Employment Rights Bill assessment ‘not fit for purpose’ – regulator

A regulator has deemed Whitehall’s impact assessment of flagship employment rights legislation “not fit for purpose” and called for further analysis of how it could affect businesses and workers.

The Employment Rights Bill seeks to improve employment conditions through changes including reforms to parental leave and protection from unfair dismissal.

The impact assessment published in October noted that delivering the changes would place a “direct cost” on employers.

Given the reach of what is proposed under the Bill, the Regulatory Policy Committee said on Monday that the impact assessment should include broader analysis to understand how it would affect employment, wages and output.

Costs

How employer costs could be passed on to employees particularly requires further analysis, the committee said.

The watchdog deemed eight of the 23 individual impact assessments not fit for purpose.

Because six of these are in the “highest impact” category, the overall opinion is that the impact assessment as a whole is “not fit for purpose”.

The Department for Business and Trade’s own assessment of the legislation said the changes would “strengthen working conditions for the lowest-paid and most vulnerable in the labour market, increasing fairness and equality across Britain”, but that “delivering those benefits will place a direct cost on employers”.

Analysis

The economic analysis showed the legislation is expected to “impose a direct cost on businesses of low billion pounds per year (ie. less than £5 billion annually)” but those that rely on low-paid workers or employees on flexible contracts could see the changes “be more disruptive”.

The Regulatory Policy Committee said: “Given the number and reach of the proposals, it would be proportionate for the [impact assessment] to include labour market and broader macro-economic analysis to understand the overall impact on employment, wages and output, and particularly the pass-through of employer costs to employees and other dynamic impacts.”

Downing Street defended the impact assessment, saying: “These initial indicative assessments of the primary legislation represent the best estimate of likely impact at this stage.

“However, we intend to refine our analysis and conduct further assessments as the Bill progresses, working with experts and businesses.”

The head of one of Britain’s leading business groups, meanwhile, said the potential cost of the Bill was among Labour measures that put a “heavy burden” on businesses.

Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), said: “The rise in national insurance, the stark lowering of the threshold, caught us all off guard.

“Along with the expansion and the rise of the national living wage – which everyone wants to accommodate – and the potential cost of the Employment Rights Bill, they put a heavy burden on business.”

The Tories have warned the Bill could create “an existential crisis” for smaller companies.

Shadow business secretary Andrew Griffith said: “Labour’s impact assessment for their radical trade union charter has been rated ‘not fit for purpose’ by the Government’s own regulator.

“But businesses up and down the country knew this already. Just like the national insurance jobs tax, this Bill is the second wave of an attack on job creators.”