Extra red tape
But Ben Smith, Senior Associate, focused on the £7.4bn cost to business over the next decade detailed in the economic analysis. He said: “The direct cost of these regulations is significant – in the short term it may be painful for businesses to absorb this extra red tape, particularly as much of the cost will be additional upfront administrative costs to understand and prepare for the new employment law landscape.“
“We may see some businesses struggle to manage the immediate financial impact. Changes to statutory sick pay (estimated to have direct costs of £400m annually) and introducing the right to guaranteed hours (estimated at £100m-£1bn of annual direct cost) are going to be significant ongoing costs for employers.”
He said smaller companies and those running on tight margins are likely to find adapting to the new rules – and the associated costs – particularly tough.
“The government are clearly gambling on those new costs being outweighed by the benefits to business of increased productivity and a happier workforce, with upgrades to workers’ rights also having wider value to society and broader economic benefits,” he added. “While that may prove to be correct, those benefits are going to be longer-term outcomes that may be difficult for businesses to quantify or even identify.”
Most of the changes in the Employment Rights Bill will not come into force until 2026, so businesses have time to plan ahead. Smith added that the government’s plans may change significantly during the consultations, so there is an “opportunity there for businesses to raise concerns about costs.”
