Employment Rights Bill: Government Should Reconsider Zero Hours Reform

The House of Lords’ first committee debate on the Employment Rights Bill took place yesterday, with guaranteed hours contracts and penalties for shift cancellations on the agenda. However, leading audit, tax and consulting firm RSM UK warns the bill in its current form puts undue administrative and financial burdens on employers, particularly in the retail and hospitality sectors, which rely heavily on part time, seasonal and casual workers.

Currently, the proposed bill means employers will have to offer workers on zero or low hours contracts a guaranteed number of hours, based on the average number of hours per week worked which is expected to be over a 12-week reference period. The government’s aim is to end one-sided flexibility and exploitative zero hours contracts, ensuring some security and predictability so workers can better plan their lives and finances.

However, a recent British Retail Consortium survey highlighted that 70% of HR directors from leading retailers felt the Employment Rights Bill would have a negative impact on their business, with the biggest concern being the right to guaranteed hours.

Several amendments are being proposed to the right to guaranteed hours in the House of Lords, including an extension of the reference period from 12 weeks and a definition of a ‘low hours contract’.

RSM UK’s head of employment legal services, Charlie Barnes said:
“While the government has taken a sensible step in not banning flexible contracts completely, there are still grave concerns from the hospitality and retail sectors already struggling with national insurance and wage cost increases. If the bill is implemented in its current form, the general consensus is that this will lead to a reduction in hiring as employers look to offset increased administration costs and take a more cautious approach on recruitment.

“The harsh reality is that this could even lead to less opportunities for those who value or rely on the flexible nature of casual work. Unfortunately, those employers trying to do the right thing will find themselves burdened with increased administration, and an obligation to provide work for a set number of hours, even where the need isn’t there. This will ultimately drive up prices and push employers to consider other ways to plug labour gaps, eg. offering more overtime to existing workers, or turning to automation and new technologies where possible, rather than hiring more people.

“Businesses fully support the need to protect vulnerable workers from exploitation, but are looking for a more flexible approach to the rules and more certainty on how they will apply in practice. The legislation as drafted leaves much open to interpretation, which is no good for anyone, and will instead add to an already unsustainable workload for employment tribunals. As it stands, retail, leisure and hospitality employers already struggling in the current economic environment, following April cost rises and the impact of tariffs, will bear the heaviest burden.”