Employment Rights: Impact on Businesses

Tuesday 16th September 2025 Westminster Hall

16:30

[Lincoln Jopp (Spelthorne) (Con)]

I beg to move,

That this House has considered the impact of employment rights on businesses.

It is a pleasure to serve under your chairmanship, Dr Murrison. Members across the House will know that I have the distinct honour of being the Member of Parliament for Spelthorne, which is not in Lincolnshire or Lancashire; it is everything south of Heathrow airport until hon. Members get to the River Thames. There are 4,500 small businesses in my constituency. They are its lifeblood. There are also huge employers: BP’s global headquarters is in Spelthorne, as is the world’s second biggest film studios, at Shepperton. I visit as many small businesses as I can, and it is always fascinating to get their insight.

Indeed, I am very much looking forward to next Wednesday, when the Spelthorne Business Forum riverboat trip will see a number of small and medium-sized enterprises come together to go two hours along our beautiful stretch of the River Thames, networking and comparing stories and views. I have to be frank and say that our consideration of the Employment Rights Bill comes in the context of these businesses already smarting, struggling and, in some cases, closing as a result of this Government’s Budget—in particular, the triple whammy of the rise in employers’ national insurance, the minimum wage and business rates.

I should explain that I have a fair experience of life in business. After my 25 years in the Army, I spent 10 years in venture capital and private equity, running, investing in and, we hope, improving small businesses, and growing them into mid-sized businesses and publicly listed bodies. They were mostly in the financial sector, and all had a tech underpinning. Latterly, I spent four years attempting to get Britain’s first ever defined-benefit pension consolidator, the Pension SuperFund, past the Pensions Regulator—an experience from which I still bear the scars.

Yesterday, the House had the opportunity to discuss the measures in the Employment Rights Bill in some detail and to vote on a number of proposed improvements thereto, but I want to concentrate today on the cost of the Bill for businesses. In my view, the cost has been significantly underestimated, and I fear it will come as a shock when the Government see the extent to which it acts as a further sea anchor on growth and employment. Sadly, we have already seen unemployment rise by, I think, 300,000 since this Government took office.

The Government’s impact assessment estimates that the measures in the Bill could cost businesses up to £5 billion annually. According to the Institute of Economic Affairs,

“the £5bn figure is likely to be a considerable underestimate. It almost entirely relates to increased administrative burdens, failing to calculate the significant impacts on business costs and hiring from making it more expensive to employ people.

There is no attempt, for example, to calculate how many fewer people will be hired due to limiting zero hour contracts and day-one rights to unfair dismissal protection”

or

“the costs of more strike action as a result of repealing the measures that made it harder to strike in the Trade Union Act 2016.”

I have been in businesses where people are making very hard decisions. They want to generate growth, they know there is considerable work to be done, and they want to take the next step and make the next investment, but that is a very big decision point, as we will see as I develop this theme. I have seen with my own eyes, talking to Spelthorne businesses, that even today people are curtailing their growth and investment plans. My huge fear is that the new measures in the Employment Rights Bill, which will eventually become an Act, will further dent business confidence, meaning that these businesses will not grow and natural leavers will not be replaced.

Economic studies and business surveys suggest that that will largely be passed on to consumers through higher prices, workers earning lower wages or job losses. I am sure that the Government Members never wanted that to be the outcome of this legislation. The Institute for Fiscal Studies estimates that around 80% of the extra costs are passed on in the form of lower wages than would otherwise have been paid. According to the Government’s impact assessment:

“Costs will be proportionately higher for small and micro businesses due to the fixed costs of admin and compliance burdens”.

There is, of course, an irreducible minimum: if a business needs a menopause management plan and it has only three employees, someone still has to write and manage that plan. The legislation does not seem to derogate, whereby certain sizes of business can just take a knee and have a bye.

The Regulatory Policy Committee, which assesses the quality of Government impact assessments, says that the Government’s impact assessment for the Employment Rights Bill was “not fit for purpose” and that the Bill could lead to lower wages and fewer jobs. It assessed eight of the 23 individual impact assessments as not fit for purpose, and six were at the highest impact measure category of the original assessment.

The Regulatory Policy Committee said that the Government need to provide more evidence to support an

“imbalance of power between employers and workers in certain sectors of the economy”

as its rationale for introducing the Bill. I am sure hon. Members will have seen that the Bill is, to a certain extent, riven with trade union speak—they will have seen trade union interests being played out in the legislation. Of course, hon. Members in certain parts of the House benefit hugely from being the recipients of donations, as does the Labour party as a whole.

[Steve Barclay (North East Cambridgeshire) (Con)]

My hon. Friend is right to highlight the flaws in the impact assessment—there has been wider commentary supporting that point. Does he agree that one of the issues is the accumulation of different aspects of the Bill? For example, not only will there be more hooks for grievances to be based on, but the removal of the 50% threshold for strike action makes it easier for strikes to follow as a result of those grievances. That is at odds with what Ministers themselves have said. For example, when the British Medical Association went on strike, the Health Secretary criticised the low turnout in the ballot, yet this Bill makes it easier to take strike action on some of those more dubious grievances.

[Lincoln Jopp]

My right hon. Friend makes a very good point. When these measures kick in, we could see the law of unintended consequences playing out, with a series of compound impacts.

The RPC said that the fundamental basis for the creation of the Bill in the first place had not been made, and that there had been insufficient “considerations of alternative options” and an “inadequate assessment” of how the Bill would impact small businesses. Some of the individual impact assessments had

“missing business impacts, lack of proportionate monetisation and insufficient assessment of key risks.”

The areas in the impact assessment with the weakest scrutiny included day one unfair dismissal rights, reforms of trade union legislation, flexible working and third party harassment. Looking at the overall cost of the reforms, the Regulatory Policy Committee said:

“The direct impact on business estimate does not account for the likelihood employers may offset the costs of regulation and mandated benefits through wage adjustments, benefit reductions or other compensatory mechanisms which would eventually be borne by the employee.”

Let us see what other people think of the impact assessment. The Chartered Institute of Personnel and Development published a report in April 2025 entitled “The (Unintended) Consequences of the Employment Rights Bill”. Its survey of 2,000 employers showed that about eight in 10 believed that the measures in the Employment Rights Bill will increase their employment costs. About half of the employers surveyed believed that, overall, the ERB measures will negatively affect employment at their organisation. When we look at how employers plan to respond to the seven measures, one by one, we can see that between 5% and 20% of employers indicate that each of the measures will lead them to reduce staff through redundancies and/or recruiting fewer workers to their organisations. So much for the No. 1 mission of growth.

Out of the measures proposed, the planned changes to the rules on unfair dismissal are expected to have the largest negative impact on employers’ recruitment and redundancy intentions. The conclusions from the report were that eight out of 10 employers believed that certain measures in the Bill, such as changes to unfair dismissal rules and the introduction of the new statutory probation period, will have the effect of increasing their workforce costs. Of those organisations, four in 10 expected to have to raise prices as a result, and a quarter said that they will cancel or scale down plans to invest or expand their business.

Of the organisations that said that employment costs will rise, almost a third anticipated cutting headcount due to reduced hiring or redundancies, and a further fifth reported that they will reduce overtime and/or bonuses, and cut spending on staff training. Of the organisations that expected the Employment Rights Bill to increase employment costs, nearly a fifth reported that they are more likely to rely on temporary workers, while 10% reported that they will increase their use of what they call

“a typical workers and self-employed contractors”.

The legislation is not improving the lot of employees; it is reducing the number of employees, as employers find alternative solutions.

That potential shift to more temporary forms of employment is much higher in certain sectors. In addition, some employers anticipate recruiting fewer workers who may need more support, such as young workers or those with health conditions. A fifth of employers reported that the removal of the unfair dismissal qualifying period and the introduction of the new statutory probation period will make them less likely to recruit from those groups.

I want to make one last point. It is obviously a big thing to take on new employees and assimilate them into teams. Culture eats strategy for breakfast in business, and those crucial hires are some of the biggest decisions that any employer will make. I have taken part in hundreds of interview boards, and often, there is what is identified as the “risk candidate”. They are the different person, who thinks differently from the employer. They are the person the employer does not fully understand. More often than not, they are the person the employer should employ. My great fear is that, as a result of the measures in the Employment Rights Bill, fewer diverse candidates will be employed, because people “won’t want to take the risk”. I believe that, ironically, as a result of the measures in the Employment Rights Bill, far fewer women are going to be employed.

16:44

[Rachael Maskell (York Central) (Ind)]

As ever, it is a pleasure to see you in the Chair, Dr Murrison, and I am pleased to follow the hon. Member for Spelthorne (Lincoln Jopp).

Next year will mark 125 years since Seebohm Rowntree’s report into poverty. It was that report that sparked Seebohm and Joseph Rowntree to use their family business to institute rights for workers in my constituency: paying decent wages; introducing pensions and good terms and conditions; and providing welfare, education and leisure. Sickness levels fell, productivity boomed and workers were better off.

Concurrently, in the crucible of industrialised Britain, the trade unions were making a case for similar rights, often to less amenable employers. They organised, they fought, they spoke up and they succeeded in winning their battles. They wanted those rights for all workers, so they found their political voice and founded the Labour party. At this point, I will refer to my entry in the Register of Members’ Financial Interests. I was a trade union official for 17 years and a national officer for 12 years, and I have worked across many industrial sectors.

In response to the speech by the hon. Member for Spelthorne, I would say that if we have strong partnerships between trade unions and business, or between trade unions and the public sector, we have the opportunity to hit a sweet spot. We will therefore not see the industrial action that he talked about and that we saw in spades under the last Government. We will also advance the interests of businesses and workers side by side, which is a strength, and where economic power comes from having strong employment rights.

[Lincoln Jopp]

Was the hon. Member affected by the tube strikes the other day?

[Rachael Maskell]

I was not, because I walk or cycle through London, which I recommend to everybody. Those strikes did not have an impact on me at all.

Good industrial relations are important for business, because when employers are in touch with their workers, business can boom. Ultimately, the people with the most vested interest in the success of a business are the people whose jobs depend on it, so when they are included in the industrial environment, the opportunities come.

The hon. Member for Spelthorne referred to employees’ talent. If employees are brought into the fold, so their imaginations run free and their creativity flourishes, that opportunity really strengthens business. That is why the measures that Labour introduced this week are good for workers and good for business. I congratulate the Labour Government on bringing forward what I hope will be just their first Employment Rights Bill. Instead of causing the fragmentation that we are seeing across our country, good workers’ rights are good people’s rights above all. They address equality and bring fairness, not only in the industrial setting but across wider society as well.

Too many workers have been left feeling insecure, however, such as those in the gig economy, the self-employed and the bogus self-employed. We have a duty to close those loopholes. Indeed, the hon. Member said that employers will seek more loopholes, but of course, we will close them if labour is being exploited. The picture of business for far too long has been about workers getting less of the wealth from business while contributing more. We have to restore such values in the workplace.

Yesterday, I was filled with real pride as we went through the voting Lobby—I think we went through 12 times. I am proud of the legislation, which will provide day one employment rights, giving people real security in employment; improve statutory sick pay; give greater flexibility to workers while ending abusive fire-and-rehire practices and exploitative zero-hours contracts; and strengthen collective redundancy rights.

[Steve Yemm (Mansfield) (Lab)]

My constituents tell me how important it is to strengthen statutory sick pay, particularly for lower-paid workers who cannot afford to take time off work without it. Does the hon. Member agree that, contrary to the views of Opposition Members, that is a particularly important employment right?

[Rachael Maskell]

I am grateful to the hon. Member for mentioning that. When I was the shadow Secretary of State for Employment Rights, we really fought for that right, not least during covid. What a difference it would have made to workers then, and it would have kept our country safer. Of course, we need to look after people when they are sick, so I dispute what the hon. Member for Spelthorne said about a menopause plan costing business—women generally would also certainly dispute that, because having a plan would be better for business and better for women at work.

We must reset the relationship with trade unions, which is why establishing a Fair Work Agency and championing engagement around equality are important. I look forward to the future for businesses with a traditional Labour agenda that benefits businesses and workers by bringing better security and better productivity, and providing the green shoots of rebuilding the economy.

I recognise that businesses are in a fragile environment. Over the summer, I held business summits for the daytime and night-time economy. The attendees are looking forward to engaging with me as we set out our plans for our city together: resetting the climate, realigning workers’ rights and giving businesses a boost. The voices of businesses are really important. The Living Wage Foundation notes that 87% of employers say that paying the living wage improved the reputation of their business, and two thirds said that it improved recruitment. A letter about the Employment Rights Bill from leading economists and employment lawyers, published by the Institute of Employment Rights, says:

“The emerging consensus is that labour laws do not, on the whole, have negative economic consequences, and may well have positive ones.”

[Euan Stainbank (Falkirk) (Lab)]

Does my hon. Friend agree that we have to assess the economic impact and consequences, which we have seen over a number of years, of low pay and insecure hours, and how they have contributed to high turnover and sickness absence in businesses? I believe that those problems are substantially addressed by the provisions of the Employment Rights Bill.

[Rachael Maskell]

My hon. Friend has spoken powerfully and brought that observation to the attention of the House. Low productivity was also a major feature of the last Administration.

The letter goes on to highlight how worker protection positively impacts productivity, how investment in skills improves the competency of workers, and how collective bargaining raises wages and stabilises employment. Over time, that positive investment will spill out to the wider economy and Government, so that there can be investment in the public services that have been so broken. If workers have more in their pockets, they are more likely to spend in the local economy, and wage disparities will be addressed so that wealth is more evenly spread, boosting local business. We also still have parts of the Taylor review and its 53 recommendations to implement to help small employers and those in irregular work.

[Lincoln Jopp]

A few months ago, The Times invited the Chancellor of the Exchequer to address its CEO summit. Just before the Chancellor was called up to the stage, the host reminded the audience that the Chancellor had promised that this would be the most pro-business Government ever. The host then invited the chief executive officers—I think there were 200 of them—to say how many of them, having seen the Labour Government at work, think that it is pro-business. Not a single hand went up. Is the hon. Member aware of that?

[Rachael Maskell]

In the first of five years, we have had to repair the economy. That has been our focus, but as we move forward, businesses will see the vision that Labour has for rebuilding the economy. In my constituency, I see the vibrant boom of entrepreneurs and their business concepts coming to fruition. People want to start a business and see its success. We will certainly build the wider infrastructure needed for that.

There is much more that we need to do to advance the rights of workers. Sector bargaining is a must, with standards and terms to boost economic sectors across the economy, address labour shortages and provide sector security. I would like to see workers on company boards, co-producing with businesses and seeing the success of workers. A single status for workers is really important as we move forward. That is an issue that I have worked on for many years.

On changing the culture in workplaces, I want to ensure that workers no longer have to fear negative behaviours at work. An issue close to my heart, and one that I have worked on for many years, if not decades, is bullying at work. In two different parliamentary Sessions, I have introduced a Bullying and Respect at Work Bill, addressing negative cultures in the workplace. Bullying costs business £18 billion, and 17 million working days are lost.

We need a legal definition of bullying, a route to an employment tribunal and a positive duty to prevent, as in Australian legislation. I hope the new Minister, who I welcome to her place, will be willing to meet me and campaigners to discuss such legislation to ensure that we can introduce such a measure on one of the biggest issues blighting business today.

If workers are not subjugated and their wages are not extracted, we will build a more equitable society, a strong economy and flourishing businesses. A cohesive society is certainly something that I know working people long to see under this Labour Government.

16:56

[Jim Shannon (Strangford) (DUP)]

It is an absolute pleasure to serve under your chairship, Dr Murrison. I thank the hon. and gallant Member for Spelthorne (Lincoln Jopp) for his passion on this topic, which he illustrated incredibly well in his contribution. The issues that he raised are the ones that were in my speaking notes to highlight to the Government yesterday during the Employment Rights Bill debate.

What a pleasure it is to see the Minister in her place. I wish her all the best for the future. I am sure her energy and enthusiasm will help her along the way.

We are all very aware that small businesses are the backbone of the British economy, as the hon. Member for Spelthorne said. In March 2025, some 89.3% of businesses in Northern Ireland—72,465, to be precise—were micro-sized, with fewer than 10 employees. Only 2.2% of businesses had more than 50 employees. Four in 10 businesses —some 39.6%—had a turnover of less than £100,000, while a smaller 12.8% had a turnover exceeding £1 million.

These are not our Tescos and Waitroses, with their human resources departments and access to civil service occupational health services. These are small shops, for whom paying £250 for an occupational health referral body is a big deal. The impact on small businesses in my constituency is absolutely ginormous and will have great effect. They include local restaurants that cannot afford to pay their staff sick pay and get other staff in to replace them. They either step in themselves and do their own work through the night, or staff all work even harder than they already are to take up the slack, because they understand the financial pressures.

The Federation of Small Businesses has said that sickness absence already costs an average small employer more than £3,500 a year, or £5 billion across the economy. The Employment Rights Bill will see those costs rise dramatically from next April. We need a better focus from the Government and, with great respect, from the Minister and her Department, on helping small firms look after people and get them back into healthy work. I know the Government have said that is part of their policy, and I do not doubt it, but we need to see how that is going to work.

There is a clear impact for businesses, whose national insurance contributions for staff have risen, whose energy costs have spiralled out of all proportion, and whose staff wages have increased while the public’s disposable income has stagnated or decreased. The pressure on the high street is something that I have not experienced for a long time, but I see the pressures there—when people go, they are not replaced, and everyone is working that bit harder to make ends meet.

Tesco can weather the storm with its small profit margin but big reach, because that is how it works, but the local corner shop is not in that position. We must ensure that we support small businesses with the financial help to which the companies with a bigger turnover should not be entitled. I know that the Minister’s reply will give us some hope that I can pass on to my constituents back home and to the small businesses, which are a crucial part of the economic life of Strangford. Staff must be supported, but so too must small businesses. We need to step up now before the backbone of our economy breaks under the additional strain.

Employees deserve rights, but small businesses need support. We cannot have one without the other, so I ask the Minister how we can get that balance. How can we ensure that small businesses can keep employing people and will still be in business next year, while also ensuring that workers’ rights are protected?

17:00

[Sarah Olney (Richmond Park) (LD)]

It is a pleasure to serve under your chairmanship, Dr Murrison. I thank the hon. Member for Spelthorne (Lincoln Jopp) for securing this debate. The Liberal Democrats support measures that work to strengthen employment rights, so yesterday we welcomed aspects of the Employment Rights Bill, such as boosting statutory sick pay, strengthening support for whistleblowers and increasing support for carers. All those measures move us in the right direction, but as the legislation progresses through Parliament, we remain concerned about the specific way in which many of them will be implemented. We must ensure that the legislation strikes the right balance for both employees and business.

In the debate yesterday, my colleagues and I highlighted several concerns about the absence of detail in the Bill. So many key elements will be left to secondary legislation or subject to consultation. Businesses in my constituency tell me that they are being left in limbo by the Government’s framing of the Bill, which prevents long-term planning. I am disappointed that the Government did not support the Liberal Democrat amendments that would have created more certainty for business in matters such as the definition of short notice when a shift is cancelled, or the changes to the period for making a claim for unfair dismissal.

Any new measures to support workers must go hand in hand with much-needed reforms to support our small businesses, such reforming the broken business rates system, bringing down trade barriers and properly reforming the apprenticeship levy. Although the impact of the Employment Rights Bill will be a significant shift for businesses, there are many other factors that remain challenging.

Small businesses are at the centre of our communities and our local economies, creating the jobs on which we all rely. We are glad that raising the employment allowance will help to protect the very smallest employers, but thousands of local businesses, including many in the hospitality sector, will still feel the damaging impact of the national insurance increase. My Liberal Democrat colleagues and I have persistently opposed these measures at every turn. Once again, I urge the Government to scrap them.

The Government’s decision to raise the rate of national insurance contributions while also reducing the threshold at which they are levied has significantly raised the cost of employing part-time workers, delivering a disproportionately large blow to the hospitality sector. Just today, the latest labour market figures show rising numbers of people claiming unemployment benefits, alongside many businesses facing workforce shortages. The Government need to scrap this failed tax, or we will not get the growth that we need to rebuild our public services.

It is not just about staffing costs. The Government must take other steps to boost the hospitality workforce, including introducing a youth mobility scheme with much more urgency and properly investing in skills and training. More broadly, they must look at measures that would ease the pressure felt by so many businesses and boost the economy as a whole. We continue to call on them to introduce vital reform to the business rates system. We also know that many businesses are struggling with sky-high energy costs, so I urge the Minister to consider Liberal Democrat proposals that will cut energy bills by a half within 10 years, by breaking the link between gas prices and electricity costs so that households and businesses can get the benefit of cheap, clean power and lower energy bills. I urge the Minister to look at our proposals to give businesses the support that they desperately need.

Most employers want to do the right thing by their staff. I have spoken to many businesses and key stakeholder groups that support the aims of the Bill but have raised significant concerns that some of the measures could backfire, leading to the loss of thousands of flexible, part-time and entry-level roles in particular. So much of the detail of the Bill is still undecided. That will compound the challenges that small businesses are facing, from the Government’s changes to employer national insurance to the reduction in business rates relief and the absence of any meaningful action to bring down commercial energy prices. We must find a way to support and provide clarity for businesses trying to plan ahead.

The Liberal Democrats remain supportive of many of the measures that the Employment Rights Bill will introduce to improve support for workers. However, as we see the impact of the legislation, we will continue to seek the right balance for both employees and businesses.

17:04

[Dame Harriett Baldwin (West Worcestershire) (Con)]

It is an honour to serve under your chairmanship, Dr Murrison. I congratulate my hon. Friend the Member for Spelthorne (Lincoln Jopp) on securing the debate. I welcome the Minister to her position; I believe that this is her first opportunity to contribute from the Dispatch Box. I heartily congratulate her on her achievement.

We have had an interesting debate. My hon. Friend the Member for Spelthorne set out clearly some of the issues with the Employment Rights Bill from his constituents’ perspective. I then heard the completely opposite view from the hon. Member for York Central (Rachael Maskell), who inexplicably has not been readmitted into the bosom of the Labour party. I hope her readmission is imminent, because she put the governing party lines across very clearly.

The clue is in the name of the debate: we have to focus on employment. Today’s labour market data was sobering and should serve as a wake-up call to the Labour Government. Payroll employment has fallen by 142,000—more people than any one of our constituencies contains—and has declined in every quarter. It is not a blip. Sadly, it is a trend, and it is happening on this Government’s watch because of measures such as the Employment Rights Bill and the jobs tax. Vacancies are also falling. My first question to the Minister is how she reconciles that with Labour’s mission to deliver economic growth.

[Andy McDonald (Middlesbrough and Thornaby East) (Lab)]

Will the shadow Minister give way?

[Dame Harriett Baldwin]

Does the hon. Gentleman wish to deny the employment facts from the Office for National Statistics?

[Andy McDonald]

I wish to intervene, not to have the shadow Minister shape the terms of my intervention. She is talking about the impact of the Employment Rights Bill. How can that be? Has it yet been enacted?

[Dame Harriett Baldwin]

I am glad that the hon. Gentleman anticipates the rest of my contribution. Has the hon. Gentleman read the impact assessment that the Labour Government have put out for the Bill? It estimates that the cost on businesses will be £5 billion. I ask him how he thinks that will end up. It will not end with a hiring spree, I can assure him.

Against the background of rising unemployment, what is the Government’s answer? It is more regulation, more costs and more pressure on employers, as we saw last night when we debated the Employment Rights Bill. It would be more apt to call it the unemployment rights Bill. What assessment has the Minister made of the impact of today’s rising unemployment and slowing job creation on those who really need an employer to give them their first chance, particularly young and entry-level workers?

If the Government are serious about making work pay, they must stop making it harder for businesses to hire, invest and grow. The British people deserve better than a shrinking jobs market and a Government who have clearly let the trade unions take the wheel. Yesterday, the Government chose to vote down all the amendments that had been agreed in the other place. They voted to reject the requirement to consult small businesses about the impact of the Bill. They voted against reinstating the requirement for the trade unions to choose to opt into the political fund. The Bill changes it to an opt-out. It is a vote for endless trade union payments. I hope that the Minister will declare her interest in relation to contributions from the unions to her election campaign.

Yesterday, the Government voted against the reinstatement of a 50% trade union member threshold for voting for industrial action. I am afraid that that is a vote for more strikes. How can the public trust that the Employment Rights Bill serves the national interest when over 200 Labour MPs have taken millions from the unions, and when the Bill appears to prioritise union access and strike powers over the much-desired economic growth?

As I have mentioned, the Government’s own impact assessment says that there will be a £5 billion cost to business. The Prime Minister’s new economic adviser, Minouche Shafik, has admitted that Labour’s Employment Rights Bill will lead to fewer jobs. We need not listen just to her. The National Farmers Union has warned that the Bill ignores the seasonal nature of agricultural work. The UK Cinema Association has said that it is “no exaggeration to say” that this Bill will bring the viability of some operators into question. The Institute of Chartered Accountants in England and Wales has highlighted the risk to small businesses: it is all but guaranteed, it says, that small businesses will adopt more risk-averse recruitment practices in response, if they are confident about taking on any new talent at all.

My heart goes out—my hon. Friend the Member for Spelthorne made this point passionately—to all those people who need an employer to take a chance on them. I am thinking of the people who are perhaps a little riskier to take into an organisation and who really need someone to give them that chance—possibly their first chance. One well-known employer is exceptional in that regard: the large employer Mitie. It warns of higher costs and tribunal pressures, and that the right in relation to unfair dismissal will cripple smaller organisations. It adds that it is crucial that the Government permit some flexibility for employers that need to adapt to fluctuating demand.

These are not fringe concerns. These are the voices of employers across agriculture, culture, services and finance, who are united in their message that this employment rights legislation will make it harder to hire, harder for the country to grow and harder to serve the public. The Labour Government’s refusal to listen to these voices is not just reckless; it is simply ideological. I think we heard some of that in this afternoon’s debate.

The Bill is not about improving rights. It is about empowering the paymasters, the unions, and about punishing enterprise. What I can say to the country is that under Conservative leadership, we will stand with business, grow jobs and deliver growth in the overall economy, because that is the only way to build a stronger, fairer economy that gives everyone an opportunity.

17:12

[The Parliamentary Under-Secretary of State for Business and Trade (Kate Dearden)]

It is an absolute pleasure to serve under your chairmanship, Dr Murrison, in what I am proud to say is my first time responding for the Department in a Westminster Hall debate. I thank the shadow Minister and all other Members for their kind words and welcome. I am grateful for all the thoughtful and considered contributions from both sides of the Chamber.

Business impact rightly remains a recurring theme in discussions on the Employment Rights Bill. I pay tribute to the SMEs and businesses that all Members have mentioned today, and particularly to those in my constituency that I have had the pleasure to meet over the past year, as their Member of Parliament. I am delighted to have the opportunity to reiterate this Bill’s positive impact on employers, workers and the wider economy.

I also pay tribute to the work done by those before us, not least that of my predecessor, my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders)—

[Dame Harriett Baldwin]

On a point of order, Dr Murrison. I appreciate that this is the Minister’s first time responding to a debate in Westminster Hall. My point of order is simply that she may wish to consider putting her entry in the Register of Members’ Financial Interests on the record.

[Dr Andrew Murrison (in the Chair)]

Minister?

[Kate Dearden]

I was just about to get to that point. I thank the shadow Minister for the reminder.

I pay tribute to my predecessor for all his work and to the officials and colleagues who worked with him. Many Members of this House and the other place engaged constructively with the team, and their insight has materially shaped the Bill. I thank them for their valuable insights. Likewise, the Bill has been shaped by extensive engagement from external stakeholders, businesses, trade unions and civil society alike. I thank them all for their engagement to date, and I reassure them that this Government remain committed to full and proper consultation on the Bill’s implementation.

I declare my interest as a proud trade union member. I look forward to working with trade unions, businesses and all stakeholders, and to continuing the positive engagement that many stakeholders have had with the Department and with this Government so far.

The Government were elected on a manifesto that committed to implementing “Labour’s Plan to Make Work Pay” in full and to putting more money in working people’s pockets. The Employment Rights Bill is the legislative backbone of that promise. We will deliver the single biggest upgrade of workers’ rights in a generation. That is good for workers and good for business, because we believe that a strong package of workers’ rights and protections go hand in hand with a strong economy. Many good employers already know that. When staff feel secure, they stay longer, are more productive and help the business to succeed. The Bill will help to make that the norm across the economy.

Our first mission as a Government is to deliver economic growth in every single part of the country. The Employment Rights Bill is a vital step. It represents a cornerstone of our mission to grow the economy, and it is designed to modernise the UK labour market, raise living standards and support long-term growth.

Securing that growth is worth doing only if working people actually feel the benefits of it in their pay, in their security and in their daily lives. Too many people face practices that undermine both their security and our economy, from fire and rehire to zero-hours contracts and last-minute shift cancellations. Those practices breed insecurity, and insecurity stifles productivity.

That is why the Bill is at the centre of the Government’s plans and is so significant. It will benefit at least 15 million workers, or half of all UK workers, protecting them from those practices and providing economic safety for the lowest paid in our labour market.

Let us consider a few of the changes that the Bill will bring. Some 9 million employees will gain protection from unfair dismissal, not after two years, but from day one. Workers in some of the most deprived parts of the country will keep hundreds of pounds a year in their pockets instead of losing them to the hidden costs of insecure work, and nearly 1 million more people each year will benefit from bereavement leave when they lose a loved one.

I thank the hon. Member for York Central (Rachael Maskell) for her comments in support of the Bill and of the Government’s work in this area, and for her work on the impact of bullying in the workplace over a number of years. I would be happy to meet her to discuss those matters further.

Economic impacts were a key part of the contribution of the hon. Member for Spelthorne. Some still argue that stronger rights are a cost, but I reject that. Stronger rights are an investment in people, in stability and in long-term growth. As set out in the Government’s published impact assessments for the Bill—I will respond in detail to his points on that—there are clear, evidence-based benefits to tackling issues holding back the UK labour market, which will have a positive impact on economic growth and will help to raise living standards across the country.

[Steve Barclay]

I join colleagues in welcoming the Minister to her place. She said in her reply to my hon. Friend the Member for Spelthorne (Lincoln Jopp) that there would not be an additional cost, but the Association of Directors of Adult Social Services has raised concerns about the additional costs and the funding gap, given that it will fall on local authorities and will therefore, in turn, require Government support. Could she clarify what she expects to be the extra cost of the Bill in terms of social care?

[Kate Dearden]

I am happy to come back to the right hon. Member on the particular social care interests and concerns that he might have.

Improving worker wellbeing, supporting productivity, reducing workplace conflict and creating a more level playing field for good employers would grant significant benefits, worth billions of pounds per year. That is why delivering the benefits of the Bill would offset the costs. That assessment is shared by organisations such as the Resolution Foundation. The £5 billion figure from our impact assessment, which the hon. Member for Spelthorne mentioned, is a top-end estimate of that cost, and will largely represent a direct transfer to the lowest paid in society, with the central estimate close to £1 billion. Even if we take that high-end estimate, the costs are therefore likely to be less than 0.4% of our national wage bill, and could even be as low as 0.1%. That is our best estimate at this stage.

[Andy McDonald]

If workers are in good, well-paid work, they can go on to lead good, flourishing lives, and they will return that as a dividend through their collaboration with their employer. They will also be in a position to be more active in the economy. We know that when working people have money, they are able to spend it and generate activity in the economy. Does the Minister agree?

[Kate Dearden]

I absolutely agree that all workers will benefit in some way from the Bill and be able to give back to the economy, whether by spending in the local economy or by contributing to other local businesses.

[Lincoln Jopp]

I think I am right in saying that the impact assessment’s estimate of a cost of £5 billion was at the higher end, but I read out quite an extensive set of quotations from the RPC saying that it was an inadequate impact assessment and that it completely under-gunned the financial impact of the measures. Does she just think that the RPC is wrong?

[Kate Dearden]

I will come back to the hon. Member’s point in a moment. A number of the measures already have strong support from businesses. An Institute for Public Policy Research survey of businesses found that the majority—at least 75%—supported the measures in our Bill, including nearly seven in 10 small businesses.

The hon. Member also mentioned the Regulatory Policy Committee’s opinion. I want to make it clear that that refers to the evidence and analysis presented in the impact assessment, not the policy itself. Our impact assessments provide initial analysis of the impacts that could follow, and we will be updating and refining them as we further develop the policy and continue our consultation and engagement. I reiterate just how important that is in our next steps with the Bill. I am keen that we continue to work with businesses as part of that consultation and engagement.

All in all, with this legislative framework, we need to ensure that we can make work pay, by addressing the challenges that Britain faces today and by including up-to-date employment protections in areas that have cost Britain’s workers and businesses so dearly over a number of years and that are desperate need of updating. For that reason, the package is pro-growth, pro-business and pro-worker. It supports our Government’s objective to boost growth and improve living standards for all.

The scale of the impacts will, of course, depend on further policies, which are ready for secondary legislation. I have already said that we will continue to engage and consult—[Interruption.]

[Dr Andrew Murrison (in the Chair)]

Order.

[Kate Dearden]

Thank you, Dr Murrison. The hon. Member for Spelthorne also mentioned particular groups of workers who will benefit. I am glad he did so, because younger workers, women, people with disabilities and people from ethnic minority groups make up a higher than average share of those workers who will benefit from the package. Flexibility and the rebalancing of security are very important for that section of the workforce, so I am proud that the Bill will help those people to stay in work and that it will make their work more family-friendly, improve their living standards and put more money in their pockets.

[Euan Stainbank]

I welcome the Minister to her place. She is making an excellent point, but I refer her to specific sectors in which some Opposition parties have called for carve-outs. Does she agree that it is important that we do not carve out, for any particular sector, the strong provisions in the Bill, and that it is both morally and economically wrong to say to a young worker that if they work behind a bar, they should have fewer rights than if they worked behind a desk?

[Kate Dearden]

I want every single worker, no matter where they work, to have a good standard of rights in their workplace and to know their rights. The Bill will ensure that we can provide that opportunity for so many people, including young workers, and that they benefit from the legislation.

[Lincoln Jopp]

Will the Minister give way?

[Kate Dearden]

I want to make a bit of progress and respond to the hon. Member for Strangford (Jim Shannon). I thank him for his warm welcome and his contributions to the debate. Our small businesses are absolutely crucial for our economy, and I pay credit to the businesses in his constituency that he mentioned.

The hon. Member also mentioned sick pay and cost. Our legislation is so important because 1.3 million employees will now be entitled to statutory sick pay. The Health and Safety Executive found that stress, depression or anxiety accounted for 17.1 million working days lost in 2022-23. That is the equivalent of more than £5 billion of lost output annually. That is why it is important that sick pay is extended to so many workers in our economy; it will ultimately benefit businesses, because we can keep people in work, but people do not have to make that decision. The pandemic shone a light on the terrible situation that many workers face; I am proud that we will be extending sick pay to so many people, so they will not have to make that decision. Ultimately, that will help businesses, because we can keep people in work and support them when they need it.

We have listened carefully to concerns raised by business groups, trade associations and individual employers. I have already mentioned my predecessor, my hon. Friend the Member for Ellesmere Port and Bromborough, who was tireless in his efforts to engage with stakeholders, and spoken of my intention to do the same.

The Bill brings an opportunity to modernise outdated practices and reduce exploitation. It aims to create a level playing field for responsible employers to start to operate and build their businesses. We are also, of course, mindful of the needs of small and medium-sized enterprises. I speak as someone with personal experience: I come from a family of small business owners, and I know at first hand the pressures that they face.

That is why many provisions will be phased in, giving time to adapt, and the Department will give clear guidance and consultation. We are committed to ongoing engagement with businesses. The implementation road map, which we published on 1 July, has received high levels of praise from businesses for the clarity that it has provided. I hope that that reassures the hon. Member for Richmond Park (Sarah Olney), as she also mentioned it in her remarks.

Decent employers stand to gain when the rules are fair. The shadow Minister mentioned her concerns about the impact of the Bill on growth. In the three months to July, GDP grew by 0.2%, meaning that cumulative growth this year has already exceeded the Office for Budget Responsibility’s forecast for the whole of 2025. I am absolutely confident in this Government’s growth agenda. We want to be bolder and more creative, and to ensure that every single area of this country feels the benefit of this Government and our growth priority. This Bill is absolutely key to that, as I have already outlined.

Our new Secretary of State for Business and Trade, my right hon. Friend the Member for Hove and Portslade (Peter Kyle) has already spoken with more than 100 business leaders. He made putting that partnership at the heart of our growth mission a priority on coming into office. That laser focus on implementation, with his priority to double down on growth, is an absolute cornerstone of building powerful partnerships with business. We have shown we are listening; he touched on that a lot in the debate yesterday, so I will not repeat the arguments that he made very eloquently in the House.

To conclude, I reiterate that this Bill is about raising standards. It is about fairness, unlocking growth and future-proofing our economy. Fairness can drive growth. Businesses that treat their workers well can innovate more and grow faster. Stronger employment relations are absolutely essential to that.

As is typical with employment legislation, the technical details of many of the policies in this Bill will be provided through regulations, and in some cases codes of practice, following Royal Assent. We will be consulting extensively, because this Employment Rights Bill is a positive step forward for workers, for employers and for the economy. I look forward to working closely with all hon. Members of this House, and people outside it, to deliver on this landmark reform and make a real difference to workers, employers and our British economy.

17:26

[Lincoln Jopp]

I thank the Minister, the shadow Minister and all hon. Members who have contributed to this debate. I fear that it has been a bit of a conversation of the deaf, but we will see whether the number of women employed in this country goes up or down. We will see whether the number of disabled people employed in this country goes up or down. We will see whether these new regulations contribute to growth in the economy, or to further shrinkage and further increases in unemployment. I fear for the British economy; I think we are heading in a really bad direction, and this Employment Rights Bill is going to turbocharge our getting there.

Question put and agreed to. 

Resolved,

That this House has considered the impact of employment rights on businesses.

17:27

Sitting adjourned.