Employment Rights Bill: New report criticises Government's £5bn annual business cost estimate

The body responsible for scrutinising legislation introduced by the government has published a damning report into the Employment Rights Bill.

The Regulatory Body Committee has assessed the quality of evidence the government has produced in support of the Bill and has declared that several key provisions are not fit for purpose including:

• Introducing a day one right for employees to claim unfair dismissal
• Repealing the Trade Union Act 2016
• Repealing the Strikes (Minimum Service Levels) Act 2023
• Changing the right to request flexible working
• Imposing liability on employers where their staff are harassed by third parties

It says that the rationale for making these changes is weak and there is no evidence that, once enacted, they will achieve the desired outcomes of improving productivity, wage growth, equality of opportunity, job security and economic activity.

The Committee is particularly concerned that the government has not explored other viable alternatives such as, in the context of unfair dismissal claims, lowering the qualifying period and widening the circumstances where an employee doesn't need to have any length of service to bring a claim of automatic unfair dismissal. And in terms of making flexible working the default position, the Committee says there is little evidence that employers are rejecting requests unreasonably or that the government has reviewed whether the changes which came into force earlier this year are working.

Cost to business

The government estimates that the total direct costs to businesses are less than £5 billion pounds annually. The Committee says that this is a ‘rough approximation’ and suggests that this figure could be way off the mark.

It is also concerned that businesses will pass on these costs to staff through lower wages and believes this will have a negative impact on recruitment as employers look for technological solutions to reduce their labour costs.  

Recommendation

The Committee has called upon the government to undertake a labour market and broad macro-economic analysis to understand the overall impact of the Bill on employment, wages, output and particularly passing on costs to employees.

Government response

According to Personnel Today, a government spokesman has said:  “These initial, indicative assessments of the primary legislation represent the best estimate of likely impact at this stage. However, we intend to refine our analysis and conduct further assessment as the bill progresses — working with experts and businesses.”

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