Labour’s workers’ rights reforms could cost businesses £5bn, Government confirms
21 October 2024, 16:11 | Updated: 21 October 2024, 16:16
Labour’s flagship workers' rights bill will cost around £5 billion per year, Government analysis has shown.
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Ministers described the Employment Rights Bill as the biggest boost to pay and productivity in the workplace in a generation.
As part of the Bill, workers will be given sick pay from the first day they are ill, new probation protections and greater freedom at work.
Women will be entitled to apply for maternity pay from their first day on the job and will be given greater protections from sacking when they return.
Probation periods, which can stretch for as long as two years, will be capped at six months, giving workers further protection against unfair dismissals.
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The plans were first championed by Deputy PM Angela Rayner while Labour was in opposition and have since gone to become a key offering from the party.
According to official Government documents published today, Labour “expects the policies covered within the Bill to impose a direct cost on business of low billion pounds per year (ie, less than £5billion annually).”
Unions warmly welcomed the measures as a "seismic shift" from the low pay, low productivity economy they accused the previous Conservative government of presiding over.
But business owners fear it may force them to 'freeze employment' as the changes could tie up small firms in too much red tape.
Martin McTague, national chairman of the Federation of Small Businesses (FSB), warned: "With all the good intentions, this [Bill] will inject fear into that employment relationship. It makes most small businesses very nervous."
Tina McKenzie, policy chair at the FSB, described the legislation as a "rushed job, clumsy, chaotic and poorly planned".
She added: "Beyond warm words, it lacks any real pro-growth element and will increase economic inactivity, seriously jeopardising the Government's own 80 per cent employment target."
There are 28 separate changes in the Bill, with most of them not expected to be implemented before the autumn of 2026.
Some measures, such as the right to "switch off" at the end of a working day, are not in the Bill but will be included in a so-called Next Steps document for further consideration and consultation.
Under the Bill, the existing two-year qualifying period for protections from unfair dismissal will be removed and workers will have the right from the first day in a job.
Announcing the plans, Ms Rayner said: "This Labour Government's plan to make work pay is central to achieving our growth mission, boosting productivity.
"After years of stagnation under the Tories, we're replacing a race to the bottom with a race to the top, so employers compete on innovation and quality.
"It's by making work more secure and modernising workplaces that we will drive up productivity, improve living standards, generate jobs and investment, and pave the way for sustained economic growth that benefits working people.
"We're calling a time on the Tories' scorched earth approach to industrial relations. A new partnership of co-operation between trade unions, employers and government will put us in line with high-growth economies that benefit from more co-operation and less disruption."
Business Secretary Jonathan Reynolds said: "Our plan will give the world of work a much-needed upgrade, boosting pay and productivity.
"The best employers know that employees are more productive when they are happy at work. That is why it's vital to give employers the flexibility they need to grow whilst ending unscrupulous and unfair practices.
"This upgrade to our laws will ensure they are fit for modern life, raise living standards and provide opportunity and security for businesses, workers and communities across the country."
