A fresh government assessment suggests UK businesses may face a far smaller bill from Labour’s flagship workers’ rights reforms than first feared, after a series of concessions and delays were built into the plan.
Earlier estimates had put the annual cost of the reforms at as much as £5 billion.
But after Labour rolled back or softened several proposals, that figure has been recalculated at around £1 billion, an 80% reduction, according to figures cited by BBC.
The revised estimate reflects changes to the scope and timing of the reforms, as well as more clarity on how the new rules would be implemented, as reportedly stated in an official impact assessment.
What the law still promises
The Employment Rights Act, which passed in December, is expected to give workers access to sick pay and paternity leave from their first day at work, along with new protections for pregnant women and new mothers.
Other measures include guaranteed hours and expanded parental leave.
One of the most debated proposals, allowing workers to claim unfair dismissal from day one, was dropped late last year.
Instead, Labour plans to introduce enhanced protections after six months in a job, which is described as the bill’s most significant remaining change.
The reforms are also set to be phased in over several years, with many elements still subject to consultation and secondary legislation.
Who feels the pressure
According to the Department for Business and Trade, the package is expected to raise total employment costs by about 0.1%. Businesses in hospitality and retail are likely to be hit hardest, as cited in a government analysis.
The workers’ rights agenda has been a controversial part of Prime Minister Keir Starmer’s policy platform.
Businesses have warned, as quoted in news reports, that higher employment costs could hurt hiring and slow economic growth, especially alongside recent business-rates reforms announced in November.
Despite this, the impact assessment reportedly said the changes could slightly boost economic output, with gross domestic product expected to rise by 0.04% due to a larger labour supply. Employment levels are also projected to increase by 0.1%.
Doubts from business groups
Not everyone is convinced by the lower cost estimate. The British Chambers of Commerce reportedly said the £1 billion figure is “likely to be a massive underestimate”.
Its policy director, Kate Shoesmith, was quoted in a news report saying the assessment does not fully account for harder-to-measure costs, such as staff time spent understanding and implementing new processes
Support from unions
Trade unions, however, welcomed the findings. The Trades Union Congress said stronger rights at work could bring benefits for workers, employers and the wider economy, as quoted in reports.
Union leaders have also urged the government to move quickly on secondary legislation, warning that the final rules need to be tightly drafted to deliver the promised protections.
The Department for Business and Trade said the Employment Rights Act would “transform the world of work," adding, as quoted in a statement, that the reforms are expected to boost productivity, reduce staff turnover and improve living standards.
