Long Read  

Govt employee bill must get the balance right for small businesses

Govt employee bill must get the balance right for small businesses
(Luke MacGregor/Bloomberg)

Keir Starmer and Rachel Reeves have made their vision for the British economy clear; their aim is a high-wage, high-productivity country where growth will not come at the expense of the people who drive it.

With this objective in mind, the government plans to reform planning, establish a British energy company, and introduce a national wealth fund.

The recent Budget also promises to create headroom through changes to inheritance tax and employers’ national insurance while redefining government debt to increase investment.

Article continues after advert

This vision rests heavily on the employee rights bill, which quietly slipped through its second reading in the House of Commons by a healthy margin of 281 votes a week before the Budget.

The bill aims to extend workers’ rights from day one of employment to tackle issues like zero-hour contracts and firing and rehiring while formalising work-life balance measures and collective bargaining.

There has been a significant focus on taxes, and rightly so. However, stepping back, it is crucial to consider how the changes to taxes we have seen will also be affected by changes to jobs themselves and how this will impact small businesses.

Following tailwinds

This new deal for employees has been coming. Kickstarted by the pandemic, flexible or remote working, better benefits, and a focus on culture have increasingly become the norm across British businesses. This bill, it seems, is just a manifestation of that, and it makes a lot of sense.

Private and public companies have increasingly been implementing ways of providing a better work-life balance for their employees. Even the financial sector, which has been among the most resistant to these changes, has recently seen work-life balance and the issue of burnout pushed up the agenda.

After pushback from junior staff, there have been attempts to change culture on both sides of the Atlantic, with JPMorgan capping working hours, and flexible working is now the norm in the UK’s financial sector.

These concessions illustrate that most industries are now at least partially convinced that you can maintain or increase productivity while improving work-life balance.

Essentially, then, this bill is a legislative extension of what is already happening across the world of work. It will enshrine the benefits of flexibility and balance while affirming the government’s ethos that productivity can be boosted by better balance at work. 

It is certainly a progressive move and one that will undoubtedly have many benefits. But it is not a panacea. Britain's businesses are not all the same, so treating them as if they are will cause unfair challenges for some.

Start-ups, SMEs, and entrepreneurs

These problems will be most obvious for start-ups, SMEs, and entrepreneurs. For these businesses, the first two years are critical, and many fail during this period due to cash flow constraints.

Requiring small businesses to offer extensive rights and benefits to new hires immediately could lead to more conservative hiring practices and redirect funds away from innovation and growth into compliance and HR management.