The Employment Rights Bill is causing small firms to tighten their recruitment belts. They are most concerned about changes in unfair dismissal laws and increased sick pay.
According to a study by the Federation of Small Businesses, in 2024 33% of small businesses expect to reduce their staff. This is up from just 17% the quarter before.
Only 10% of small businesses plan to hire more employees, compared to 14% the previous quarter. Only 56% of small businesses plan to increase their workforce, down from 14% in the previous quarter.
According to the FSB, the Employment Rights Bill also caused “dread” in the small business community. According to a separate FSB study, 75% small employers expressed concerns over changes in unfair dismissal, and 74% were concerned about changes in statutory sick pay.
The Employment Rights Bill is expected to reduce hiring by two-thirds of small businesses (67%) and 32% before it comes into effect.
The Employment Rights Bill contains plans to abolish eligibility for two years to claim unfair dismissal. It will become a right from the first day.
Sick pay regulations will be changed to eliminate the three-day wait period. This means that SSP is payable on the first day you are absent.
Tina McKenzie is the policy chair of the FSB. She said, “The numbers speak for themselves – plans to allow employees the right to sue on their first day at work will cause havoc to our fragile economy. Changes to statutory sick leave will make employers rethink their hiring plans.”
“Sure, the existing protections from unfair dismissal due to protected characteristics should be maintained. Extending these rights to all cases, from the very beginning, risks allowing frivolous claims.
Instead of dismissing their concerns, ministers should recognize the threat to jobs and reject any approach that appears out of touch with reality.
Angela Rayner, the deputy prime minister of , said last week that the Cabinet fully supported the Employment Rights Bill despite fears from some senior Labour politicians and businesses to weaken it.
McKenzie said: “The Prime Minister should abandon these reckless changes in unfair dismissal, and restore the one-year period of qualification that worked under Labour’s previous government. This is a no-cost solution that shows he knows what it takes for jobs to be created and sustained.
If hiring staff becomes a minefield of legal issues, then businesses will stop. This means that more people will be on welfare, the welfare bill will balloon, and living standards could suffer a severe blow. “Those who are forced to give up their jobs because of the Bill deserve better treatment from the government.”
The Employment Rights Bill will then move to the report stage of the House of Commons. MPs may make further amendments before the final reading of the bill and its passage through the House of Lords.
A spokesperson for the government said: “This Government has delivered to workers’ rights in the workplace, one of their biggest upgrades in a century. Our measures have already received strong support from businesses and overwhelming public support.”
We will give businesses the opportunity to comment and prepare for any possible changes in our pro-business agenda.
The FSB said that the government should also introduce a SSP rebate. The FSB’s data was derived from two surveys conducted in November and Decemeber, which each gauged the opinions of approximately 1,300 small-business owners.
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