Employment Rights Bill risks stifling economic growth
11 March 2025
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Media
11 March 2025
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Lifestyle Economics
17 March 2025
Commenting on the new amendments to the Employment Rights Bill, Professor Len Shackleton, Editorial and Research Fellow at the free market think tank the Institute of Economic Affairs, said:
“The Government’s Employment Rights Bill may be well-intentioned, but it risks damaging businesses which are already under pressure and stifling economic growth, whilst hurting the very workers the bill intends to protect. Today’s amendments do not alter this.
“The Government appears to have watered down its commitment to eliminating zero hour contracts, and it should still be possible to employ some workers on these arrangements. However, they will be increasingly hedged around with conditions so that firms will fear inadvertently creating obligations which they did not intend, so we will probably see a lot less use of this type of arrangement. Zero-hours contracts are not for everyone, but they have offered opportunities to some groups of people that would not be able to work regular hours, including students, and people with caring commitments. At a time when we are all worried about falling economic activity rates, cutting some people off from contributing to the economy is foolish.
“As for the changes to trade union law, I do not expect a massive increase in private sector recruitment though it seems likely that unions representing a small number of employees will have rather greater power. This may mean more strikes, but not necessarily: the threat of strikes is itself enough to boost bargaining power and induce employers to make higher pay offers – which may be inflationary and/or discourage the expansion of employment. Unions will be better able to resist change – for example on the railways, where the productivity record is already abysmal and there is chronic overstaffing in some areas.
“The Government’s Employment Rights Bill may be well-intentioned, but it risks damaging businesses which are already under pressure and stifling economic growth, whilst hurting the very workers the bill intends to protect. Today’s amendments do not alter this.
“The Government appears to have watered down its commitment to eliminating zero hour contracts, and it should still be possible to employ some workers on these arrangements. However, they will be increasingly hedged around with conditions so that firms will fear inadvertently creating obligations which they did not intend, so we will probably see a lot less use of this type of arrangement. Zero-hours contracts are not for everyone, but they have offered opportunities to some groups of people that would not be able to work regular hours, including students, and people with caring commitments. At a time when we are all worried about falling economic activity rates, cutting some people off from contributing to the economy is foolish.
“As for the changes to trade union law, I do not expect a massive increase in private sector recruitment though it seems likely that unions representing a small number of employees will have rather greater power. This may mean more strikes, but not necessarily: the threat of strikes is itself enough to boost bargaining power and induce employers to make higher pay offers – which may be inflationary and/or discourage the expansion of employment. Unions will be better able to resist change – for example on the railways, where the productivity record is already abysmal and there is chronic overstaffing in some areas.
“The right to access physical workplaces to attempt to recruit union members would necessarily be limited in the frequency union officials could organise this but ‘digital access’ is a whole new ball game. It could involve relentless emails to staff. The template for access, presumably to be produced by Acas, will need careful watching,
“Given that it will now be a case of having to opt out of the political levy on union members (rather than opt-in), the further amendment to remove the requirement for a renewal ballot looks like it will permanently give unions a much larger pot to play with.
“The extension of the ballot mandate from 6 to 12 months, without requiring unions to submit pay offers to members, is likely to extend strike action.
“E-balloting and repeal of the turnout requirements will increase the likelihood of strike mandates and boost the power of officials.”
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