The Labour Party has pledged to enact an Employment Bill within its first 100 days in office that will bring significant changes to employment laws and employee rights. Named the ‘New Deal for Working People’, it promises employees their rights from day one and aims to tackle longstanding issues of worker rights and employment insecurity. The bill proposes banning zero-hours contracts, abolishing fire and rehire practices, and eliminating qualifying periods for basic rights.

While these measures aim to enhance worker protections, their potential impact on businesses requires careful consideration. The proposal has been the subject of much debate, with the party facing lobbying pressure, criticism about loopholes and concerns about power imbalances, but how do businesses feel? To gauge business sentiment, we surveyed 1,200 business decision makers via the Business Opinion Omnibus.

What do businesses make of the ‘New Deal for Working People’?

Overall, the findings reveal low levels of awareness with 36% of businesses entirely unfamiliar with the bill’s contents. Even among those with some knowledge, understanding of the specifics is limited.

Beyond this, the survey indicates that a substantial portion (79%) of businesses anticipate being directly affected by the changes. This includes businesses currently using zero-hours contracts (21%), those with unionised workforces (17%), and those that may need to introduce more flexible working arrangements, allowing staff to ‘disconnect from work’ (34%).

Concerns voiced by employers centre around potential risks associated with outcomes such as stricter dismissal procedures and expanded sick pay entitlements. In response, 70% of businesses indicate they will implement changes to manage this exposure. These adjustments could include:

    • Reduced hiring activity (22%) or offshoring operations (10%) to circumvent UK employment regulations

    • Increased reliance on outsourced labour (32%), achieved through a combination of subcontracting (20%) and / or using more freelancers (17%)

    • Investment in technological solutions (15%) to automate tasks currently performed by human employees

    • Enhanced scrutiny during the recruitment process (31%), involving more thorough reference checks, prioritising candidates with greater experience, and potentially even trying to review past sick leave records

Sentiment and scale appear to be intertwined, with larger businesses (250+ employees) more likely to foresee potential upsides, such as a more content and productive workforce, while concerns are most pronounced among the smaller businesses (under 50 employees) which often lack the resources to readily adapt. Perceived downsides include higher labour costs (59%), higher recruitment costs (45%), hesitancy over expanding the business by taking on more staff (40%), more litigation (18%), and more industrial action (10%).

The inherent advantages enjoyed by larger businesses are particularly relevant here. These entities possess the resources to navigate potential delays in recruitment, handle disputes, restructure to manage increasing costs or even relocate operations overseas.

We can also see hot spots of discontent by sector, suggesting industry specific concerns. Businesses operating within the retail, wholesale, and construction sectors appear particularly apprehensive.

How might this play out?

The ‘New Deal for Workers’ has potential to significantly reshape the UK employment landscape, creating a business and employment environment closer to that of Europe. Those in work will enjoy more protections and may be happier, but there may also be unintended consequences such as higher unemployment among younger people yet to find their first role, with neither the experience nor the track record to demonstrate that they do not pose a risk to employers.

With loop-holes and work arounds featuring in mainstream news commentary, a broader concern has to be around the creation of a two-tier labour market, especially given that 17% of businesses may attempt to circumvent the new regulations by misclassifying employees as freelancers. This practice would deny these workers the legal protections and benefits they are entitled to.

There are already concerns about how AI and automation could replace some in the workforce, and these changes could accelerate the adoption of new technology to replace employees, as shown by the 15% of businesses who would look to technology to replace employees. This could be a particular pain-point for SMEs as they will not have the same resources or capital to manage these changes.

Ultimately while some businesses perceive potential benefits, a significant number express understandable concerns, but the impact will likely be most keenly felt by smaller businesses. We will continue to monitor the situation closely to assess the evolving impact of these proposals on both businesses and workers.

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