Workers’ rights laws couldn’t come at a worse time for businesses
The government’s Employment Rights agenda is becoming a reality, and the timing could scarcely be worse. As the first provisions of the Employment Rights Act come into force, Britain’s economic outlook is darkening rapidly.
Growth is faltering under the weight of an energy shock, inflation is stirring again and businesses are staring down a period of acute uncertainty not seen since the pandemic. Stagflation is the forecast, with a chance of recession.
Into this environment – seemingly oblivious to it – ministers are introducing one of the most sweeping rewrites of the labour market in decades. Even the accompanying consultations are a bureaucratic headache for employers wanting to contribute. Ten separate documents, running to hundreds of pages, pose more than 170 questions on everything from the expansion of trade union access to new restrictions on zero-hours contracts.
A further tranche of consultations is still to come as part of Labour’s wider “Make Work Pay” agenda. Incidentally, senior hires at the new Fair Work Agency are being given the option of a four-day week on full pay, which tells you all you need to know about the mindset of a new quango designed to drag corporate Britain into an enlightened future.
Ministers are detached from reality
Pushing ahead with these reforms at precisely the moment when firms need clarity, flexibility and confidence makes ministers look utterly detached from reality. The implicit assumption underpinning all of this is that regulation can be layered on without consequence; that the labour market can be tightened and corralled without affecting hiring decisions, investment or growth.
Employers are warning, with increasing bluntness, that the direction of travel is wrong. These warnings ensured some sensible and specific compromises were made as the law passed through parliament, but by and large the concerns of business fell on deaf ears.
Ministers continue to insist that their package of reforms will be good for employment and good for growth, but this assertion rests more on hope than evidence. The truth is that when the cost and complexity of employing people rises, the incentive to create jobs diminishes.
Saddling businesses with layers of new obligations and costs in the midst of an economic slowdown is frankly perverse. The danger is that by the time the full consequences of this well-intentioned endeavour become clear, the damage will already have been done.