The Employment Rights Bill, a wide-ranging package of employment law reforms to be unveiled today, could see small business owners suffer financially unless they streamline their processes to mitigate additional costs.
The draft legislation is set to radically overhaul employment rights and includes 28 reforms ‘to boost pay and productivity’, including:
- A right to claim unfair dismissal from day one of employment: The existing two-year qualifying period will be removed
- Statutory probation period changes: The government will consult on introducing a maximum nine-month statutory probation period
- Exploitative zero-hour contracts will be banned: Workers on zero-hours contracts will have the right to guaranteed hours if they work regular hours over a defined period
- ‘Fire and rehire’ will be unlawful: A ban on fire and rehire practices aims to provide greater protections for workers
- Flexible working: The ability to request flexible working will become the default for everyone ‘where practical’
- Universal entitlement to sick pay: Workers will be entitled to sick pay from the first day they are ill. Other changes include removing the lower earnings limit and scrapping the 3-day waiting period
Despite a poll by TUC union indicating the Bill has received widespread support from business leaders, particularly among larger employers, small business owners have voiced concern about the additional burden and costs it will impose on them.
While the exact shape of the legislation is still to be determined following a consultation period, it is clear that new day-one rights and entitlements including a universal entitlement to statutory sick pay (SSP) will impose significant new costs on business owners, making it more costly to hire new workers and even costlier to fund staff sick leave without financial support from the Government.
According to a BrightHR survey of over 140,000 small business owners in the UK, 88% of small business owners have concerns about implementing the reforms in the Bill, with the top concerns being the amount of time it will take to implement the changes (42%), the associated costs (40%), and the monetary risk of implementing reforms incorrectly (24%).
The survey also found that nearly 8 in 10 (78%) small business owners believe it will be ‘difficult’ to implement new day-one rights, including protection from unfair dismissal, while only 1 in 5 (19%) say they have the in-house HR expertise and systems necessary to navigate the changes confidently and compliantly.
Alan Price, CEO at BrightHR, says: “Small business owners are understandably concerned about the many new HR requirements they will need to adhere to when the Employment Rights Bill comes into effect.
“While many of the elements we expected to see in the Bill have been stripped out, including creating a single status of ‘worker’, an overhaul of employment tribunals, and the introduction of a formal ‘right to disconnect’, the key changes it imposes will nonetheless have a seismic impact on SMEs across the UK.
“In what is already a very challenging economic environment for small businesses, the Bill will impose significant additional responsibilities and costs, with the proposed introduction of universal entitlement to sick pay and protection from unfair dismissal from day one of employment being the most difficult reforms for SMEs to implement in a cost-effective way.
“Unlike larger employers, SMEs have fewer resources and less in-house HR expertise to navigate employment law changes confidently and compliantly, which is concerning given the depth and breadth of the reforms that Labour is planning to introduce.
“Small business owners are particularly concerned about the new day-one rights that employees will likely be entitled to under the Employment Rights Bill, particularly the right to be protected from unfair dismissal from day one of employment, rather than after the current two-year qualifying period.
“These changes will not only demand an overhaul of existing HR policies, processes, and documents; they will also require a significant investment of time and resource to make sure they are implemented correctly.
“Small business owners will need to review their hiring strategy and look at where they can improve operational efficiency to mitigate the cost of hiring new workers, which will increase significantly under the Bill. By streamlining their operations and automating processes where they can be automated, SMEs can best set themselves up for success as the 28 reforms laid out in the Bill begin to be introduced.”
Lucy Cobb, Employment Law Specialist and Advice Operations Manager at BrightHR, adds: “Getting employment law wrong can be incredibly costly, leaving businesses at risk of tribunal claims, legal fees, and reputational damage. Without access to in-house HR teams, small business owners in particular will need to stay alert to legal changes in the wake of the Employment Rights Bill and ensure they have the correct policies, procedures and documentation in place when the new legislation comes into effect.
“I would advise business owners to seek expert legal support if they are unsure about what they will need to change in their business to stay compliant. Expert advisors can help business owners determine exactly what they will need to do to ensure their policies and processes are compliant with new laws as and when they come into effect, while comprehensive HR software like BrightHR can provide them with the tools, software support and document templates they will need to adjust their operations efficiently and compliantly.”