Landmark employment rights reforms in the UK could saddle businesses with costs reaching £5 billion per year, according to a new government analysis. However, the report also highlights that low-paid workers are set to reap the most benefits, with some shift staff potentially earning an extra £600 annually.
The sweeping changes, part of the government’s Employment Rights Bill, aim to strengthen protections for millions of workers. Key measures include a near-ban on zero-hours contracts, expanded statutory sick pay, and day one rights to paternity leave and unfair dismissal claims.
Balancing Costs and Benefits
While acknowledging the substantial price tag for businesses, which covers higher wages, benefits, and administrative expenses, the government stressed that the costs are minimal compared to total employment expenditures. Officials estimate the reforms amount to less than 1.5% of the £1.3 trillion in overall wage costs across the UK in 2023.
Moreover, the analysis suggests that much of the financial impact represents a redistribution from companies to their workers. Low-wage earners who have been most vulnerable to precarious employment practices are expected to gain the most from enhanced rights and protections.
Zero-Hours Contract Crackdown
The proposed near-elimination of zero-hours contracts emerges as the most expensive element, potentially costing businesses up to £2 billion. This includes around £1 billion for providing workers the right to guaranteed minimum hours and a similar amount for reasonable notice of shift cancellations.
Government analysts predict companies will adapt to reduce last-minute shift changes, but the cost of unavoidable cancellations could still hit £120 million per year.
– Employment Rights Bill report
For employees, scrapping zero-hours arrangements could be transformative. Some stand to save £600 yearly in lost wages and “insecurity premiums” from wasted childcare and transportation costs, exceeding recent increases to the National Insurance threshold.
Expanding Worker Protections
Other notable costs stem from reforms to statutory sick pay, projected at nearly £1 billion, along with around £100 million each for new day one rights to paternity leave, unpaid parental leave, and unfair dismissal protections.
Unfair dismissal claims could rise by 15%, resulting in 20,000 more Acas mediation complaints, 4,750 additional employment tribunal cases, and 875 extra hearings, the analysis forecasts. While costly for employers, this provides greater security for workers changing jobs.
Broader Economic and Social Gains
Beyond the direct financial effects, the government emphasized the intangible benefits of the employment reforms. Officials argue that greater job security and work-life balance will boost economic productivity and social wellbeing.
Despite repeated attempts to paint this bill as bad for business, this rigorous impact assessment shows that the business costs are negligible and are more than offset by the wider economic and social gains.
– Paul Nowak, General Secretary, Trades Union Congress
Advocates point to the 17 million working days lost to stress, anxiety, and depression in a single year, translating to over £5 billion in lost output. By tackling job insecurity and enhancing worker wellbeing, the reforms could unlock significant economic potential.
Yet business groups warn against imposing excessive burdens, especially on small firms. The British Chambers of Commerce cautioned that companies risk being “buried under a mountain of additional cost” and urged close consultation to avoid unintended consequences.
Charting a New Course for Work
As the Employment Rights Bill progresses through Parliament, it’s clear the proposed reforms mark a pivotal shift in the UK labour landscape. While businesses grapple with the costs, the potential gains for worker welfare, productivity, and social equity are substantial.
The task ahead lies in striking a careful balance, ensuring the bill delivers meaningful protections for employees, especially the low-paid, without placing unsustainable pressures on employers. With active dialogue between government, unions, and industry, the UK has an opportunity to craft a fairer, more resilient future of work.
