RPC warns that the Employment Rights Bill will result in lower wages and fewer job opportunities

The government’s impact assessment of the Employment Rights Bill was ‘not up to purpose’. Its policies may lead to lower wages or fewer jobs.

A statement released by the Regulatory policy Committee (RPC), whose job it is to evaluate the quality of the evidence and analyses used to inform the regulatory proposals, stated that the Bill did not have any evidence to support the problem addressed.

It evaluated eight out of 23 impact assessments that the government submitted in relation to the Bill and found eight of them not suitable for their purpose. It said that six of them were in the highest impact category of the original analysis.

On 21 October the government released its preliminary impact assessment, which suggested that the new legislation could have a positive effect on economic growth but also cost the businesses PS7,4 billion over a decade.

The RPC stated that the government had to provide additional evidence to justify “a power imbalance between employers and employees in certain sectors of economy” to support its rationale for the Bill.

The report also stated that there had been a lack of consideration for alternative options and an “inadequate evaluation” of the impact of the Bill on small businesses.

It added that some of the impact assessments were “missing key business impacts, lacking proportionate monetisations and inadequate assessment of key risk”.

In the impact assessment, the areas that were least scrutinized included the day-one unfair dismissal right, reforms of trade union legislation and flexible working.

The RPC stated that when estimating the total cost of reforms “the direct impact estimate does not take into account the likelihood that employers will offset the costs associated with regulation and mandated benefit through wage adjustments or benefit reductions.

The RPC has criticised the initial impact analysis for failing to consider the options available between the two-year period before the rights kick in and the first-day rights proposed in the Bill.

The RPC stated that the proposal could increase the likelihood for smaller employers to be drawn into tribunal proceedings, and added that “risk averse employers” will take into account the increased costs/risks of refusing requests, in order to avoid expensive employment tribunals.

The government has started a series consultations to inform the legislation that will be passed, such as statutory sick pay and zero-hour contracts.

Mel Stride, the shadow chancellor, accused the government last week of “withholding an impact analysis” of the planned increases to employer’s national insurance that are set to take effect in April. The government is also accused of failing to publish an equality impact analysis on the withdrawal from winter fuel allowances for some pensioners.

“This government has upgraded people’s work rights to the greatest extent in a generation,” said a government spokesperson. Our plan to make working pay is an ambitious agenda that aims to improve the working conditions of workers, ensure their rights are up to date with a modern economy and empower them.

These initial, indicative assessments represent the best estimate at this stage of the likely impact. We will refine our analysis as the bill advances, working with experts and business.

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