Employers warn of workers’ rights reform and Budget double whammy
Businesses are concerned about the aggregate cost of changes to workers’ rights and the cumulative impact of Budget measures, MPs have been told.
The committee of MPs scrutinising the Labour government’s employment rights legislation took evidence from business groups, industry representatives and trade unions on Tuesday.
And they were warned the combination of reforms to employment law and regulation – alongside changes announced in the Budget to employers’ national insurance contributions (NICs) risk a chilling effect on hiring.
Allen Simpson, from UKHospitality, said he was concerned about the “aggregate cost” in addition to the NICs hike and the rise in the national living wage (NLW) posing a “barrier to employment”.
He told the panel: “The bigger impact was the Budget… there are certainly going to be job losses as a result. We should expect that those job losses will heavily weigh on those people who are on the minimum wage.
“Hospitality will bear a disproportionately large number of that, for sure.”
Alex Hall-Chen, from the Institute of Directors (IoD), said: “A key fear for us is the cumulative impact of all the 28 reforms in this bill coupled with everything else happening in the employment space so far, and that taken as a whole the measures make hiring someone riskier and more expensive for businesses.
“Our research has shown that as a result businesses will hire fewer people.”
Budget ‘cumulative impact’
She said the situation had worsened since the IoD polled firms in August, thanks to the Budget, and added: “The cumulative impact really can’t be overstated.
“We’re now seeing for the first time since October 2020 our data showing that more business leaders expect to reduce their headcount in the coming year than increase it and this bill is a key reason for this change.”
The Recruitment and Employment Confederation (REC)’s chief executive Neil Carberry also warned of the wider impact on firms, including on consulting over site closures..
“I don’t think it’s in anyone’s interest for large companies employing thousands of people to be stuck in perpetual collective consultation when they’re shutting down one site with 20 people,” he cautioned.
“We need to make sure we’re not putting up barriers to employment in this bill.”
Speaking in the Commons, as work and pensions secretary Liz Kendall announced her welfare reforms to get Brits back to work, Richard Holden, shadow paymaster general, said businesses in his Essex constituency are “absolutely terrified by both the taxes coming through national insurance and the hit on them through business rates as well”.
He continued: “With the OBR saying there’s going to be at least 50,000 jobs a year going because of those changes, where are the people that she’s hoping to get off benefits and into work, going to find employment?”
Kendall insisted: “I know the issues that businesses face, but they are also thinking about the longer term, the vacancies, how on earth they get the skills they need that are particular to their own business in that area.”
‘Join the dots’
And Matthew Percival, work and skills director at the Confederation of British Industry (CBI), urged ministers to “join the dots” between rising taxes, labour costs and unemployment.
“Employers have a key role to play in supporting the delivery of the government’s objectives,” he said. “There’s no doubt that rising taxes and employment costs will make it more difficult for them to do so.”
Kendall defended the Budget measures, and stressed: “Of course, [firms] face pressures, but I think many businesses also understand you have to actually have a government that is looking at the fundamentals and we did face a problem with the public finances.”
And challenged on the same issue, and its impact on exports, at the Commons business and trade committee, business secretary Jonthan Reynolds stressed that the workers’ rights measures had been “in the public domain put forward by the Labour Party for many years”.
He added: “There’s nothing that would take anyone by surprise in what we have put forward… the vast majority of businesses in the UK operate to a far higher standard than even the floor will be raised by this bill.”
Reynolds also told MPs that the “aggregate impact” of all government policy was championed within the “collective process”, and stressed that the “combination of the two things” was at the “forefront” of the Treasury’s mind.
The doubling of the employment allowance and removal of the threshold announced in the Budget, he argued, is “is such a significant measure, probably one of the relatively few times a Chancellor has exceeded the request of business groups in terms of the scale of the change being put forward”.
A government factsheet on the proposed legislation states: “This is a comprehensive bill which, once implemented, will represent the biggest upgrade in employment rights for a generation. It will raise the minimum floor of employment rights, giving the British public the prosperity, security and dignity that everyone in Britain needs and deserves at work.”