Government plans to upgrade employment rights have been slammed again by the Federation of Small Businesses (FSB), which said making unfair dismissal claims a day one right would “wreak havoc” on the economy.
The FSB also criticised changes that will increase sick pay costs, saying it was a further key concern for smaller employers.
Results from the body’s Small Business Index showed that in the last quarter of 2024, 33 percent of small employers said they expect to reduce staff. This is a rise from 17 percent in the quarter before.
The index research, conducted with 1,396 small business owners, also showed that the number of businesses planning to recruit had dropped from 14 percent in Q3, 2024, to 10 percent in Q4.
In more positive findings, 56 percent said they expect to keep their workforce headcount the same.
However, 51 percent of small employers also said labour costs are a major barrier to growing their business.
Separate FSB research, published earlier this year, showed that 75 percent of small employers were concerned about unfair dismissal changes, with 74 percent worried about changes to statutory sick pay (SSP).
In response to its own index findings, the employer body urged the prime minister to scrap plans to make claims for unfair dismissal a day one right. Instead it advocated for a one-year qualifying period for the right to bring a claim and also called for the introduction of a SSP rebate.
Tina McKenzie, FSB policy chair, said: “The figures speak for themselves – plans to allow employees to sue their employers on their first day on the job will wreak havoc on our already fragile economy, while changes to SSP will make employers think twice about their hiring plans.
“Of course, existing protections against unfair dismissal for protected characteristics from day one are essential and should remain. But extending these rights to any and all cases from day one risks opening the door to frivolous claims.
“Ministers should recognise the risk to jobs and resist any approach that comes across as out of touch with business reality, instead of brushing off their concerns.
“The Prime Minister should ditch these reckless changes to unfair dismissal and reinstate the one-year qualification period that worked under the last Labour government. It’s a zero-cost fix that would show he understands what it takes to create and sustain jobs.”
She said that if hiring staff “becomes a legal minefield” employers will simply stop.
Earlier this week, CIPD research with employers of all sizes showed that 25 percent plan to make redundancies in the three months to March 2025.
The institute’s labour market research found that employer’s redundancy intentions have risen to their highest level in the past ten years, excluding the pandemic.
