Britain passes law to strengthen workers’ rights and reshape economy in show of left’s might

LONDON – Britain’s Labour government passed a workers’ rights package that expands protections for employees and achieves a key policy goal of the party’s left.

The Employment Rights Bill, including new rights to guaranteed hours, an expansion of parental leave and the introduction of greater protections against unfair dismissal, was approved on Dec 16 by Parliament’s House of Lords after a lengthy standoff with the lower chamber, the House of Commons. 

“This landmark legislation, now soon to be in law, will drag Britain’s outdated employment laws into the 21st century and offer dignity and respect to millions more in the workplace,” Business Secretary Peter Kyle said in a statement.

The package follows through on a key promise by Labour in the run-up to 2024’s general election, though some of the provisions have been watered down to cater for the concerns of businesses, after the government’s own impact assessment determined it could cost British firms as much as £4.5 billion (S$7.8 billion) a year. 

The changes were introduced and championed by former deputy prime minister Angela Rayner, who’s seen as a potential rival to Prime Minister Keir Starmer in the event that his dire poll ratings prompt the party to seek new leadership. Since stepping down from government in September over a failure to pay the proper taxes on a property purchase, Ms Rayner has only spoken in the House of Commons to support the legislation’s progress.

The legislation introduces paternity leave and unpaid parental leave from day one of employment and removes a three-day waiting period for the receipt of statutory sick pay. It also cuts to six months from two years the period after which employees gain the right to claim unfair dismissal, after Labour backed away from awarding the right from day one in the face of opposition in the Lords and among businesses. 

The legislation does, however, remove a cap on payments for unfair dismissal – a move that had been subject to the final standoff between the Lords and the Commons, before the upper chamber eventually backed down.

Despite the cost to business, the government’s analysis expected a “positive but small” impact on growth. Its economic watchdog, the Office for Budget Responsibility has so far declined to take a view, citing the vagaries of implementation, while other forecasts vary wildly: The UK’s largest group of unions, the Trades Union Congress estimate the changes will increase output by £10.3 billion annually, whereas the right-wing Independent Growth Commission predicts the hit to be £7.6 billion.

In April, the country’s five biggest business lobbies penned a joint letter criticising the reforms, saying that they would damage growth and employment. Despite those warnings, Labour ministers billed the package as “pro-business and pro-worker” as well as providing an answer to the productivity crisis that prompted the OBR to downgrade its assessments of the UK’s growth potential at November’s budget. 

Earlier this week, six business groups including the country’s biggest, the Confederation of British Industry, urged lawmakers to pass the Bill, saying that despite ongoing “concerns,” they wanted to bank the government’s concession on the qualifying period for unfair dismissal.

Labour’s Bill also empowers trade unions, in part by lowering the legal bar to declare strike action. It puts an end to so-called fire and rehire practices except where businesses have no alternative, introduces new protections for pregnant women and new mothers, and establishes a Fair Work Agency to enforce employee rights.

Ms Rayner, who entered politics through the labor movement, called the legislation an “historic achievement for this Labour government.” Her September departure from the prime minister’s core team was seen as a significant blow to the prime minister, whose party has languished in the polls, trailing Mr Nigel Farage’s Reform UK since April. 

She had formed a key link to the left of the party of which Mr Starmer only became an elected member in 2015, and as a teenage mother from a poor background, was seen as showcasing Labour’s promise to its core voter base.

“This is an historic day and early Christmas present for working people across the country,” Trades Union Congress General Secretary Paul Nowak said. “Unions and workers have long campaigned for these vital rights. Together, we have broken a decades long economic status quo defined by insecurity, weak rights and poor pay.”  Bloomberg