Labour has been warned that its plan to reform workers rights could lead to higher unemployment because firms will be reluctant to take on new staff if they run the risk of being sued.
The King’s Speech included a vow to a right to flexible working from ‘day one’ as well as immediate access to sickness and parental leave and protection from unfair dismissal.
Labour has also committed to sweeping away zero hours contracts, while unions have reacted with glee at the scrapping of Tory restrictions on the chaos that can be caused by strikes.
But the Tories and businesses claimed the government was running the risk of unintended consequences, citing the higher unemployment rate in France, where workers have more protection.
In his response to the King’s Speech opposition leader Rishi Sunak told MPs: ‘In this country, our employment rate is far lower than the European average and that is thanks, in part, to our flexible labour market.
‘I would urge the party opposite not to impose new burdens on businesses that business leaders themselves have warned of the unintended consequences of those plans.
‘That they could lead to firms being less likely to invest, less likely to hire and so increasing unemployment in the long term.’
And shadow business and trade secretary suggested hospitality businesses like pubs and restaurants might think twice about taking ‘the risk of somebody putting in a claim to an employment tribunal’ days after being taken on if they feel they are badly treated.
The FSB said small business were ‘increasingly worried’ about the proposals driving up ‘costs and risks’ of giving people jobs.
In his response to the King’s Speech opposition leader Rishi Sunak told MPs: ‘In this country, our employment rate is far lower than the European average and that is thanks, in part, to our flexible labour market.’
The New Deal for Workers was being championed by Angela Rayner, but has seemingly been given to Business Secretary Jonathan Reynolds
Lawyers pointed out the government, workers and business have little idea how the proposals will work in practice. They highlighted the risk of ‘unintended consequences’ such as mass sackings of people with shorter service just before the measures come into force.
The New Deal for Workers was being championed by Angela Rayner, but has seemingly been given to Business Secretary Jonathan Reynolds.
The King’s Speech included a pledge to ban zero hours arrangements, but after protests from businesses and people who benefit from the terms it has been watered down.
Only ‘exploitative’ deals will be targeted.
The government is vowing to end so-called ‘Fire and Rehire’ and ‘Fire and Replace’ practices.
Parental leave, sick pay and unfair dismissal protection would also be made available from the first day in a job.
Flexible working is also being made the ‘default’, but there is a caveat that this is only ‘as far as is reasonable’ rather than a right.
The Tory government’s reforms of union powers, including minimum service standards in areas like rail, will be abolished.
The process of getting recognition for unions in workplaces will also be ‘simplified’, although there are few details.
The King said the Government would ‘ban exploitative practices’ as part of a new package of workers’ rights.
Under the new Bill, a Fair Work Agency will be established to strengthen enforcement of workers’ rights.
There will also be a new fair pay agreement in the adult social care sector to establish national terms and conditions and fair pay rates, as well as a ‘genuine’ national living wage which removes ‘discriminatory’ age bands.
The Government said the measures represent the biggest upgrade to workers’ rights in a generation and will improve the lives of working people across the country, stressing that ministers will work in partnership with unions and business.
A draft Equality Bill was also announced, enshrining in law the full right to equal pay for ethnic minorities and disabled people, making it easier for them to bring unequal pay claims.
Unions responded with delight to the plans.
But the FSB’s Tina McKenzie said: ‘It is small businesses which take on those furthest from work and who must be the solution to labour market participation. Small firms must be given the right platform to recruit those out of work, create new jobs, and expand. There was nothing on this today, which suggests early signs of complacency on the need to back small businesses to resolve economic inactivity.
‘The Government has before pledged to consult widely and openly on measures it has announced, and FSB will be working intensely on this over the coming months, and helping our community to deal with the more difficult challenges.’
Beverley Sunderland, a partner at Crossland Employment Solicitors, said: ‘There is a marked difference between making sweeping promises in an election manifesto, and understanding the detailed reasons why perhaps this is not as easy as it might appear to be to the untrained eye.
‘They will need employment law experts who understand all of the twists and turns and case law and not leave it to civil servants who do not have that experience.
‘There is also the spectre of unintended consequences. If the law changes to include day one employment rights (subject to a probationary period) then there is the very real possibility that all those employees currently under two years’ service, where the employer is undecided about them, will be dismissed before any new laws come in.’
Ross Meadows, Partner at Oury Clark Solicitors, said: ‘The Labour Government’s plan to introduce day one employment rights will have massive implications for employers.
‘The changes are likely to necessitate rigorous hiring practices and comprehensive onboarding to mitigate the risk of immediate legal disputes.
‘Employers will need to invest in robust HR policies and training to ensure compliance and avoid potential litigation. This change will increase operational costs and administrative burdens.’
Luke Johnson, a serial entrepreneur and the former chairman of Pizza Express, said Labour’s new rules would stifle economic growth.
He told MailOnline: ‘More regulation will make Britain a less attractive place for investment.
‘The government say securing economic growth is their fundamental mission. More red tape will do the opposite. Unfortunately this proposed slate of legislation will add plenty of bureaucracy and make life harder for businesses.’
‘Smaller businesses are likely to face greater challenges adapting to these requirements, potentially affecting their competitiveness and financial stability. It could lead some employers to engage Professional Employer Organisations (PEOs) and Employers of Record (EORs) rather than employing staff directly. The PEO/EOR would take on all the employment/HR responsibilities and mitigate the risks associated with direct employment, including potential unfair dismissal claims.’
Fire Brigades Union general secretary Matt Wrack said: ‘The steadfast commitment to start delivery of the New Deal for Working People within 100 days will significantly improve the lives of workers after 14 years of vicious anti-trade union legislation from the Tories.’
Mr Reynolds’ business department is expected to steward the New Deal for Workers
Mick Lynch, general secretary of the Rail, Maritime and Transport (RMT) union, said: ‘These achievements are down to pressure from the trade union movement and we will continue to articulate what is in the best interests of railway workers and working people as a whole.
‘We will also continue to actively engage with the Government on the pay issues in our sectors which can be resolved quickly.’
TUC general secretary Paul Nowak said: ‘This King’s Speech begins the process of repairing and rebuilding Britain after 14 years of chaos and decline.
‘Whether its boosting workers’ rights, launching GB Energy, or bringing our railways back into public ownership, this is a serious statement of intent.
‘Working people need – and want – a Government that will deliver meaningful change and be on their side.’
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