Labour’s Employment Rights Bill is estimated to cost businesses up to £5 billion a year, as per the government’s own analysis. The legislation, set for its second reading in the Commons, aims to eliminate exploitative zero-hours contracts and unfair fire and rehire practices, benefitting millions of workers. Among its provisions is the removal of the two-year qualifying period for protection against unfair dismissal and granting rights from day one of employment.
However, a government impact assessment warns that these measures will impose a significant financial burden on businesses, particularly affecting small and micro enterprises due to additional administrative costs and compliance requirements. The analysis highlights that around 40% of businesses may raise prices in response to higher labour costs, with 17% considering job cuts, while others may absorb costs through profit margins.
While acknowledging the potential positive impacts on economic growth, the assessment also cautions that the legislation could lead to reduced employer willingness to hire workers and decreased investment in employee development. Notably, the Employment Rights Bill is expected to save workers up to £600 annually in hidden costs associated with insecure work, benefiting around 2.4 million individuals in irregular employment arrangements.
Deputy Prime Minister Angela Rayner expressed strong support for the bill, emphasising its role in enhancing worker rights and driving economic growth. Industry reactions have been varied, with business groups welcoming the proposed changes as beneficial for enhancing working standards and productivity, while the Federation of Small Businesses criticized the legislation for its perceived rushed and chaotic implementation, raising concerns about the impact on small employers.