Employment Rights Bill Not Fit for Purpose

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The Labour government's flagship employee rights bill has been deemed "not fit for purpose" by the Regulatory Policy Committee (RPC).

The Employment Rights Bill contains various proposals to address low pay, poor working conditions, and poor job security.

However, the RPC has assessed the Bill and rated it as 'not fit for purpose' as there could be significant unintended negative impacts on wages and employment if passed.

The RPC said the government should undertake a labour market and broader macroeconomic analysis to understand the overall impact on employment, wages, and output, particularly the pass-through of employer costs to employees.

The RPC reviews new legislation, estimates the impacts of regulatory changes produced by department and regulator analysts, and assesses whether they are fit for purpose.

"It is concerning that the RPC has deemed the government’s impact assessment of the Employment Rights Bill as 'not fit for purpose'," says Dr. Roger Barker, Director of Policy at the Institute of Directors.

"This underlies the fact that, before introducing this Bill, the government should have undertaken a less hurried analysis of its impact on employment, wages and output, particularly with regard to small and micro business," he says.

Business confidence has suffered under the new Labour government, which has hiked taxes on businesses and sought to introduce more onerous regulations.

There is a fear that the moves will result in slower-than-expected economic growth rates in the coming months and rising unemployment.

"The government also failed to adequately assess the extent to which higher employer costs will simply be passed through to employees through lower wages or benefit reductions," says Barker.

The RPC report also raises major doubts about the overall cost to business of the package. According to the government, these costs will not exceed £5bn per year. However, the RPC suggests that they could be much higher than this.

"It is clear that the government views the Employment Rights Bill as a core component of its electoral mandate. However, this does not obviate the need to carry out a proper assessment of the impact on business, especially at a time when business confidence is depressed, and economic prospects are uncertain," says Barker.

He warns that when combined with the measures announced in the Chancellor’s recent Budget, the greater regulatory burden introduced by the Bill may threaten the ability of businesses to deliver the growth outcome that the UK so desperately needs.