Ready for the Bill’s bill? How to prepare for the financial impact of the Employment Rights Bill

With significant changes to workers’ rights on the horizon, businesses need to be aware of potential cost implications. But with strategic foresight, there are plenty of things businesses can do to prepare – and find some hidden advantages. People Director Steve Lynas explains more.

As business leaders, you know the importance of keeping up to date with regulations. The Employment Rights Bill, with its aims of enhancing workers’ rights and protections, brings a host of potential challenges which could have a major impact on growing businesses. However, with strategic planning and a good understanding of the underlying financial picture, there are plenty of things you can do to prepare, and there are even some opportunities to be found to benefit both your business and your employees.

Understanding the financial implications

The Employment Rights Bill introduces several new laws that could significantly impact your business operations and financial planning.

Key areas include:

Increased costs of compliance: Ensuring that your business meets the new legal requirements, such as enhanced parental leave, flexible working rights, and extended sick pay, may mean that existing policies need tweaking. These changes could lead to increased administrative and payroll costs.
Potential for increased litigation: The bill is considering allowing all workers the right to claim unfair dismissal from day one, rather than the current two-year waiting period. Getting the right processes into place before these changes take effect is key to protect your business. Starting with recruitment and training, ensuring that managers make considered and evidence-based decisions is vital to ensure you select the best candidate for the role. Then train your managers how to pro-actively manage and coach their direct reports, particularly during the probation period, will be crucial to avoid costly litigation and reputational damage.
Increased wage bills: One of the key proposals seeks to get rid of age-related wage bands and introduce one minimum living wage for workers aged 18 and over. If your workforce comprises lots of younger workers, that could involve a significant increase to wages. However, the impact of the changes could also lead to more security of employment for younger workers, thus reducing potentially expensive staff turnover.
Banning zero hours contracts: Focused on banning “exploitative” zero hours contracts, businesses in sectors which currently use this model could have some challenges ahead, depending on how it’s operated.
Increased employer pension contributions: – this is still being discussed but could form a part of the financial burden being placed on employers so is worth being aware of. Employers should look to consider options such as pension salary sacrifice which make both commercial sense for the employer, and also reduce the costs for employees.

How can you mitigate risk?

The first step in mitigating risk is to identify where the risks are and on what sort of scale. Additional costs seem somewhat inevitable, but that’s not to say they aren’t manageable, and there are steps you can take to prepare.

Here are some key steps to consider:

Review and update policies

Conduct a thorough review of your current recruitment and onboarding policies and practices, and ensure your probationary processes and measurements are watertight. These must all tick the new requirements of the Employment Rights Bill so a thorough audit of your people-related processes and policies is a must. Most importantly, make sure your managers adhere to these processes and implement them properly.

Strengthen employee relations

Open and transparent communication with your workforce is key to building trust and reducing the risk of disputes. Consider establishing employee forums or committees to how the new legislation will affect them and gather their suggestions on how the changes can be implemented smoothly.

Recruit brilliantly

It may sound obvious, but if you’re bringing in the right people, developing them well and keeping them longer, you will not only be raising the asset value of your business, you’ll also be reducing recruitment and onboarding costs – and reduce the risks of bring on unsuitable hires.

Seek expert advice

The Employment Rights Bill will be extensive and complex and business leaders are often already stretched. This is something to use expert help with and ensure you have the right people looking at the task at hand, rather than expecting someone with basic understanding of employment law and people policies to step up to the required level. This is certainly an area where People Puzzles can support businesses, particularly SMEs Plan for different scenarios

It’s always worth playing out some different situations to stress-test your processes and make sure your policies are robust.

Look ahead

Not all employment changes relate to all sizes of business so it’s important to be aware of implications at the next stage of growth. For example, at 250 employees, there are more in-depth requirements on wage reporting and wellbeing policies, so it’s worth being ahead of the curve here.

Intelligent use of rewards, benefits, and tax strategies

While the Employment Rights Bill may introduce new costs, it also presents an opportunity to rethink your rewards and benefits strategy. By gaining proper insight into what your people really want and familiarising yourself with all the options available to you, you can make significant wins on both sides, offering schemes your people really want, but which may cost less than your current arrangements.

Some examples may include:

Flexible benefits packages

By introducing flexible benefits packages, you can allow employees to choose the perks that matter most to them. This not only improves engagement and brand reputation but also enables you to control costs by tailoring benefits to the needs of your workforce. For example, offering a mix of health insurance, wellness programs, and professional development opportunities can boost morale while keeping expenditures in check. And remember, not all benefits have to cost the earth – remote working and flexibility on hours can be more valuable than expensive add-ons. For example, one benefit that is highly requested by employees, but is often forgotten is Life Assurance. It is actually one of the most cost-effective benefits to provide with costs around £1 per £1,000 salary cover.

Tax-efficient compensation structure

Consider implementing tax-efficient compensation strategies such as salary sacrifice schemes, where employees exchange part of their salary for non-cash benefits like pension contributions, electric vehicles or additional leave. These arrangements can reduce both the employer’s and the employee’s tax liability, making them a cost-effective way to enhance your benefits offering.

Utilise government incentives

Look at government-backed incentives and grants designed to support businesses in complying with new regulations, as some of these can offset some of the costs associated with the Employment Rights Bill and provide financial relief during the transition period.

Attract investment

Many growing businesses rely on investment to fund growth. With a clear, commercial business strategy with a properly aligned people plan, strong leadership team and robust succession and development plan in place, you’ll be in a much stronger position to attract funding and accelerate growth.

Turning challenge into opportunity

Ultimately, change is always an opportunity to assess the status quo and bring in improvements. You may find that bringing in these improvements (even before they’re required, perhaps) could make you a more attractive employer, with better retention and lower recruitment costs.

The Employment Rights Bill undoubtedly presents a range of challenges, but by taking a proactive approach, you can mitigate these risks and even use the changes to put your business in a stronger position.