Restructuring of workers’ rights causes small businesses to reduce jobs and hiring

Almost a third of small businesses plan to make staff redundant this year in response to legislation introduced by the new Labor government, data suggests.

A survey by the Federation of Small Businesses showed that 32 per cent of respondents plan to reduce staff as a result of the Employment Rights Bill, while 67 per cent say they will hire fewer new workers.

More than 90 per cent of members said they were concerned about the bill, with many citing fear of being sued under planned changes to unfair dismissal legislation.

The FSB has urged the Government to make urgent changes to the bill, which it claims will cause Britain’s benefits bill to soar after almost half of respondents said they would avoid hiring the unemployed and claimants first job.

The Working Rights Bill is the first phase of delivering the “Plan to Make Work Pay” and provides support to employers, workers and unions “to move Britain forward”.

The Government says the Bill will update and modernize the current legislative framework in relation to employment rights.

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 Commons report and third reading stage, before being presented to the House of Lords for further scrutiny.

The FSB wants the Government to remove provisions from the bill that would allow employees to take employers to court for unfair dismissal from the first day of work, according to the trade body.

FSB policy chair Tina McKenzie said: “If employers fear being sued, fewer will hire, with knock-on effects including a rise in their benefits bill and a lasting drag on living standards across the UK. “.

The FSB says Prime Minister Keir Starmer should return to the one-year qualification period for the tribunal, which was in place during the last Labor government.

It marks the latest pushback from the business community in the wake of Labour’s Autumn Budget, which will see businesses pay a higher rate of national insurance contributions and a national living wage from April.

Businesses, particularly those in the hospitality sector, have warned that Chancellor Rachel Reeves’ tax plans will lead to a rise in unemployment and businesses will be forced to close.

McKenzie added: ‘Small businesses have made it very clear that the bill will not encourage them to hire more at all. His response is emphatic, resounding and overwhelming.

‘Ministers must demonstrate that they are putting jobs at risk and avoid an arrogant, dogmatic or condescending approach to the clear and strong response from small businesses. The economy is not in suitable conditions for a “war on jobs.”

‘These changes would have a serious negative impact on the real economy. All those who will be left out of work as a result of this Bill deserve better from the Government.

“Returning to the one-year qualifying period in place 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 sustaining jobs.”