Employment Rights: Impact on Businesses

Lincoln Jopp Excerpts

Tuesday 16th September 2025 Westminster Hall

[Lincoln Jopp (Spelthorne) (Con)]

I beg to move,

That this House has considered the impact of employment rights on businesses.

It is a pleasure to serve under your chairmanship, Dr Murrison. Members across the House will know that I have the distinct honour of being the Member of Parliament for Spelthorne, which is not in Lincolnshire or Lancashire; it is everything south of Heathrow airport until hon. Members get to the River Thames. There are 4,500 small businesses in my constituency. They are its lifeblood. There are also huge employers: BP’s global headquarters is in Spelthorne, as is the world’s second biggest film studios, at Shepperton. I visit as many small businesses as I can, and it is always fascinating to get their insight.

Indeed, I am very much looking forward to next Wednesday, when the Spelthorne Business Forum riverboat trip will see a number of small and medium-sized enterprises come together to go two hours along our beautiful stretch of the River Thames, networking and comparing stories and views. I have to be frank and say that our consideration of the Employment Rights Bill comes in the context of these businesses already smarting, struggling and, in some cases, closing as a result of this Government’s Budget—in particular, the triple whammy of the rise in employers’ national insurance, the minimum wage and business rates.

I should explain that I have a fair experience of life in business. After my 25 years in the Army, I spent 10 years in venture capital and private equity, running, investing in and, we hope, improving small businesses, and growing them into mid-sized businesses and publicly listed bodies. They were mostly in the financial sector, and all had a tech underpinning. Latterly, I spent four years attempting to get Britain’s first ever defined-benefit pension consolidator, the Pension SuperFund, past the Pensions Regulator—an experience from which I still bear the scars.

Yesterday, the House had the opportunity to discuss the measures in the Employment Rights Bill in some detail and to vote on a number of proposed improvements thereto, but I want to concentrate today on the cost of the Bill for businesses. In my view, the cost has been significantly underestimated, and I fear it will come as a shock when the Government see the extent to which it acts as a further sea anchor on growth and employment. Sadly, we have already seen unemployment rise by, I think, 300,000 since this Government took office.

The Government’s impact assessment estimates that the measures in the Bill could cost businesses up to £5 billion annually. According to the Institute of Economic Affairs,

“the £5bn figure is likely to be a considerable underestimate. It almost entirely relates to increased administrative burdens, failing to calculate the significant impacts on business costs and hiring from making it more expensive to employ people.

There is no attempt, for example, to calculate how many fewer people will be hired due to limiting zero hour contracts and day-one rights to unfair dismissal protection”

or

“the costs of more strike action as a result of repealing the measures that made it harder to strike in the Trade Union Act 2016.”

I have been in businesses where people are making very hard decisions. They want to generate growth, they know there is considerable work to be done, and they want to take the next step and make the next investment, but that is a very big decision point, as we will see as I develop this theme. I have seen with my own eyes, talking to Spelthorne businesses, that even today people are curtailing their growth and investment plans. My huge fear is that the new measures in the Employment Rights Bill, which will eventually become an Act, will further dent business confidence, meaning that these businesses will not grow and natural leavers will not be replaced.

Economic studies and business surveys suggest that that will largely be passed on to consumers through higher prices, workers earning lower wages or job losses. I am sure that the Government Members never wanted that to be the outcome of this legislation. The Institute for Fiscal Studies estimates that around 80% of the extra costs are passed on in the form of lower wages than would otherwise have been paid. According to the Government’s impact assessment:

“Costs will be proportionately higher for small and micro businesses due to the fixed costs of admin and compliance burdens”.

There is, of course, an irreducible minimum: if a business needs a menopause management plan and it has only three employees, someone still has to write and manage that plan. The legislation does not seem to derogate, whereby certain sizes of business can just take a knee and have a bye.

The Regulatory Policy Committee, which assesses the quality of Government impact assessments, says that the Government’s impact assessment for the Employment Rights Bill was “not fit for purpose” and that the Bill could lead to lower wages and fewer jobs. It assessed eight of the 23 individual impact assessments as not fit for purpose, and six were at the highest impact measure category of the original assessment.

The Regulatory Policy Committee said that the Government need to provide more evidence to support an

“imbalance of power between employers and workers in certain sectors of the economy”

as its rationale for introducing the Bill. I am sure hon. Members will have seen that the Bill is, to a certain extent, riven with trade union speak—they will have seen trade union interests being played out in the legislation. Of course, hon. Members in certain parts of the House benefit hugely from being the recipients of donations, as does the Labour party as a whole.

[Steve Barclay (North East Cambridgeshire) (Con)]

My hon. Friend is right to highlight the flaws in the impact assessment—there has been wider commentary supporting that point. Does he agree that one of the issues is the accumulation of different aspects of the Bill? For example, not only will there be more hooks for grievances to be based on, but the removal of the 50% threshold for strike action makes it easier for strikes to follow as a result of those grievances. That is at odds with what Ministers themselves have said. For example, when the British Medical Association went on strike, the Health Secretary criticised the low turnout in the ballot, yet this Bill makes it easier to take strike action on some of those more dubious grievances.

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[Lincoln Jopp]

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.

[Rachael Maskell (York Central) (Ind)]

As ever, it is a pleasure to see you in the Chair, Dr Murrison, and I am pleased to follow the hon. Member for Spelthorne (Lincoln Jopp).

Next year will mark 125 years since Seebohm Rowntree’s report into poverty. It was that report that sparked Seebohm and Joseph Rowntree to use their family business to institute rights for workers in my constituency: paying decent wages; introducing pensions and good terms and conditions; and providing welfare, education and leisure. Sickness levels fell, productivity boomed and workers were better off.

Concurrently, in the crucible of industrialised Britain, the trade unions were making a case for similar rights, often to less amenable employers. They organised, they fought, they spoke up and they succeeded in winning their battles. They wanted those rights for all workers, so they found their political voice and founded the Labour party. At this point, I will refer to my entry in the Register of Members’ Financial Interests. I was a trade union official for 17 years and a national officer for 12 years, and I have worked across many industrial sectors.

In response to the speech by the hon. Member for Spelthorne, I would say that if we have strong partnerships between trade unions and business, or between trade unions and the public sector, we have the opportunity to hit a sweet spot. We will therefore not see the industrial action that he talked about and that we saw in spades under the last Government. We will also advance the interests of businesses and workers side by side, which is a strength, and where economic power comes from having strong employment rights.

[Lincoln Jopp]

Was the hon. Member affected by the tube strikes the other day?

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[Rachael Maskell]

My hon. Friend has spoken powerfully and brought that observation to the attention of the House. Low productivity was also a major feature of the last Administration.

The letter goes on to highlight how worker protection positively impacts productivity, how investment in skills improves the competency of workers, and how collective bargaining raises wages and stabilises employment. Over time, that positive investment will spill out to the wider economy and Government, so that there can be investment in the public services that have been so broken. If workers have more in their pockets, they are more likely to spend in the local economy, and wage disparities will be addressed so that wealth is more evenly spread, boosting local business. We also still have parts of the Taylor review and its 53 recommendations to implement to help small employers and those in irregular work.

[Lincoln Jopp]

A few months ago, The Times invited the Chancellor of the Exchequer to address its CEO summit. Just before the Chancellor was called up to the stage, the host reminded the audience that the Chancellor had promised that this would be the most pro-business Government ever. The host then invited the chief executive officers—I think there were 200 of them—to say how many of them, having seen the Labour Government at work, think that it is pro-business. Not a single hand went up. Is the hon. Member aware of that?

[Rachael Maskell]

In the first of five years, we have had to repair the economy. That has been our focus, but as we move forward, businesses will see the vision that Labour has for rebuilding the economy. In my constituency, I see the vibrant boom of entrepreneurs and their business concepts coming to fruition. People want to start a business and see its success. We will certainly build the wider infrastructure needed for that.

There is much more that we need to do to advance the rights of workers. Sector bargaining is a must, with standards and terms to boost economic sectors across the economy, address labour shortages and provide sector security. I would like to see workers on company boards, co-producing with businesses and seeing the success of workers. A single status for workers is really important as we move forward. That is an issue that I have worked on for many years.

On changing the culture in workplaces, I want to ensure that workers no longer have to fear negative behaviours at work. An issue close to my heart, and one that I have worked on for many years, if not decades, is bullying at work. In two different parliamentary Sessions, I have introduced a Bullying and Respect at Work Bill, addressing negative cultures in the workplace. Bullying costs business £18 billion, and 17 million working days are lost.

We need a legal definition of bullying, a route to an employment tribunal and a positive duty to prevent, as in Australian legislation. I hope the new Minister, who I welcome to her place, will be willing to meet me and campaigners to discuss such legislation to ensure that we can introduce such a measure on one of the biggest issues blighting business today.

If workers are not subjugated and their wages are not extracted, we will build a more equitable society, a strong economy and flourishing businesses. A cohesive society is certainly something that I know working people long to see under this Labour Government.

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[Kate Dearden]

I absolutely agree that all workers will benefit in some way from the Bill and be able to give back to the economy, whether by spending in the local economy or by contributing to other local businesses.

[Lincoln Jopp]

I think I am right in saying that the impact assessment’s estimate of a cost of £5 billion was at the higher end, but I read out quite an extensive set of quotations from the RPC saying that it was an inadequate impact assessment and that it completely under-gunned the financial impact of the measures. Does she just think that the RPC is wrong?

[Kate Dearden]

I will come back to the hon. Member’s point in a moment. A number of the measures already have strong support from businesses. An Institute for Public Policy Research survey of businesses found that the majority—at least 75%—supported the measures in our Bill, including nearly seven in 10 small businesses.

The hon. Member also mentioned the Regulatory Policy Committee’s opinion. I want to make it clear that that refers to the evidence and analysis presented in the impact assessment, not the policy itself. Our impact assessments provide initial analysis of the impacts that could follow, and we will be updating and refining them as we further develop the policy and continue our consultation and engagement. I reiterate just how important that is in our next steps with the Bill. I am keen that we continue to work with businesses as part of that consultation and engagement.

All in all, with this legislative framework, we need to ensure that we can make work pay, by addressing the challenges that Britain faces today and by including up-to-date employment protections in areas that have cost Britain’s workers and businesses so dearly over a number of years and that are desperate need of updating. For that reason, the package is pro-growth, pro-business and pro-worker. It supports our Government’s objective to boost growth and improve living standards for all.

The scale of the impacts will, of course, depend on further policies, which are ready for secondary legislation. I have already said that we will continue to engage and consult—[Interruption.]

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[Kate Dearden]

I want every single worker, no matter where they work, to have a good standard of rights in their workplace and to know their rights. The Bill will ensure that we can provide that opportunity for so many people, including young workers, and that they benefit from the legislation.

[Lincoln Jopp]

Will the Minister give way?

[Kate Dearden]

I want to make a bit of progress and respond to the hon. Member for Strangford (Jim Shannon). I thank him for his warm welcome and his contributions to the debate. Our small businesses are absolutely crucial for our economy, and I pay credit to the businesses in his constituency that he mentioned.

The hon. Member also mentioned sick pay and cost. Our legislation is so important because 1.3 million employees will now be entitled to statutory sick pay. The Health and Safety Executive found that stress, depression or anxiety accounted for 17.1 million working days lost in 2022-23. That is the equivalent of more than £5 billion of lost output annually. That is why it is important that sick pay is extended to so many workers in our economy; it will ultimately benefit businesses, because we can keep people in work, but people do not have to make that decision. The pandemic shone a light on the terrible situation that many workers face; I am proud that we will be extending sick pay to so many people, so they will not have to make that decision. Ultimately, that will help businesses, because we can keep people in work and support them when they need it.

We have listened carefully to concerns raised by business groups, trade associations and individual employers. I have already mentioned my predecessor, my hon. Friend the Member for Ellesmere Port and Bromborough, who was tireless in his efforts to engage with stakeholders, and spoken of my intention to do the same.

The Bill brings an opportunity to modernise outdated practices and reduce exploitation. It aims to create a level playing field for responsible employers to start to operate and build their businesses. We are also, of course, mindful of the needs of small and medium-sized enterprises. I speak as someone with personal experience: I come from a family of small business owners, and I know at first hand the pressures that they face.

That is why many provisions will be phased in, giving time to adapt, and the Department will give clear guidance and consultation. We are committed to ongoing engagement with businesses. The implementation road map, which we published on 1 July, has received high levels of praise from businesses for the clarity that it has provided. I hope that that reassures the hon. Member for Richmond Park (Sarah Olney), as she also mentioned it in her remarks.

Decent employers stand to gain when the rules are fair. The shadow Minister mentioned her concerns about the impact of the Bill on growth. In the three months to July, GDP grew by 0.2%, meaning that cumulative growth this year has already exceeded the Office for Budget Responsibility’s forecast for the whole of 2025. I am absolutely confident in this Government’s growth agenda. We want to be bolder and more creative, and to ensure that every single area of this country feels the benefit of this Government and our growth priority. This Bill is absolutely key to that, as I have already outlined.

Our new Secretary of State for Business and Trade, my right hon. Friend the Member for Hove and Portslade (Peter Kyle) has already spoken with more than 100 business leaders. He made putting that partnership at the heart of our growth mission a priority on coming into office. That laser focus on implementation, with his priority to double down on growth, is an absolute cornerstone of building powerful partnerships with business. We have shown we are listening; he touched on that a lot in the debate yesterday, so I will not repeat the arguments that he made very eloquently in the House.

To conclude, I reiterate that this Bill is about raising standards. It is about fairness, unlocking growth and future-proofing our economy. Fairness can drive growth. Businesses that treat their workers well can innovate more and grow faster. Stronger employment relations are absolutely essential to that.

As is typical with employment legislation, the technical details of many of the policies in this Bill will be provided through regulations, and in some cases codes of practice, following Royal Assent. We will be consulting extensively, because this Employment Rights Bill is a positive step forward for workers, for employers and for the economy. I look forward to working closely with all hon. Members of this House, and people outside it, to deliver on this landmark reform and make a real difference to workers, employers and our British economy.

[Lincoln Jopp]

I thank the Minister, the shadow Minister and all hon. Members who have contributed to this debate. I fear that it has been a bit of a conversation of the deaf, but we will see whether the number of women employed in this country goes up or down. We will see whether the number of disabled people employed in this country goes up or down. We will see whether these new regulations contribute to growth in the economy, or to further shrinkage and further increases in unemployment. I fear for the British economy; I think we are heading in a really bad direction, and this Employment Rights Bill is going to turbocharge our getting there.

Question put and agreed to. 

Resolved,

That this House has considered the impact of employment rights on businesses.