The UK government’s proposed Employment Rights Bill, championed by Deputy Prime Minister Angela Rayner, is set to cost businesses up to £5 billion annually, according to a recent government impact assessment.
This comprehensive overhaul of workers’ rights introduces 28 individual measures aimed at improving working conditions and job security.Key reforms include:
- Near-ban on zero-hours contracts (up to £2 billion)
- Right to guaranteed hours (up to £1 billion)
- Reasonable notice for shift cancellations (up to £1 billion)
- Changes to statutory sick pay (up to £1 billion)
- New rights such as bereavement leave and immediate paternity leave (approximately £100 million each)
The government argues that these reforms are necessary for long-term economic growth and could yield wellbeing benefits exceeding £3 billion annually.
However, business leaders, particularly those representing SMEs, have expressed significant concerns about the potential impact on their operations.Possible business responses to increased costs include:
- Raising prices for consumers
- Reducing staff numbers
- Cutting back on investment and training expenditure
The legislation is expected to benefit low-paid workers the most, with some potentially earning an extra £600 per year.
The hospitality, healthcare, social care, and retail sectors are likely to see the most significant changes.
Deputy Prime Minister Angela Rayner said: “We’re delivering real change for working people across the country, while driving our mission for growth and making people better off.
“Successful firms already know that strong employee rights mean strong growth opportunities. This landmark legislation will extend the employment protections given by the best British companies to millions more workers.
“We said we would get on and deliver the biggest upgrade to rights at work in a generation and the growth our economy needs – and that is exactly what we are doing.”
While the bill aims to boost productivity and improve working conditions, critics warn it could lead to job cuts and increased economic inactivity.
The government maintains that the costs are modest compared to total wage expenditures in the UK, which reached £1.3 trillion in 2023.
Scottish businesses, particularly SMEs in the hospitality and retail sectors, are likely to face proportionately higher costs due to these reforms.
As Scotland’s economy relies heavily on these industries, the impact of the Employment Rights Bill could be particularly pronounced north of the border.