Smaller businesses ‘could face higher costs under new employment laws’

Small businesses could be hit with a higher cost burden to comply with the Government’s new employment rights plans, according to Whitehall’s own assessment of the legislation.

The Employment Rights Bill is getting its second reading in Parliament on Monday, which will present the first opportunity for MPs to debate the main points of the plans in the Commons.

The legislation includes plans to improve employees’ rights from day one of employment including in areas such as parental and bereavement leave and protection from unfair dismissal.

The economic analysis of the Bill published by the Department for Business and Trade on Monday claims that it will “strengthen working conditions for the lowest-paid and most vulnerable in the labour market, increasing fairness and equality across Britain,” but states that “delivering those benefits will place a direct cost on employers”.

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The document predicts that the costs to businesses will be in the “low billions of pounds per year” but those that rely on low-paid workers or employees on flexible contracts could see the changes “be more disruptive”.

Overall, the plans are expected to add “less than 1.5%” on to employment costs.

Costs will be “proportionately higher” for small and micro businesses because of the “fixed costs of admin and compliance burdens”. However the Government says that rules have to apply to all businesses in the same way as they do not want to create a “two-tier workforce” where some people are entitled to rights where others are not.

The document also warned that reforms to day one rights, “particularly the strengthening of protections against dismissal could also make employers less willing to hire workers”.

According to the analysis document, policies such as rights to guaranteed hours with zero hours contracts, and day one unfair dismissal rights are among the changes that are “likely to have a disproportionate cost to small and micro businesses”.

While the proposed changes to statutory sick pay of removing the lower earnings limit and waiting period are “certain to have a disproportionate cost to small and micro businesses”.

The Government document says that they “intend to refine this assessment” as the policy is developed and the “benefits will outweigh the costs”.

The Prime Minister’s official spokesman said: “What this Bill represents is an investment by businesses, by employers into their employees.

“For too long poor productivity, insecure work and broken industrial relations have held back the economy.

“Last year we saw the highest number of working days lost to strikes since the 1980s, costing the economy billions of pounds.”

The spokesman added: “The impact assessment says it will have a positive impact on economic growth. But of course, this is not everything the Government is doing to support economic growth in the economy.”

The Trades Union Congress (TUC) said on Monday afternoon that the assessment shows that the legislation is “good for workers, good for business and good for the wider economy”.

General secretary Paul Nowak said in a statement: “Most employers in this country treat their staff well and do not use exploitative practices like zero hours contracts and fire and rehire.

“By levelling the playing field on workers’ rights and protections this Bill will give people more predictability and control over their lives. And it will stop decent firms from being undercut by the bad.

“These reforms will improve the health of our workforce, bring real economic gains and ensure working people share fairly in the gains of growth.”

Labour’s election manifesto pledged that “good work” would be the “foundation” of their approach to tackling equality.

“We will create more good jobs, reform employment support, and make work pay so that many more people benefit from the dignity and purpose of work,” the manifesto read.