Small firms slash jobs on fears of employment rights bill
An alarming number of businesses have become increasingly concerned about the future of the UK’s workforce under the new Labour government’s employment reforms.
A fresh survey of 1,270 small employers by the Federation of Small Businesses (FSB) has revealed over 90 per cent are worried about the implications of the Employment Rights Bill.
A majority of those also cited fears of lawsuits due to unfair dismissal legislation, which falls under the day one rights’ proposals included in the Bill.
As a result, some 67 per cent plan to halt recruitment efforts in the new year, with 32 per cent planning to subsequently reduce current headcount.
Over half of those employers said they also feel the need to cancel or scale back investment on expansion plans in the new year.
“Small firms have made it crystal clear that the Bill will not motivate them to hire more whatsoever,” Tina McKenzie, FSB policy chair, said, adding that the feedback is “emphatic, resounding, and overwhelming.”
A call for change
The small business lobby group has urged the government to make changes to the bill, including the removal of plans for day one dismissal processes.
Returning to the previously allocated one-year period allows for a “balanced approach and cost-free” solution, it said.
“Ministers must show they get the risk to jobs and avoid a cavalier, dogmatic or patronising approach to the loud and clear feedback from small businesses,” McKenzie said.
If employers fear they will be sued, fewer will hire – with knock-on effects including a rising benefits bill and a lasting drag on living standards across the UK.
“These changes would have a severe negative impact on the real economy. All those who will be locked out of work as a result of this Bill deserve better from the Government.
The cost of the Employment Rights Bill
Labour’s employment overhaul was laid out in October with 28 individual measures in the Bill, including ending exploitative zero-hour contracts and banning fire and rehire tactics.
Ending zero-hour contracts is likely to cost up to £1bn a year, while reforms to day-one employment rights come with a price tag of around £100m a year in new business costs, according to a report publishing that same month.
The overall cost predicted that British businesses will face was around £5bn due to this legislation.
A Department for Business and Trade spokesperson said: “Our plan to Make Work Pay is a crucial part of the mission to grow the economy, boost workers’ pay and raise living standards across the country.
“This Government is pro-business and pro-worker and we continue to engage closely with businesses and unions to ensure the Employment Rights Bill works for workers and employers alike.
“We know the vital importance of small businesses to our economy and have already achieved a great deal in a short period of time, including protecting small businesses from late payments.
“We are now focused on creating opportunities for businesses to compete and access the finance they need to scale, export and break into new markets.”