Labour's plans to improve workers' rights will cost businesses up to £5 billion a year, according to the government's own analysis.
The new measures would have a disproportionate impact on small businesses, which employ 13 million workers, according to the impact assessment report.
However, the £5 billion was a “modest” amount, less than 1.5% of the total amount businesses spent on hiring staff, the report said.
Additionally, the “wellbeing” benefits of the measures, which include challenging the use of zero-hours contracts and increasing sick pay, would amount to £3 billion, the study found.
The economic assessment report was prepared for MPs ahead of the second reading of the Employment Rights Bill on Monday.
The government says the law represents the biggest improvement in workers' rights in a generation.
It would guarantee new rights to workers from the first day of their employment, including: sick pay, protection against unfair dismissal, parental and bereavement leave.
He also proposes banning what he calls “exploitative” zero-hours contracts and strengthening union rights.
However, the report warns that the additional costs could lead employers to reduce their workforce, which could in turn “weigh” on economic growth, the government's stated policy priority.
Ben Smith, of employment law firm GQ|Littler, said it would be “painful” in the short term for businesses trying to deal with additional red tape, while positive long-term outcomes would be more difficult to quantify.
Tina McKenzie, policy chair of the Federation of Small Businesses, said: “As serious as these impacts may seem, they still underestimate the real costs this legislation could have on growth and participation. »
Paul Nowak, general secretary of the TUC, said the government's assessment showed the bill's costs to business were negligible and more than offset by wider economic and social gains.
“These changes will mainly affect companies whose business models rely on low-paid and precarious employment.
“Decent employers will welcome these measures and the improvements they will bring to their businesses and their workforce,” he said.
The report argues that the reforms could lead to a reduction in lost working days if employees felt less worried about their pay and working conditions.
Citing figures from the Health and Safety Executive, the report says depression, stress and anxiety led to the loss of 17 million working days last year, costing the economy £5.2 billion in loss of production.
Workers in the hospitality, health and social care, and retail sectors are expected to benefit the most, the report says, where precarious and low-paid work is more common.
Under the proposed legislation, employers currently using zero hours contracts would have to offer contracts to staff guaranteeing a fixed number of hours per week. This will be calculated on the basis of the worker's average working time over a period of 12 weeks.
Around two million workers are expected to benefit from the reforms, the report says, including a £400m-a-year increase in sick pay due to statutory sick pay reforms.
