Now is not the time for Labour’s rushed Employment Rights Bill
Labour’s Employment Rights Bill is being rushed through parliament at the cost of small businesses, writes Lord Howard Leigh
As someone who has long been involved with the small and medium-sized enterprise (SME) sector, I have felt compelled to speak out this week on the Employment Rights Bill as it passes through the House of Lords. The Bill, which may be well intentioned, carries significant risks for SMEs – a sector that is already struggling to recover from the challenges of recent years. The Federation of Small Businesses (FSB), the UK’s largest business group, has warned that this Bill will “wreak havoc on our already fragile economy”. Trade Body APSCo has also warned the Bill is being “fast-tracked through parliament” despite facing scrutiny which “has to be acknowledged and addressed before it reaches royal assent”. I share their concerns.
How the Employment Rights Bill will affect SMEs
Recent surveys paint a grim picture for small businesses. A poll of 1,270 companies by the FSB revealed that two thirds of them will curtail hiring, while one third may reduce staff if the Bill passes. Similarly, the Chartered Institute of Personnel and Development found that 25 per cent of its members are considering layoffs as a direct result of these proposed changes. The Institute of Directors has gone as far as to describe the Bill as “a sledgehammer to crack a nut”. The evidence is clear: this Bill threatens to undermine the very backbone of the UK economy.
The Bill has been rushed through to meet the 100-day deadline, leaving little time for meaningful engagement with the very businesses it aims to affect
I speak from personal experience. In 1989, I started a small business, then called Cavendish Corporate Finance, with a partner and one assistant. Today, Cavendish plc employs over 200 people. That journey was long, fraught with challenges and at times uncertain. But it is precisely because I was able to make hiring decisions without overwhelming constraints that we could grow the business to where it is today. The decision to employ someone in a small business is never easy – whether it’s the first person or the fiftieth. It’s not just about filling a role; it’s about finding someone who shares the company’s values and contributes to its culture. When things don’t work out, you need the flexibility to make difficult decisions without facing a mountain of legal and financial hurdles.
This is where the Bill is particularly troubling. It imposes burdens on small businesses that are simply not equipped to absorb them. Unlike larger firms, SMEs don’t have dedicated HR departments or the resources to wade through complex new legislation. Instead, they are forced to turn to expensive external agencies for guidance, further straining their already limited resources. For many, this could become an insurmountable obstacle, discouraging them from hiring altogether.
A call for pragmatism
The financial burden alone is enough to cause concern. The Bill is expected to cost the economy around £5bn, with a disproportionate share of that falling on small businesses. The impact of National Insurance contributions, already an unbearable weight for many, has only worsened the situation. With this added cost, SMEs will find it harder to grow, employ new people and invest in innovation.
Moreover, the Bill will inevitably make businesses risk averse. The Institute of Chartered Accountants in England and Wales has warned that the additional risks and costs created by the Bill will deter businesses from making decisions that could lead to growth. This is a critical issue, as the only way for any business to expand is by taking on new employees, bringing fresh talent, new ideas and additional expertise. If the conditions for hiring become too daunting, many businesses will simply stop trying.
Perhaps most troubling of all is the lack of consultation surrounding this Bill. It has been rushed through to meet the 100-day deadline, leaving little time for meaningful engagement with the very businesses it aims to affect. As a result, we are left with a plethora of amendments to sift through, many of which are poorly thought out and likely to exacerbate the problems facing SMEs.
While I understand that this Bill forms part of the government’s manifesto, I urge caution. SMEs, which employ a significant portion of the workforce, must be given the breathing room to recover and thrive. This Bill, in its current form, will only hinder that process. Perhaps it could be revisited, amended and introduced at a later stage when businesses are in a stronger position to handle its demands. For now, however, we must protect our SMEs from unnecessary harm.