A double-edged sword – how the Government’s new Employment Rights Bill and budget will impact your business

Since then, the Labour government has revealed plans to introduce the new Employment Rights Bill, which is expected to come into effect in 2026, alongside the burden on small businesses outlined in the latest budget.

Many people, including both franchisors and franchisees, will be asking themselves what this will mean for their business. And with the latest franchise sector survey out from the British Franchise Association showing that franchising contributes £19.1 billion to the UK economy from over 1,000 franchised systems and over 50,000 franchise units, the sector voice is becoming stronger than ever in the British business landscape. But, for the majority of businesses, there’s no straightforward answer.

Many business owners may be rightfully asking themselves, ‘What is the proposed Employments Rights Bill and how does it impact me?’ In simple terms, employees will be granted more rights than they previously hold – creating certain obstacles for employers and impacting the way they run their business.

The Employee Rights Bill aims to strengthen protections for workers, granting immediate rights from day one of employment by removing the two-year qualifying period for unfair dismissal claims. It proposes a nine-month statutory probation period to help employers assess employee suitability. The bill seeks to ban exploitative zero-hour contracts, allowing workers with regular hours to secure guaranteed schedules. Fire and rehire practices will be prohibited, ensuring greater job security. Additionally, flexible working requests will become standard for all employees where feasible, and statutory sick pay will be expanded by eliminating the earnings threshold and waiting period.

The Autumn 2024 Budget announced that the Employer National Insurance Contribution (NIC) will see a rise from 13.8% to 15%, while the point where NIC kicks in is reducing from £9,100 to £5,000 annually. As wages increase, employers will also have to find room in their budget for the new national living wage rising from £11.44 to £12.21 per hour.

Paul Limb is the MD of ActionCOACH Bolton based on the high street in Chapeltown. He launched the business coaching franchise in his local area in May 2018. “We’re currently planning to invest in a new office and employ further staff in the New Year. Whilst the changes in NI contributions, threshold and minimum wage increases will raise costs, this will not impact our plans moving forwards. If anything, it will make us invest more heavily in marketing to ensure we’ve increased customer demand and revenues to more than offset the increased costs.

“Our clients are of the same mind. They’re unhappy with the lack of support for small businesses and in the Government’s definition of ‘working people’ - many still consider themselves working people, although they run their own small business and employ others. But they will roll with the punches and come out more determined than ever to succeed and hit their goals.”

For certain business owners who place a significant focus on workers ethics, the proposed Employment Rights Bill is a step in the right direction. A rigorous impact assessment reveals that 10 million workers will benefit from the overhaul of workers’ rights, with a ‘significant positive impact’ for workers in low-paid, insecure work. Forward-thinking employers welcome a more motivated and committed workforce as the reforms will help more people stay in work, boost living standards and improve health and wellbeing, and as a result improve the end-customer experience.

Dan Archer is the UK CEO of in-home care franchise Visiting Angels. Many care franchises use zero-hours contracts for care staff but Visiting Angels started their business in the UK in 2017 with the aim of rewarding their care givers properly and that meant a ban on zero-hours contracts from the start.

“By offering better pay and benefits, training, career progression and mental health support, we’re showing the sector how to deliver the care the right way.”

Dan’s flexibility, dedication and commitment to creating a better workplace for all has helped over 70 franchisees up and down the country flourish, which has subsequently enabled Visiting Angels’ clients to do the same.

“The flexibility and rights within the proposed bill will give all care providers the impetus to change the way they operate for the better. It clearly works because the national turnover rate for care staff is around 73% but our business now sits at just 11%, 30% of our new hires come from staff referrals and mental health absences have reduced from 16% to 3.3%.”

The impact assessment also shows that negligible costs to business are more than offset by substantial wider economic and social gains, ultimately futureproofing the state of the UK’s business landscape for years to come. However, it is reported that the majority of businesses surveyed as part of the assessment have said they are likely to reduce rates of hiring as a result of employment rights reforms. This could mean a dip in employment rates in an already suffering national workforce, leaving many people demotivated and struggling to find employment.

So, whilst employee-focused businesses and franchise brands are likely not to see a drastic change in the way they operate as many already have the proposed reforms in place as company standard policy, some small business owners may struggle at first to navigate these HR and financial challenges.

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*125 franchisor respondents