Updated government assessment says measures will now entail ‘no more than a modest increase’ for employers

Labour watering down its sweeping overhaul of workers’ rights is expected to slash the cost of the plan for UK businesses by billions of pounds, the government’s own analysis shows.

According to an updated Whitehall impact assessment published on Wednesday, concessions by ministers could reduce the cost of the employment rights bill for businesses to about 1bn.

An earlier version of the document had suggested the package, which includes day-one employment rights and banning zero-hours contracts, could have cost firms up to 5bn.

In its revised analysis, the government said the new lower estimate reflected a decision to phase in the changes over several years, as well as “the fact that policy design and evidence have developed” since its last assessment, in October 2024.

Labour’s employment rights bill finally became law last month after a lengthy legislative battle in the House of Lords, amid fierce business lobbying and after the government made a last-minute U-turn on an important element of the plan.

In a direct breach of Labour’s manifesto, prompting anger among backbench MPs, ministers abandoned their plan to give workers day-one rights to claim for unfair dismissal, instead proposing a six-month threshold.

The concession, which aimed to break the parliamentary deadlock to ensure the progress of other important legislative upgrades to employment rights, came...

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