The news that the employment rights reforms could cost businesses up to £5 billion a year was not welcomed by small businesses. However, with the right preparation, small businesses can harness the benefits of the reforms without significantly increasing their spending.
In the analysis, the government acknowledges the additional costs to businesses but believes this is justified by better work-life balance and wider social and economic gains. In 2023/2024, around 17 million workdays were lost because of stress, depression or anxiety and the latest statistics suggest that around 9.25 million people between the ages of 16 – 64 are economically inactive. The government hopes that by extending employee protections, they will reduce these figures and promote growth.
The changes introduced by the Employment Rights Bill are broad and are likely to affect every small business in some way. However, some changes such as reforms to zero-hours contracts and shift work are likely to have more of an impact on certain industries such as hospitality or social care. Businesses should carry out an audit of their current contracts, policies and practices to understand which changes will impact their working arrangements so that they can take targeted steps toward compliance. By identifying gaps now, they can implement small changes over time rather than having to make large-scale adjustments when the law comes into effect, spreading the burden of any potential costs.
For some of the changes, such as ‘day 1’ unfair dismissal rights and flexible working, the effect of the changes can be managed by investing time into ensuring that the business has robust procedures which are implemented effectively by managers. Taking the example of unfair dismissal rights, the legislation introduces the concept of an ‘initial period of employment’ of 6 or 9 months, in which an employee can be dismissed fairly. Employers will need to follow a “light touch” procedure, which is expected to be similar to a probation period review process. By ensuring the business has a clear procedure to review performance during probation and implementing this ahead of the changes to allow time for any issues to be ironed out, employers will be in a good position to adjust to the new legislation.
For some of the changes, adopting HR software tools to automate compliance will be a worthwhile investment. For example, the introduction of guaranteed hours offers for zero-hours workers, the right to reasonable notice of shifts and right to payment for shifts that are cancelled or moved at short-notice, are likely to be administratively burdensome for some businesses unless they embrace technological solutions. Although there is an upfront cost to these tools, they can save time, reduce errors, and avoid costly fines in the long run.
While small businesses will be aiming to minimise costs, there are times when it is advisable to seek professional advice, especially when it comes to complex issues (zero-hours workers being one them!) which could have a significant impact on the business or lead to costly penalties.
By assessing the impact of the reforms and taking proactive steps now, small businesses can be well-positioned to navigate the new employment landscape with confidence.
