Almost all small businesses in Britain are worried about the government’s plans to expand workers’ rights, exacerbating concerns about stagnating economic growth after the budget and a collapse in hiring.
Small businesses intend to slow hiring and lay off workers over the next year in response to the government’s Employment Rights Bill.
Many pointed out that protection against unfair dismissal from the first day of employment was a potential detriment to the labor market.
Ninety-two percent of 1,270 small employers surveyed by the Federation of Small Businesses (FSB), a lobby group, in November expressed concern about the bill.
Researchers said 67 percent planned to hire fewer staff and nearly a third would cut their workforce. Fifty-six percent said The bill would prompt them to abandon investment plans and efforts to grow their businesses.
He bill aims to rebalance the power relationship between workers and businesses, which the government says tilted too much in favor of employers during the Conservatives’ 14 years in power.
The measures include providing protection to workers against unfair dismissal from the first day of employment; giving people rights to guaranteed hours, effectively ending zero hours contracts; expand access to statutory sick pay and strengthen union representation and the ability of members to strike.
The changes aim to achieve a fairer distribution of income in the economy between companies and workers as part of Sir Keir Starmer’s promise improve living standards during the current five-year parliament. Since the 2008 global financial crisis, average real wages have barely risen, which economists attribute to dismal productivity gains.
The bill is currently being considered by a committee of MPs ahead of its third reading in the House of Commons. The Lords have yet to interrogate the proposals.
Boosting worker rights could result in higher operating costs if it does not increase productivity. Cost pressures have already been intensified by Rachel Reeves, the chancellor, launching £40bn of tax rises in the Budget in October. Most of these affected businesses through a £25 billion increase in national insurance contributions.
The chancellor also announced a 6.7 percent increase in the minimum wage, which will come into effect in April.
Higher labor costs risk companies freezing their hiring plans or raising prices to protect their profit margins.
Last month, the Bank of England said the budget would put upward pressure on inflation, currently at 2.6 percent, and warned of zero growth in the final quarter of 2024.
Tina McKenzie, FSB policy chair, said: “Small businesses have made it very clear that the bill will not motivate them to hire more at all. “His comments are emphatic, resounding and overwhelming.”
He added that the new bill has expanded the grounds for workers to take their employers to court, which could result in employers reducing hiring to avoid potential legal costs.
“Ministers must demonstrate that they accept the risk to jobs and avoid an arrogant, dogmatic or condescending approach to the clear and strong reactions of small businesses,” McKenzie said, adding that “the economy is not in a position to ‘ war against work.
The Department of Business and Trade said: “Our plan to make work pay is a crucial part of the mission to grow the economy, raise workers’ wages and raise living standards across the country. “This Government is pro-business and pro-worker and we continue to work closely with business and unions to ensure the Employment Rights Bill works for both workers and employers.”
“We know the vital importance of small businesses to our economy and we have already accomplished a lot in a short period of time, including protecting small businesses from late payments. “We are now focused on creating opportunities for companies to compete and access the financing they need to scale, export and enter new markets.”