As a small business owner, staying on top of changes to employment law is crucial, especially when reforms could directly impact hiring decisions and operating costs. With the upcoming Employment Rights Bill, many business leaders are bracing for significant changes, and the majority are concerned that these new rules could slow down hiring. Here’s what you need to know and why it’s essential to be prepared.
Business owners put off hiring new staff
According to recent research by the Institute of Directors (IoD), 57% of business leaders are less likely to hire new employees due to the planned employment rights reforms proposed by the government. These reforms include a variety of measures aimed at enhancing workers’ rights, but many employers fear the increased costs and legal obligations could make hiring more difficult.
Only about 35% of business owners believe the changes will have no impact on their business, while a tiny 2.2% of respondents expect the reforms to actually lead to an increase in hiring.
The Employment Rights Bill, which outlines these changes, is due to be published by 14 October, and while the government insists that these reforms are part of a broader strategy for economic growth, many in the business community are expressing concerns.
One of the most contentious points surrounding the Employment Rights Bill is the lack of public consultation. While there has been no formal opportunity for businesses to provide feedback through public channels, the government has been engaging with business lobby groups to discuss the potential impact of these sweeping reforms. This dialogue is critical, as many see the upcoming legislation as the most significant overhaul of employment law in decades.
Key changes expected
For small business owners, it’s important to understand the key provisions of the Employment Rights Bill and how they might affect your operations. Some of the most notable measures include:
- ‘Day one’ employment rights: employees would gain rights to parental leave, sick pay, and protection against unfair dismissal from the first day of employment. This shift could increase the administrative burden and costs for small businesses, particularly those that rely on flexible or temporary workers.
- Contracts reflecting usual hours: employers will be required to provide contracts that reflect the actual hours employees typically work. This could add more complexity to managing part-time or variable hour contracts.
- Fire and re-hire rules tightened: The Bill is expected to strengthen the statutory code on “fire and rehire,” making it harder for businesses to rehire employees on different terms. This could limit a business’s flexibility in adjusting workforce needs during economic downturns or changes in market conditions.
- Stronger protections for maternity returners: the new rules would make it unlawful to dismiss an employee returning from maternity leave for six months, except under specific circumstances. This is designed to offer greater security to returning mothers, but may complicate planning for small businesses with limited staff.
- Simplifying trade union recognition: changes to the statutory process for trade union recognition may lead to more streamlined procedures, though for smaller businesses this may not be a major factor.
- Expanded Statutory Sick Pay (SSP): The Bill proposes to remove the lower earnings limit and waiting period for SSP, making it available to more workers. This could have a financial impact on small businesses, especially those with a high proportion of lower-paid or part-time staff.
What Should Small Business Owners Do?
With the Employment Rights Bill expected to be unveiled in October, small business owners should start preparing now for these potential changes. Here are a few steps you can take:
- Review your employment contracts: make sure they are up to date and reflect the hours and terms that are in line with the new rules.
- Assess the cost of compliance: consider how day one rights for sick pay, parental leave, and protection against unfair dismissal might affect your business’s budget.
- Plan for workforce flexibility: with changes to fire and re-hire practices and enhanced protections for employees, you may need to rethink how you structure your workforce to maintain flexibility while staying compliant.
- Stay informed: although there hasn’t been a public consultation, stay in touch with industry groups and professional networks to keep informed of developments and share your concerns with policymakers.
Conclusion: preparing for change
The proposed reforms in the Employment Rights Bill will likely introduce new costs and administrative challenges for small business owners, particularly when it comes to hiring and managing employees. While the government aims for these changes to support workers and encourage long-term growth, the short-term impact on hiring practices could be significant.
By staying proactive and adapting to the upcoming changes, small business owners can mitigate risks and find ways to thrive in this evolving employment landscape.
