Cost vs. benefit | Employment Rights Bill to cost UK firms £5bn a year, Gov reveals

Labour’s Employment Rights Bill is poised to introduce significant changes to the UK labour market, but new analysis suggests it could cost businesses up to £5 billion per year to implement. The bill, which represents the largest upgrade to workers’ rights in a generation, aims to tackle low pay, job insecurity, and poor working conditions, especially among vulnerable workers. 

However, the economic assessment reveals that these reforms may come at a substantial financial cost to employers, particularly those who rely heavily on flexible and low-paid contracts.

Breaking down the costs

The government’s own analysis, detailed in the Employment Rights Bill’s economic assessment, outlines a series of costs and benefits associated with the proposed legislation. The estimated £5 billion annual cost will stem largely from new administrative, compliance, and operational changes businesses will be required to implement. 

To contextualise the size of this impact, the report highlights that total wage costs in the UK were £1.3 trillion in 2023, meaning that this is equivalent to an uplift of the UK’s total pay bill of up to 0.4%.