Urgent warning over Employment Rights Bill: recruiters sound alarm on potential damage to UK jobs market

As key consultations on the Employment Rights Bill end, the Recruitment and Employment Confederation (REC) warned that the Bill is undercooked and needs changes. With businesses already struggling with rising costs, the REC urges further change to avoid the measures stifling opportunity.

The REC comments come as MPs continue to scrutinise the Employment Rights Bill at Committee in Parliament next week. And as a recent report from the Regulatory Policy Committee (RPC) rates the government’s impact assessment of the Employment Rights Bill as ‘not fit for purpose’, The Employment Lawyers Association (ELA) suggesting the Bill could ‘swamp business’ and may not  achieve better conditions for workers, and The London Chamber of Commerce and Industry (LCCI) survey showing firms predicting the upcoming Employment Rights Bill would have a significant impact on their operations

Shazia Ejaz, REC Director of Campaigns and Research, said:

“At a time when our research shows that the flexible labour market really works for Britain, especially when times are uncertain, it is worrying that some of these proposed changes put those benefits at risk for both businesses and workers. A dynamic labour market is the best way of keeping the labour share of income high, as the relatively stronger performance of the UK by comparison to UK competitors shows.

“Recruiters across the country are keen to work with the government to protect our jobs market, but this Bill is undercooked. Major revisions to the Bill are necessary to ensure that the Plan to Make Work Pay will succeed at protecting workers and growing the economy.”

Zero-hours contracts

The government is introducing measures to tackle one-sided flexibility in zero-hours contracts through a right to guaranteed hours with a contract that reflects the number of hours regularly worked, and a right to reasonable notice of shifts with payment for shifts cancelled or curtailed at short notice. The REC appreciates the reasons for greater protections for directly employed workers but applying it to temps working through agencies is wholly unnecessary given their separate framework of rights under the Conduct of Employment Agencies and Employment Business Regulations 2003 and the Agency Workers Regulations.

Shazia Ejaz said:

“Government wants to apply these rights to agency workers to avoid evasion by a few rogue employers switching away from direct employment. We are more concerned about the million temps who went to work this morning and protecting their opportunities. The plans are using a hammer to crack a nut. Agency workers are well protected by law already and choose to work flexibly; exempting agency workers from the new rules is a simple way to make the law changes work without unnecessarily upending the temporary labour market. Fears of a loophole created by such a carve-out for agency workers are exaggerated, as businesses will still need to maintain a pool of directly engaged staff to effectively manage their resources and staff workloads.

“When someone chooses to work through an agency, they understand the temporary nature of their role. Guaranteeing their hours after 12 weeks on assignment, or to provide ‘reasonable notice’ of shifts isn’t within the gift of an agency. There are alternatives to this that could be delivered within the framework of existing agency regulations, and the REC is ready to work with government on this.”

Strengthening Statutory Sick Pay

The government is consulting on the percentage replacement rate for those earning below the current rate of Statutory Sick Pay. The REC is concerned that changes to SSP could create significant challenges for small businesses in the agency sector.

Shazia Ejaz said:

“The expanding scope of SSP will most likely place the burden of increased costs on agencies, not end hirers, given their ongoing struggles to reclaim SSP from client businesses.

“It is important to strike a good balance between the need to make sure people have better levels of SSP and the reality of businesses (especially SMEs) being able to afford this additional cost at a time when they are already struggling with a wide range of rising employment costs, including the National Insurance rises in the Budget, new regulatory costs from the Bill and a minimum wage that has risen by a quarter in just three years. Small businesses, which make up a significant portion of the market, would bear a disproportionate cost burden, with 60% of new SSP costs falling on them. We urge the government to set the rate of SSP at a level that encourages employers to retain staff, rather than having to move swiftly to capability-based dismissal. A balance between worker support and business sustainability is necessary. Alternatively, reintroduction of the government rebate for SMEs to offset the increase in costs would help both employers and workers.”

Fire and rehire

The government is seeking views on measures to strengthen the collective redundancy framework and protections for employees against fire and rehire practices. REC strongly supports the principle of the government’s reforms in this area, but it has concerns about the method and detail of the government’s proposals.

Shazia Ejaz said:

“Fire-and-rehire practices are not an appropriate way to manage staff outside the most extreme scenarios, but it is important that dismissal and re-engagement remains available in some way as a necessary tool for businesses. The government should focus on strengthening the existing Code of Practice rather than pushing through rigid primary legislation that could present a higher bar to essential business restructuring than they intend. The previous government worked in close partnership with businesses to develop this Code, ensuring it reflects real business needs. It offers clear, practical guidance for managing significant changes in a way that works for both employers and employees.”

Ends

Notes to editors:

1.     In REC’s Overcoming Shortages report, it shows exactly how much damage could be done if we don’t step up. With a 10% surge in demand for staff across the economy, and the labour market restricted by shortages, we could see a 1.2% fall in expected GDP and productivity by 2027 – costing the economy anywhere between £30 billion and £39 billion every year. This figure is just short of the entire current defence budget, or two whole Elizabeth Lines.

2.     Britain’s temporary labour market is working well for people, firms and the modern economy – with about one million temps working every day. Its success at bringing and retaining people in the labour force is vital to the new government’s central mission of driving growth. We are proud to share the voices of temporary workers - showing first-hand the impact temporary work has on the lives of individuals. These stories emphasise how important it is that employment regulation protects workers but does not stop people from accessing flexible work. The 'Voice of the worker' campaign is underpinned by our survey of 520 temp agency workers in Britain in June 2024, where we asked why agency work matters to them.

Click here to view all REC press releases and for more information and interview enquiries, contact the REC Press Office on 020 7009 2157, 020 7009 2129 or pressoffice@rec.uk.com. Outside of regular office hours, please call 07702 568 829.

The REC is the voice of the recruitment industry, speaking up for great recruiters. We drive standards and empower recruitment businesses to build better futures for great candidates and themselves. We are champions of an industry which is fundamental to the strength of the UK economy.

Find out more about the Recruitment & Employment Confederation at www.rec.uk.com.