New workers’ rights to cost businesses £5bn a year, government says

Ben Smith, from specialist employment law firm GQ|Littler, said it would be “painful” in the short term for businesses trying to cope with the extra red tape, while the longer term positive outcomes were harder to quantify.

Tina McKenzie, policy chair at the Federation of Small Businesses said: “As bad as these impacts seem, they still underestimate the real costs this legislation could have on growth and participation.”

Paul Nowak, general secretary of the TUC, said the government’s assessment showed the business costs from the Bill were negligible and more than offset by wider economic and social gains.

“These changes will mostly affect those companies whose business models have been built on low-paid, insecure employment.

“Decent employers will welcome these measures and the improvements they will bring for their businesses and workforces,” he said.

The report argues that the reforms could lead to fewer lost workdays, if employees feel less anxious about their pay and working conditions.

Quoting Health and Safety Executive figures, the report says depression, stress and anxiety led to 17 million working days being lost last year, costing the economy £5.2 billion in lost output.

Workers in the hospitality, health and social care, and retail sectors were set to benefit most, the report said, where insecure and low-paid work is more common.

Under the proposed legislation, employers that currently use zero hours contracts would have to offer staff contracts guaranteeing a set number of hours per week. That will be calculated based on the worker’s average working hours over a 12-week period.

Around two million workers were set to benefit from the reforms, the report said, including a £400m a year increase in sick pay due to reforms to Statutory Sick Pay.