Small businesses across the UK are urging the government to scale back its proposed Employment Rights Bill, warning that sweeping changes could hamper hiring and trigger widespread job losses.
The Federation of Small Businesses (FSB), which represents thousands of employers nationwide, claims the plans — including expanded grounds for unfair dismissal and automatic sick pay from day one — “will wreak havoc on our already fragile economy”.
In a survey of 1,270 members, two thirds of small firms said they would reduce or freeze recruitment if the bill is passed in its current form, while a third predicted they would cut existing headcount before the measures even come into force. Tina McKenzie, policy chairwoman of the FSB, says that allowing staff to “sue their employers on their first day on the job” risks opening the door to “frivolous claims”, especially during an economic climate where many businesses feel more exposed.
The government has heralded the Employment Rights Bill as the “biggest upgrade to rights at work for a generation”. It includes removing the two-year qualifying period for unfair dismissal protections and offering new rights to sick pay from the first day of employment. While some large employers and trade unions have welcomed the moves, the FSB believes they could mean more legal uncertainty for smaller enterprises and has urged the prime minister to revert to a one-year qualifying period, alongside a rebate for statutory sick pay costs.
The FSB’s concerns come amid tense relations between business groups and government following last autumn’s budget, which introduced a £25 billion increase in employment taxes. Other industry snapshots reflect growing caution: one FSB poll found that 32 per cent of small firms planned to reduce staff in the final quarter of last year, with only 10 per cent looking to hire — a notable shift from the 14 per cent figure three months before. Meanwhile, the Chartered Institute of Personnel and Development (CIPD) has reported that one in four businesses intend to make redundancies or slow their recruitment drive.
McKenzie warns that “reckless changes” may deter businesses from hiring: “If taking on staff becomes a legal minefield, companies will simply stop. That means more people on benefits, a ballooning welfare bill and a devastating hit to living standards.”
The Department for Business and Trade has yet to comment on the FSB’s assertions. Nevertheless, the government maintains that stronger safeguards and expanded entitlements will support workers’ rights without placing untenable strain on employers. As the bill progresses through the House of Commons, small businesses will watch closely to see if any amendments ease their mounting concerns.
