The Conservative Party has raised concerns about the potential impact of proposed changes to employment rights on small businesses. Shadow business secretary Kevin Hollinrake warned that the Employment Rights Bill could lead to “an existential crisis of a magnitude not seen since the pandemic” for small enterprises. According to economic analysis published by the Department for Business and Trade, policies such as day-one protections from unfair dismissals and the ban on zero-hours contracts are expected to impose a disproportionate cost burden on small and micro businesses.
The assessment reveals that changes to paternity leave could result in small businesses bearing 35% of the costs while accounting for only 29% of employees. Additionally, 74% of small businesses have at least one worker on a flexible contract, which would lead to an increased administrative burden following the proposed changes to statutory sick pay, including the removal of the lower earnings limit and waiting period.
Despite these concerns, Downing Street has stated that the impact assessment demonstrates the Bill’s potential positive impact on economic growth. Mr. Hollinrake expressed apprehension about the implications of the legislation, questioning whether he would start a small business under the proposed conditions. He emphasised that the high costs associated with the measures would ultimately be passed on in the form of higher prices, reduced wages, and potential job losses, with small businesses bearing the brunt of these effects.
During the debate, Deputy Prime Minister Angela Rayner defended the Bill, stating it aims to address low pay and insecure work practices. Ms. Rayner highlighted the Bill’s intention to combat “bullying tactics” such as fire and rehire, which can lead to employees accepting lower pay and reduced terms under threat. The government’s spokesman underscored the Bill as an investment by employers in their employees, targeting improved productivity, job security, and economic growth.
The Trades Union Congress (TUC) welcomed the legislation, asserting that it is beneficial for workers, businesses, and the wider economy. While the proposed changes are expected to add less than 1.5% to employment costs, concerns remain about the potential strain on small businesses and the broader implications for the economy. As the debate continues, stakeholders are likely to closely monitor the discussions surrounding the Employment Rights Bill and its ramifications on the business landscape.