Business leaders less likely to hire new workers following employment rights reforms

According to research from the Institute of Directors, 57% of business leaders will be less likely to hire new workers as a result of the Government’s planned employment rights legislation.

The findings were based on 715 responses from across the UK, conducted between 16-28 August 2024. Of these respondents, 11% ran large businesses (250+ people), 21% medium (50-249), 25% small (10-49 people), 31% micro (2-9 people) and 12% were sole traders or self-employed business entities (0-1 people).

The UK Government committed to introducing an Employment Rights Bill within its first 100 days of office, by 12 October 2024). The measures expected to be in the Bill include:

• Giving workers the right to a contract reflecting the hours they usually work

• Strengthening the statutory code on fire and rehire
• ‘Day one’ employee rights to parental leave and sick pay, and protection against unfair dismissal
• Making it unlawful to dismiss an employee returning from maternity leave for six months after their return to work, except for in specified circumstances.
• Simplifying the statutory trade union recognition process
• Making Statutory Sick Pay available to more workers by removing the lower earnings limit and waiting period

The Labour government has also proposed giving full-time employees the right to request compressed working hours, which could see staff working four days a week, and a plan to strengthen employees’ right to ‘switch off’, so that they have right not to have to engage with work correspondence outside contracted working hours. 

When asked what impact the reforms would have on businesses’ hiring intentions, 57.2% reported being less likely to hire, 35.5 reported no impact and only 2.2% were more likely to hire (5.0% responded N/A). The results, therefore, reflect a reluctance by businesses to increase the rights of their employees, or perhaps concerns around the cost and disruption that Labour’s proposals could entail for organisations.

Alexandra Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, commented, “Business leaders are concerned about the impacts of the proposed new reforms on the cost of employing staff.

“The Government’s self-imposed deadline for the introduction of employment rights legislation is now just over a month away […] so it is essential that the Government starts to meaningfully engage with business on the detail of its proposed reforms to ensure that its growth mission is not derailed”, she added.

John Neal, CEO of Lloyd’s of London, is among those who have expressed concern over Labour’s plans, warning that it was vital to ‘get the balance right’, as putting too much pressure on employers with new rules could lead to job cuts or pushing them to offshore jobs.

“You want UK plc to be alive and well, if it’s alive and well it needs to grow, if it’s growing then it’ll create employment opportunities. If you put businesses under too much pressure where they get very, very cost- focused, then the risk is you find yourself with two issues: do they go through restructuring or redundancy programmes, do they think about job offshoring.”

The Government’s proposed employment rights legislation would give employees greater protection and the right to flexibility in their working arrangements, which could galvanise the working population, boost productivity and increase inclusivity, allowing carers or parents to access the workplace via home working arrangements, for instance.

Conversely, imposing heavy restrictions on employers could limit the flexibility of businesses’ relationships with their employees and reduce hiring and investment. It is clear, therefore, that Labour must collaborate and communicate with employers to ensure that the proposed reforms strike a balance that enables businesses and the wider economy to benefit, as well as employees.