Workers' Rights Bill Faces Backlash: Is Growth at Stake?

Five major business organizations in the UK have united to demand urgent revisions to the government’s Employment Rights Bill. Set for examination by the House of Lords this month, the Bill promises enhanced rights for workers, including guaranteed hours and restrictions on zero-hour contracts; however, the business groups—British Chambers of Commerce, Confederation of British Industry, Institute of Directors, Federation of Small Businesses, and Make UK—believe that the current draft could jeopardize economic growth at a pivotal moment for the UK economy.

The proposed Bill seeks to provide a wide range of new workers’ rights from day one of employment, encompassing sick pay, protection against unfair dismissal, parental leave, and the right to request flexible working conditions. It also introduces new measures against ’fire-and-rehire’ practices, where employees are terminated and then re-employed under less favorable contracts.

In a rare joint letter, these business organizations expressed support for the government’s objectives of enhancing productivity, wages, and workers’ rights but cautioned that the Bill, as it stands, could adversely impact growth and employment, counteracting the government’s aims. They contend that the guarantee of fixed-hour contracts could deter hiring, particularly among businesses that operate close to the margins of the labor market, due to the risk of expensive tribunal claims. Furthermore, they highlighted concerns about increased administrative burdens and reduced flexibility for both employers and employees.

The government, however, maintained its stance, pledging that the Bill represents the most significant enhancement of workers’ rights in a generation. A spokesperson emphasized that extensive consultations were conducted prior to the proposal and stated that they are open to working with businesses to ensure the legislation benefits both employees and employers. Notably, the Office for Budget Responsibility (OBR) indicated that it could not fully account for the Bill in its economic forecasts due to a lack of concrete details, but warned that regulations affecting labor market flexibility could lead to negative impacts on employment, prices, and productivity.

Andrew Griffith, the shadow business secretary, pointed out that the call from leading business groups should be a wake-up call for the government, advocating for a reevaluation of the Bill, indicating its potential to undermine economic growth.