Labour must keep listening to business

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Britain’s Labour government came to power facing a balancing act between its manifesto commitment to offer a “new deal for working people”, and fulfilling its pledge to be pro-growth and pro-business. Employers have sounded alarms over the impact of its landmark employment rights bill; the Federation of Small Businesses called it “rushed, chaotic and poorly planned”. But by moderating some promises and committing to further consultation, Labour has shown itself ready to listen to business — even at risk of irking its union allies. It should continue to heed corporate concerns as it thrashes out how the bill will be implemented. Above all, it must not undermine the priority of boosting UK growth, productivity and competitiveness in its quest to bolster workers’ rights.

The government’s biggest concession is to soften the day-one protection for employees against unfair dismissal that has been a centrepiece of its plans. Companies had worried they could face costly employment tribunals simply for dismissing new hires who proved unsuitable — a potential disincentive to take on workers, especially for small business. There will now be a statutory probation period during which employers need follow only a “lighter-touch” dismissals process than the more onerous procedure that currently kicks in after two years of employment. The probation period is to be consulted on, but ministers have signalled they favour nine months — an apparent victory for pro-business voices in the cabinet.

The bill will deliver day-one rights to parental, paternity and bereavement leave for millions of workers, as Labour had promised. Employers will have to pay statutory sick pay from the first day of illness, rather than after three days as now. But some promised steps are tempered or postponed. A default right to flexible working will apply only where practical. A “right to disconnect”, barring employers from contacting staff outside hours, is sensibly now expected to be addressed separately through a statutory code of practice.

Some abusive practices will rightly be curbed, including the “exploitative” use of zero-hours contracts. More than 1mn people on such arrangements will gain new rights to a contract reflecting a pattern of regular hours they build up over time — though workers, some of whom prefer zero hours, do not have to accept. Loopholes that businesses have used to fire workers then rehire them on worse pay or terms will be closed, except where companies can show they are at genuine risk of failing. Less positive is the repeal of Conservative legislation designed to preserve minimum levels of public services during strikes.

Many measures are subject to further consultation over secondary legislation required to implement them; some will not take effect before 2026. That means workers will wait two years for some rights, and businesses face further uncertainty. But it allows time to hammer out the balance between employees’ and employers’ rights, and iron out wrinkles in a bill ministers scurried to publish within a 100-day deadline.

Striking the right balance on employment rights is, however, only one part of a broader picture. Whether Labour lives up to its pro-business billing will depend, too, on avoiding burdening companies with excessive taxes in the Budget, finding money to invest in infrastructure, training and skills, and coming up with a credible industrial strategy. After a rocky start, the government will hope publishing the employment bill, on top of efforts to get a grip on its Downing Street operation this week, marks a reset. Business, much of which gave Labour the benefit of the doubt due to frustration with the Conservatives, still needs some convincing about its growth credentials.

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