The shakeup of workers’ rights is causing small businesses to cut jobs and reduce workforces
- The FSB says members fear being charged under the Employment Rights Bill
Nearly a third of small businesses plan to cut staff this year in response to legislation introduced by the new Labor government, data shows.
A poll by the Federation of Small Businesses found that 32 percent of respondents plan to reduce their workforce as a result of the Employment Rights Bill, while 67 percent say they will hire fewer new workers.
More than 90 percent of members said they were concerned about the bill, with many citing fears of being taken to court over planned changes to unfair dismissal legislation.
The FSB has urged the government to make urgent changes to the bill, which it says will see Britain’s benefits bill soar, after almost half of respondents in the survey claimed they would avoid hiring unemployed and first-time job applicants to take.
The Employment Rights Bill is the first phase of Labour’s plan to make work pay and provides support for employers, workers and trade unions ‘to move Britain forward’.
The government says the bill will update and modernize the current legislative framework relating to labor rights.
FSB warns that UK benefits will rise as employers cut back on hiring
It has passed its first and second readings and is now at committee stage in the House of Commons. The bill will also have to pass the House of Commons report and third reading stage before being referred to the House of Lords for further scrutiny.
The FSB wants the government to drop provisions in the bill that would allow workers to take employers to court for unfair dismissal from their first day at work, the trade body said.
FSB policy chair Tina McKenzie said: ‘If employers fear they will be sued, they will hire fewer workers – with knock-on effects such as a rising benefit bill and continued pressure on living standards in the UK.’
The FSB says Prime Minister Keir Starmer should instead return to a one-year qualification period for the tribunal, which existed under the last Labor government.
It marks the latest setback for businesses in the wake of Labour’s autumn budget, which will see companies pay a higher rate of national insurance contributions and a higher national living wage from April.
Businesses, especially those in the hospitality sector, have warned that Chancellor Rachel Reeves’ tax plans will cause unemployment to rise and businesses will be forced to close.
McKenzie added: “Small businesses have made it crystal clear that the bill will not motivate them to hire more staff. Their feedback is emphatic, resounding and overwhelming.
‘Ministers must demonstrate that they are aware of the risks to jobs and avoid an arrogant, dogmatic or patronizing approach to the loud and clear feedback from small businesses. The economy is incapable of waging a ‘war on labor’.
‘These changes would have a serious negative impact on the real economy. Anyone who no longer has a job as a result of this bill deserves better from the government.
‘Reverting to the one-year qualification period that applied under the last Labor government is a more balanced approach and a free route for the Prime Minister to show he understands the importance of creating and retaining jobs.’
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