As the Employment Rights Bill moves ever closer to becoming law, with the third reading in the House of Lords scheduled for 3 September, a new survey shows how businesses across the country are feeling about the changes. And it’s not good news for the government.

577 businesses were surveyed to find out how they are preparing for the implementation of the Employment Rights Bill and their concerns around the risks posed by the different changes.

The survey found that

• 68% of respondents believe that the Employment Rights Bill will have a negative impact on business in the UK. Only 10% believe that the bill will have a positive impact on their business.
• The changes businesses believe will be most positive are enhanced protection against sexual harassment (58%), day one right to paternity leave and unpaid parental leave (31%), and changes to zero-hour contracts (25%)
• By contrast, the changes respondents say will have the most negative impact on businesses are the day one right to claim unfair dismissal (62%), flexible working as the default (47%), and changes to Statutory Sick Pay (SSP) (42%).
• 71% of businesses surveyed are concerned about higher operating costs, of which 32.7% say they were very concerned and 37.9% somewhat concerned.
• 66% are concerned about the number of changes and increased administrative burden the Employment Rights Bill will place on them.
• Businesses in the East Midlands have the most negative overall outlook, coming above the national average in all categories, while those in London are most positive.
• 46% of employers believe the increased costs of statutory rights under the ERB pose a major or critical risk to their business
• More than half of businesses are concerned about the increased risk of more tribunal claims

When it comes to the day one right to paternity leave and unpaid parental leave, 39% of London businesses feel this will be a positive change while only 19.5% say it will be a negative. The East of England (41.9%), Northwest (41.8%) and Yorkshire (41.5%), however, all overwhelmingly believe it will be a negative change.

Kate Palmer, Employment Services Director at Peninsula, says, “Clearly businesses are incredibly concerned about the impact the Employment Rights Bill will have. The Chancellor’s hike on employer national insurance contributions (NICs) had a crippling effect on many, with more small businesses closing their doors than ever before. And with increased national minimum wage, the day one right to Statutory Sick Pay and paternity leave, changes to tipping laws and the removal of lower earnings limits to come, this financial pressure is only going to increase.

“Throw in the potential for more tribunal claims, with the costly process of defending your business against claims, and you can see why some are referring to the next few months as the Autumn of Discontent.

“We’ve seen a marked increase in the number of calls regarding redundancies and hiring confidence has dropped sharply over the last year, with many businesses scaling back operations. A staggering 60% of our survey respondents say they are concerned about the additional risks of hiring new employees once the Employment Rights Bill comes into law, a figure that clearly warns of tough times ahead.

“When you break this down by business size, those with 21-50 employees are most concerned (68%). 57% of SMEs with 6-20 employees were concerned, while 52.8% of micro-SMEs (those with 1-5 employees) expressed concerns.

“The latest employment figures confirm these trends. While wages are growing job vacancies are falling, along with the number of people in payrolled employment.

“26% of UK employers said their main goal for the year ahead was survival, up from 19% in 2023. Similarly, only 5% said they were planning to recruit, compared to 22% the year before. These numbers warn of difficult times ahead, especially for small businesses.

“These changes are coming whether businesses like them or not, so preparation is key. Just over half the businesses we surveyed have started to plan for the implementation of the Bill, with only 12% stating that they feel ‘very prepared’. Those without internal HR knowledge should seek advice to ensure they stay ahead of all the incoming changes, keeping policies and processes up to date with all latest legislation and reducing the risk to their business.”

Penisula’s Business Confidence Survey