Business groups urge changes to reforms

The five biggest business groups in the UK have written an open letter calling for urgent changes to the government’s Employment Rights Bill.

The proposed new law, due to be scrutinised by the House of Lords this month, includes a right to guaranteed hours and cracks down on zero-hour contracts without the offer of work.

But the British Chambers of Commerce, Confederation of British Industry, Institute of Directors, Federation of Small Businesses and Make UK warn the Bill in its current form could hit growth at an uncertain time for the UK economy.

The government insists the Bill will deliver the “biggest upgrade to workers’ rights in a generation”.

The new Employment Rights Bill would guarantee new rights for workers from the first day of their employment.

These include sick pay, protection from unfair dismissal and parental leave, as well as the right to request flexible working.

New restrictions on “fire-and-rehire” processes – when employees are let go and then re-employed on new contracts with worse pay or conditions – will also feature in the bill.

In a rare joint intervention, the business groups said they support the government’s core aims of improving productivity, wages and workers’ rights.

But the groups said the Bill would “damage growth and employment, undermining the government’s own goals”.

They argue the changes will discourage companies hiring “particularly those at the margins of the labour market” as business will not want to risk costly tribunal cases.

Business groups also urged Lords to consider if guaranteeing workers fixed-hours contracts could backfire, reduce flexibility for both employers and staff, and introduce unnecessary administrative costs.

In response to the letter, a government spokesperson said the Bill will represent “the biggest upgrade to workers’ rights in a generation, and our measures already have strong support amongst business and the public”.

“We’ve consulted extensively with business on our proposals,” the spokesperson added. “We will engage on the implementation of legislation to ensure it works for employers and workers alike.”

Last month, the Office for Budget Responsibility (OBR) said it has not been able to take account of the Employment Rights Bill in its forecasting as there is not enough detail available on the policy.

However, it said regulations which “affect the flexibility of businesses and labour markets” are likely to have “material and probably net negative, economic impacts on employment, prices, and productivity”.

Conservative shadow business secretary Andrew Griffith said the UK’s top business groups calling for a rethink “sends a powerful message”.

“The business groups are correct when they say as currently drafted, the bill will have deeply damaging implications for the government’s priority growth mission,” he said.

“The world has changed, the government must shelve this disaster of a bill now.”