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Representatives of small businesses have reacted with alarm to Labour’s plans to overhaul workers’ rights.
The Institute of Directors called the measures in the government’s Employment Rights Bill, which was published on Thursday, a “sledgehammer to crack a nut” which will “ultimately make it both riskier and more costly for businesses to employ staff at a time when business confidence is at its lowest point in two years”.
The Federation of Small Businesses said the reforms, which include giving millions more people the right to claim unfair dismissal, were a “rushed job, clumsy, chaotic and poorly planned” that would “jeopardise job creation”.
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Reaction from large employers was more upbeat, with the CBI saying the government “deserves credit for its willingness to engage with businesses and unions on how to make a success of” the reforms.
The government said the legislation marked the “biggest upgrade to rights at work for a generation”. It includes granting new rights on parental and bereavement leave and sick pay from day one of employment, as well as banning “exploitative” zero-hours contracts, which give workers no guaranteed hours. Rights to request flexible working will be enhanced.
It was generally welcomed by trade unions, who traditionally fund the Labour Party, as well as bosses of companies including BT, Sainsbury’s and Centrica. Greene King, the pubs group, also welcomed the plans but Nick Mackenzie, its chief executive, said more more details were needed on how changes to zero-hours contracts would be compatible with the seasonality of pub work.
While Britain has one of the highest minimum wages in the world compared with average salaries, it has been a laggard in the area of minimum employee benefits, according to the Organisation for Economic Co-operation and Development.
An existing two-year qualifying period for protections from unfair dismissal will be removed, benefiting nine million workers who have been with their employer for less than this period.
Daniel Pollard, employment partner at Charles Russell Speechlys, a law firm, said this was “possibly the most radical change to unfair dismissal law since it was first instructed in 1971”.
A nine-month probation period during which staff can still be sacked without a full process has been proposed, although it is unclear how this will work.
Representatives of smaller companies said they were concerned the costs of he reforms would fall disproportionately on employers who could least afford to shoulder them.
Craig Beaumont, executive director of the FSB, said: “When the government wants and needs more growth and economic activity, the last thing it should be doing is making it more risky and expensive for small companies to take staff on.
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“There will always be lots of roles in shiny offices in London but we also need employment in small companies in local communities around the country. The government must not forget the needs of small employers when it is implementing these rules.”
Lord Leigh of Hurley, who co-founded Cavendish Corporate Finance, an investment bank and adviser to growth companies, said the proposals were “terrible for small business” and represented a “wave of rules to go through that they don’t have time to deal with”.
He added: “Small business owners already have to master basic human resources skills. This will demand more of their time is spent on admin matters and take them away from running the business. There is no need to impose this on SMEs who can deal with managing a small team their own way.”