The UK Government has cut its estimate of the cost to business of its flagship workers’ rights reforms to around £1 billion a year, saying it is now “highly unlikely” that an earlier worst-case estimate of £5bn will be realised.
A revised official impact assessment, published on Wednesday, said the original £5bn figure was based on deliberately cautious assumptions about the largest overhaul of employment rights in a generation. With further evidence and policy development since October 2024, ministers now believe the direct annual cost to business, once the reforms are fully in place, will be closer to £1bn.
The higher figure had been repeatedly cited by opposition MPs, including Conservatives, as evidence that the reforms would damage UK businesses. The Government said the revision reflects the fact that many measures will be introduced gradually and that the £5bn scenario assumed the maximum potential cost of every policy would recur each year.
The reforms include tighter rules on zero-hours contracts and “fire and rehire” practices, wider eligibility for statutory sick pay, stronger trade union rights, and a reduction in the qualifying period for unfair dismissal protection from two years to six months.
Officials said businesses are likely to adapt over time, potentially by raising prices, hiring fewer staff, moderating pay growth, or investing in productivity-enhancing technology.
However, the Government acknowledged that the estimate does not capture all potential impacts. It excludes the cost of a proposed fair pay agreement in social care and does not fully quantify concerns about reduced labour flexibility, such as the requirement to offer guaranteed-hours contracts. As a result, the £1bn figure largely reflects administrative and compliance costs rather than longer-term effects on business models or the broader economy.
Ministers argued the additional burden represents only a modest increase against total UK employment costs of £1.4 trillion. At the same time, trade unions said the reforms would deliver significant social benefits to millions of workers.
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