Businesses are calling on Labour to rethink its plans for a “full fat” shake-up of the country’s employment laws, warning that it could significantly increase costs and damage the UK’s economic recovery.
Angela Rayner, the deputy leader of the Labour Party, is spearheading proposals for the biggest overhaul of workers’ rights in a generation, including a “right to switch off” and not be contacted after hours along with stronger rights to flexible working unless bosses can justify refusing staff demands to work from home or compressed hours.
The package would also see Labour scrap all zero-hours contracts, clamp down on “bogus” self-employment, make it easier for unions to strike and give workers new rights to enhanced sick pay and to claim for unfair dismissal.
The party is promising legislation within 100 days and say that the plans would be implemented in full during the next parliament. They insist that reforms to workers’ rights will not follow Labour’s green spending plans in being scaled back, with architects of the package boasting it would be “the biggest transformation of the British economy for aeons”.
Businesses support the aspirations of the plan but there is some alarm among many business groups who fear Labour will impose new significant costs on firms and discourage them from hiring new staff at a time when the economy is stuttering.
Official figures showed that the economy contracted by 0.3 per cent in the three months to December last year, worse than market expectations. This means that the UK has met the technical definition of a recession — two consecutive quarters of negative growth.
At the same time the government’s budget watchdog downgraded the “headroom” that Jeremy Hunt, the chancellor, has for tax cuts at the budget in March, as Treasury sources admitted that plans for a two pence cut in income tax or national insurance were now “out of the window”.
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Labour has sold its workers’ rights package as a central element of its economic strategy arguing that it would help grow the economy and boost productivity.
But privately many businesses have deep reservations about the plans which they warn could impose additional costs on businesses.
“The concern we have is that if Labour went ahead with the ‘full fat’ version of some of these proposals they will impose very significant costs on businesses at a time when many companies are struggling with a difficult trading environment,” said Alex Hall-Chen, principal policy adviser for employment at the Institute of Directors.
“Labour needs to make sure that the result of these changes is not that British firms become uncompetitive.
“These changes are not something that should be rushed through in a hundred days. They need to be considered and thought through.”
Jane Gratton, deputy director of public policy at the British Chambers of Commerce, said: “We have made clear that a balance must be struck to give employers the flexibility to respond to challenges and opportunities. To protect jobs and the economy, any changes to legislation must be proportionate and affordable.”
Businesses fear the package could make it harder to get rid of unsuitable workers, push up costs and prove immensely complicated to implement.
The CBI said it was providing “feedback” to Labour on its proposals and was consulting widely with businesses about the likely impact.
“We want to work with Labour to ensure that these measures do not result in unintended consequences for businesses that adversely affect their ability to grow and take on new staff,” said Matthew Percival, a CBI director.
“Our members do have areas of concern.”
Labour sources downplay this, saying that businesses are not lobbying them to water down reforms to workers’ rights.
One of the architects of the policy said: “The new deal for working people is the biggest transformation of the British economy for aeons. It will tackle the scourge of in-work poverty head on and get people back into the club, working and contributing. It’s win-win-win.”
Other business leaders say that companies are yet to fully engage with the details of Labour’s policy, but warn the party not to mistake that for support.
“There will be a real worry that through a variety of mechanisms Labour will put up the costs and risks associated with employment,” said a senior business source.
“The main ask from business firstly, to be careful with the Labour market as it may well be much more fragile than the current political perception, and secondly, just as Labour wants to avoid promising to spend public money, please don’t go into the election committing the private sector to spend money.”
While Labour’s leadership was deeply split over the decision to scale back its £28 billion green spending plan, Sir Keir Starmer told businesses this month they should be “crystal clear” about his commitment to the plan.
Labour insists that it will relish an election battle on the issue, in contrast to its fears that spending commitments will be used by the Conservatives to stoke fears of tax rises.
“Politically we are campaigning on it and we do think ‘make work pay’ speaks to people. It’s not just low-paid workers now, but professionals too working really hard and not feeling like they are getting more in their pocket,” a party source said.
Polling by YouGov for The Times finds that many of Labour’s planned policies are extremely popular with 86 per cent supporting the right to disconnect and 71 per cent in favour of enhanced statutory sick pay. However, they are evenly split on proposals to make it easier for unions to call strike action.
Labour is promising to consult business on the implementation of the scheme, accepting the full package will take more than 100 days to take effect and to give business detailed guidance and time to adapt.
A Labour spokesman said the workers’ rights package was “part of our plan for growth, helping to break the cycle of low productivity, low investment and worker shortages. As a pro-worker and pro-business party, we engage with numerous organisations who should be in no doubt that our New Deal for Working People will be a core part of our offer to the country.”