Contribution
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.