The Government estimates that new obligations placed on employers under the Employment Rights Bill could result in substantial compliance costs – totalling around £5 billion.
The Bill will introduce a ban on many zero-hour contracts and extend day one employment rights across several areas, such as protection from unfair dismissal and parental leave.
For employers, this will represent a significant shift in their current practices. Sectors such as hospitality, care and retail will be disproportionately affected due to the widespread use of zero-hour contracts to manage fluctuating demand.
Breaking down the costs
Compliance costs are likely to be the biggest hit faced by businesses and their cash reserves.
These may include:
- Training on new legislation
- Administration
- Loss of flexibility afforded by zero-hours contracts
- The costs associated with leave, such as temporary recruitment
For example, it is estimated that enhanced sick pay alone could cost employers around £400 million per year, while workforce planning could represent a cost of around £200 million.
Staying ahead of the curve
To offset potential expenses, you might want to prioritise:
- Efficiency – New processes, while potentially costly, are an opportunity to make work more efficient and reduce the overall time and cost associated with employment admin.
- Delaying investment – Many costs associated with compliance will taper off over time, so businesses may need to delay investment to maintain a healthy cash flow.
- Planning the transition – Starting early and covering staffing requirements without paying for unneeded hours can help to keep costs to a minimum.
While certain expenses are inevitable, careful spending and budgeting can help you reduce the pressure on your cash reserves.
For advice on managing the cost of the new employment rights, please contact our team today.
