(Bloomberg) — The UK Labour government’s package of workers’ rights reforms could cost businesses as much as £4.5 billion ($5.9 billion) per year, with small firms disproportionately impacted, according to an economic analysis of the policy.
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The hit would amount to a rise of around 1.5% of total employment costs for companies, the Department for Business and Trade said Monday in a statement, describing this as a “modest increase.” Its analysis found that “the benefits will outweigh the costs” for society as a whole, “delivering those benefits will place a direct cost on employers.”
Prime Minister Keir Starmer’s new Labour government earlier this month published its Employment Rights Bill that will introduce 28 reforms to the relationship between businesses and their employees. Monday’s document is the first to detail the potential costs to business of the legislation, which was hard fought over by unions and firms as the government hammered out the details of its plans. further reforms will be subject to consultation.
Policies ending so-called zero hours contracts to guarantee hours for workers, paying for shifts canceled at short notice, and improved access to statutory sick pay for employees, represent the biggest outlays tor companies, at as much as an aggregate £1 billion per year each, according to the analysis.
“Costs will be proportionately higher for small and micro businesses due to the fixed costs of admin and compliance burdens,” the analysis found. “For business who rely on flexible contracts or low-paid employment these changes could be more disruptive, at least in the short-run,” it said.
Despite those admissions, the document insisted the workers’ rights package was worthwhile, arguing “not acting would enable poor working conditions, insecure work, inequalities and broken industrial relations to persist.”
The package “could have a direct and positive impact on economic growth, but we expect this to be small,” according to the document.
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