 billion sum is relatively modest, representing less than 1.5% of the total annual cost of employing staff across the UK. In addition, the report highlights potential benefits to employee wellbeing, estimated at £3 billion annually. These include better support for those on zero-hours contracts and improvements to sick pay.
The findings were outlined in an economic impact assessment ahead of the second reading of the Employment Rights Bill, which the government has described as the most significant upgrade to employment law in a generation.
Under the new legislation, workers would gain key rights from day one of their employment, including sick pay, protection from unfair dismissal, and entitlement to parental and bereavement leave. The bill also aims to eliminate the use of zero-hours contracts, which Labour has labelled “exploitative”, and strengthen trade union rights.
However, the government report warns that the added costs for businesses could result in reduced workforce numbers, potentially hindering economic growth—an area the government has prioritised.
Ben Smith, a lawyer at GQ|Littler specialising in employment law, described the reforms as a short-term burden for businesses, adding that the long-term benefits are more difficult to assess.
Tina McKenzie, policy chair at the Federation of Small Businesses, also expressed concerns, suggesting that the report might underestimate the true impact on business growth and participation.
Conversely, Paul Nowak, General Secretary of the Trades Union Congress (TUC), argued that the costs to business were outweighed by the potential gains to society and the economy. He added that only companies relying on insecure and low-paid jobs would feel the strain, while ethical employers would benefit from more motivated and secure staff.
The government’s report also noted that these reforms could help reduce absenteeism, with fewer workdays lost due to anxiety and stress over pay and conditions. Last year, 17 million working days were lost to depression, stress, and anxiety, costing the economy £5.2 billion, according to data from the Health and Safety Executive.
The reforms are expected to benefit workers in sectors where low pay and insecure work are common, such as hospitality, retail, and healthcare. An estimated two million employees are set to benefit from these changes, including a £400 million annual increase in sick pay through revisions to Statutory Sick Pay rules. Employers who currently use zero-hours contracts will be required to offer set weekly hours based on workers’ average hours over the previous 12 weeks.
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