Work rights bill set to cost businesses up to £4.5bn annually: Report

LABOUR’s new workers' rights package could cost businesses up to £4.5 billion per year, according to a government impact assessment.

The assessment reveals that small businesses will be disproportionately affected, potentially leading to higher prices and job cuts, The Times reported.

The reforms, which include repealing anti-trade union laws and extending the duration for industrial action ballots, could lead to an increase in strikes. Political donations from unions, particularly to the Labour Party, are also expected to rise, according to officials.

However, the analysis also noted that the package would support economic growth through higher productivity and more workers entering the labour market. The Department for Business and Trade’s report highlighted benefits such as improved health, wellbeing, and equality.

Angela Rayner introduced the Employment Rights Bill, calling it a “momentous opportunity” to reshape the economy. When questioned on the projected costs, Rayner emphasised that the bill would have a positive impact on growth and benefit over ten million workers.

The proposed reforms include day-one protections against unfair dismissal, guaranteed hours, flexible working by default, sick pay from the first day of illness, and new rights for parental and bereavement leave.

Rayner, reflecting on her early work experience as a carer with casual terms, said the reforms were “personal” to her and described them as transformative for working people, The Times reported.

The government’s analysis estimated that businesses would face direct costs in the “low billions” annually, with an upper estimate of £4.5bn, approximately 0.4 per cent of the UK’s annual pay bill. This translates to around £3,200 per business, with the costs concentrated in lower-paid industries.

A survey found that 40 per cent of businesses would respond to the increased costs by raising prices, 17 per cent would cut jobs, and 31 per cent would absorb the costs.

The impact of providing sick pay from the first day of illness is estimated to cost businesses £400 million annually. However, at a statutory rate of 60-80 per cent of earnings, around 1.3m workers could receive a lower rate of sick pay than they currently do, The Times reported.

Rayner also highlighted the bill’s role in “resetting industrial relations” by reversing Conservative trade union laws. Unions will have more power to recruit members and call for strikes, with online ballots allowed for the first time.

Small businesses are expected to bear the brunt of the changes, with five of the nine major measures disproportionately affecting them. The government rejected proposals for more flexible rules for small businesses, stating that it would create a “two-tier” workforce.