The government’s proposed reforms to the U.K.’s employment law will deter both domestic and foreign businesses from recruiting more staff in Britain, the boss of an influential business lobby group has warned.
Rupert Soames, president of the Confederation of British Industry (CBI), has issued a warning to the government that its Employment Rights Bill, in its current form, “risks severely damaging companies’ willingness to invest and grow.”
The group argues that the bill, when combined with the government’s other recent measures, has saddled the country’s businesses with the most significant increase in the cost of employing people in decades.
“Businesses will respond rationally to this increased burden: they will hire fewer people and reduce investment,” Soames wrote in The Times on Friday.
Soames said all businesses in the U.K. have to be burdened with red tape, just to address the misconduct of a few employers. “Everyone acknowledges there are, unfortunately, bad actors in the labor market — a small minority of bad employers, just as there are a few bad employees,” he said.
And he points out that the legislation will add another £5 billion to companies’ costs, according to the government’s own estimates.
Soames is also chairman of British medical devices maker Smith and Nephew and grandson of Sir Winston Churchill. Formerly the CEO of Aggreko and Serco, he joined the CBI in February last year.
The Employment Rights Bill was introduced by the Labour government in October as part of its “Make Work Pay” plan that aims to strengthen employees’ rights. The party’s election manifesto had promised to revamp the country’s outdated employment laws.
Spearheaded by Deputy Prime Minister Angela Rayner, the bill promises to bolster workers’ rights with measures targeting key areas such as unfair dismissal, fire and rehire tactics, zero-hour contracts and sick pay.
Most unions have expressed their support for the bill, but business groups have been expressing their concerns about the additional costs their members will incur from the new employment laws in addition to increases in taxes and minimum wage rates beginning in April.
The government has been under heavy criticism from the business sector since its October budget, which included higher payments for employers’ national insurance (a payroll tax), as well as increases in the national living wage.
The hospitality industry is expected to be hit particularly hard by the measures. UKHospitality, a trade body representing the sector, had warned months ago that the government’s hike to national insurance contributions (NIC) would force businesses to cut jobs.
“The business world has fundamentally changed since the publication of the Employment Rights Bill, with significant increases to employer NIC upending the finances of hospitality businesses,” Kate Nicholls, CEO of UKHospitality, said on Tuesday. “Everything must now be viewed in that context.”
The government has defended the bill by arguing that it would increase productivity and create the conditions for long-term, sustainable economic growth. Labour officials say the amendments will address the low pay, poor working conditions and poor job security that they contend has been holding the economy back.
Officials have held numerous consultations with union representatives and business groups, but Soames was unimpressed by the effort. He said the CBI had engaged with the government over the legislation, but their recommendations had been “largely disregarded.”