New laws could make it harder to find a job, warn experts

Labour’s new Employment Rights Bill will be rolled out tomorrow, promising extensive reforms to current employment laws. 

However, experts have warned that these new measures may make businesses reluctant to take on more staff, in spite of still struggling with the skills gap.

How will the Employment Rights Bill protect employees?

Labour’s latest bill is designed to improve employees’ rights and protections in the UK. Key proposals of this bill include:

• New rights for trade unions: Granting trade unions regulated access to workplaces to recruit and organise, while employers will be required to inform workers of their right to join a trade union regularly.
• Protection from unfair dismissal: Employees will be protected from unfair dismissal from day one, as opposed to the current two-year requirement, though it is unclear how this will apply during probation periods.
• Restrictions on “fire/rehire” policies: Curbing the practice of “fire and rehire”, where an employer dismisses an employee and re-hires them under new (often worse) terms and conditions – only being permitted as a last resort to keep a business working successfully.
• Scrapping “exploitative” zero-hour contracts: It isn’t yet known what will be defined as “exploitative”, but the bill plans to introduce a right to an average-hours contract based on a 12-week reference period.
• Improved parental leave: Employees who are parents will have the right to unpaid time off work from day one, scrapping the original one-year requirement. However, this is yet to be confirmed.
• Statutory sick pay (SSP) for all workers: All workers will be entitled to SSP from the first day of their illness, rather than the fourth. However, the rate of sick pay for employees who earn below the threshold is likely to be lower than the standard rate (£116.75 weekly).
• Better maternity leave rights: New mothers, including those adopting, will have the right to give notice for maternity leave from day one without the risk of dismissal.
• Six-month probation cap: Probation periods exceeding six months are expected to become illegal. Employers will also be required to arrange a formal meeting to end an employee’s probation, rather than dismissing them without valid reason.

Will the Employment Rights Bill halt hiring?

While the new bill has obvious benefits for employees, experts have warned that it could hinder businesses from taking on new staff. Concerns surrounding a possible increase in employment tribunals have also been raised.

Nicholas Le Riche, Partner in the Employment Law team at BDB Pitmans, commented: “The potential impact of this change has meant that we’ve seen more organisations reviewing their workforces now before the rules are in force, and several organisations we work with have told us they’re more reluctant to hire staff as a result.

“We’re also certainly going to see an increase in Employment Tribunal claims following the introduction of the bill since it will provide a much greater number of employees with protection from unfair dismissal.”

He added: “The Government is clear in its determination to employees’ rights but without a corresponding extension of funding for the Tribunal system, the ability for both employees and businesses to manage these changes effectively could be undermined.”

Skill gaps are persisting in UK businesses

Although experts have raised concerns about the potential impact of the new bill on hiring practices, UK skills gap statistics suggest that businesses may still carry out recruitment efforts to address these shortages.

According to the government’s website, around 44% of businesses have skill gaps in basic technical areas. Approximately 390,000 organisations (27%) are reported to have gaps in advanced skills, such as penetration testing for cyber security roles. Incident management skill gaps have also increased from 27% in 2020 to 48% in 2024.

In terms of region, the Midlands was reported to have the highest levels of skills shortages at 68%. This is followed by the North and South of England (65%), Scotland (56%), Wales (47%) and Northern Ireland 44%).

According to Manpower’s 2024 report, the UK has reached an 18-year high of cross-sector shortfalls, with 80% of employers struggling to find candidates with the right skills for available roles. A report by recruitment company PeoplePlus also revealed that despite the public sector facing high staff cuts, many employers have reported “hard to fill” vacancies, with 41% struggling to recruit – suggesting that the need for highly qualified candidates remains critical.

While Labour’s new bill promises significant reforms to protect employees, concerns remain about its potential impact on hiring due to increased legal obligations and employment tribunal claims. However, how businesses balance these risks against the persistent technical skill gaps remains to be seen.