Labour sweetens its employment rights bill to bring business on side

The employment bill is an attempt to reconcile a central Labour election pledge – to extend workers’ rights – with another, the imperative to deliver economic growth.

In theory they should go hand-in-hand. Happy, well-rewarded workers are more productive and everybody wins.

In practice, anything that limits employers’ flexibility and adds costs is contentious, and this bill has been a point of tension with business groups who before the election were happy to talk up relations with the incoming government.

The result is a bill that, while delivering significant reforms including an end to “exploitative” zero hours contracts and extensions to paternity leave, is full of compromise.

Most obvious is the headline measure to deliver “day-one” protection against unfair dismissal, currently only granted after two years.

Major employers in hospitality and retail made it clear to Business Secretary Jonathan Reynolds that day-one rights without any concession would severely hamper their business models.

The compromise is the promise of statutory probation periods of up to nine months, during which new hires can be dismissed fairly under the law, but with a less onerous process.

Another striking omission from the bill that may prove more contentious is the promise to create a single category of worker, an issue that cuts to the heart of concerns over the treatment of workers in the gig economy.

Currently there are three categories; employees, workers and the self-employed, with the grey area between the latter two deeply contentious as the casual gig economy has expanded.

Classifying delivery drivers as self-employed means that the companies they work for do not have to offer any of the protections, including sick pay, that apply to workers and employees. The courier bears all the costs.

Unions have long campaigned against misclassification to deliver greater protection to workers often drawn from migrant communities.

It is a legally complex area however, and for the gig-economy model, deeply embedded in parts of the economy, change will have wide-reaching consequences.

Government sources insist they are still committed to introducing a single category of worker, but with the issue the subject of live legal action between unions, workers and employers, they have prioritised areas where they can make more immediate progress.