Workers' rights bill could cost firms up to £5bn a year

Impact biggest on small business, says government analysis

- MILLIE COOKE

Labour’s Employment Rights Bill will cost businesses up to £5bn a year, the government’s own impact assessment says.

The legislation, which returned to the Commons for its second reading yesterday, will include plans to ban exploitative zerohours contracts and “unscrupulous” fire and rehire practices which it said will benefit millions of workers.

Under the new legislation, the existing two-year qualifying period for protections from unfair dismissal will be removed and workers will have the rights from the first day in a job.

However, an impact assessment published by the government has warned that the policies will “impose a direct cost on business of low billion pounds per year (ie, less than £5bn annually)”. Total wage costs in the UK were £1.3 trillion in 2023 in nominal terms.

The assessment cites official surveys suggesting that 40 per cent of businesses would respond to higher labour costs by increasing prices, while 17 per cent would cut jobs. Around a third would rely on profit margins to absorb the costs, the assessment said.