£7.4bn Employment Rights Bill

According to an impact assessment, the newly proposed Employment Rights Bill is projected to create additional costs for businesses amounting to £7.4 billion over the next ten years. Ben Smith, Senior Associate at employment law specialists GQ|Littler, comments that the short-term burden could be particularly challenging for businesses as they adjust to the new legislation.

Smith explains that many of the costs will stem from upfront administrative work required to adapt to the updated employment law landscape. Specifically, he highlights changes such as the reform of Statutory Sick Pay, estimated to cost £400 million annually, and the introduction of a right to guaranteed hours, with projected costs ranging from £100 million to £1 billion per year. These measures represent significant ongoing costs for employers, especially for smaller companies and businesses operating with tight profit margins, which may struggle to absorb these expenses.

Smith adds that while the government aims for the long-term benefits of the legislation—such as increased productivity and a happier workforce—the immediate costs may be hard for businesses to manage. He also notes that these benefits may take time to materialise and could be difficult to measure or quantify in the short term.

The good news, according to Smith, is that businesses have time to prepare for these changes, with the majority of the reforms not expected to take effect until 2026. This allows employers time to spread out the upfront costs and adjust accordingly. Furthermore, there is potential for the government to modify its plans during the consultation process, which gives businesses an opportunity to raise concerns and suggest changes.