Employment rights reforms could cost businesses £5bn a year, Labour analysis finds

Employment rights reforms will cost businesses up to £5bn a year, the government's own analysis has warned. But low-paid employees will see most of the benefit, with some shift workers earning an extra £600 a year.

- Jessica Elgot, Kiran Stacey, Julia Kollewe

In the analysis, the government acknowledges that businesses will end up paying more, including on reforms to sick pay, paternity leave and zero hours contracts as well as administrative costs.

It found that many of the mental health and physical benefits to families and workers would save significant sums, however.

Speaking in parliament before the bill's second reading yesterday, the deputy prime minister, Angela Rayner, said that most employers were already complying with the changes stipulated in the bill.

She insisted that the strengthening of workers' rights would help the economy grow long-term, saying: "Successful firms already know that strong employee rights mean strong growth opportunities. This landmark legislation will extend the employment protections given by the best British companies to millions more workers."

But the shadow business secretary, Kevin Hollinrake, said the costs "could sink" some businesses, particularly those hit by new employment claims.

The government said the costs were minimal - less than 1.5% - when compared with total employment costs and that most of the cost will represent a redistribution from firms to their workers.

Business groups said they risked being "buried under a mountain of additional cost" and warned against rushing the measures through.