New employment rules risk damaging UK labour market, experts warn

The latest phase of the government’s workers rights overhaul is expected to have an adverse impact on the labour market, according to legal experts. This warning comes as businesses prepare to manage the increased costs and complexities associated with employing new staff under the updated regulations. The new measures form part of the sweeping employment reforms contained within the landmark Employment Rights Act, which aim to provide tighter workplace protections for employees across the country.

Taking effect on Friday, the next stage of the overhaul introduces several significant legal obligations for employers. Businesses will be required to grant trade unions greater access to their premises and digital platforms. They will also become directly liable for staff harassment committed by third parties, such as clients or customers. Furthermore, employers must take all reasonable steps set out in the law to prevent sexual harassment in the workplace. These new laws are scheduled to be rolled out over the next two years, following earlier changes that reduced the qualifying period for unfair dismissal to six months, removed the compensation cap, and strengthened trade union rights.

Tania Goodman, partner and head of employment at Collyer Bristow, noted that while the legislation may be well-meaning, it carries the risk of negatively impacting the labour market. She explained that if employing staff is perceived as becoming more costly, complex or uncertain, there is a danger that hiring will be discouraged. Goodman observed that employers are already beginning to assess the implications of these forthcoming reforms, particularly the move towards unfair dismissal protection arising at a much earlier stage of employment. As a result, some companies are reviewing their current workforce and future staffing requirements. She added that the challenge for the government is ensuring that measures intended to support workers do not inadvertently discourage hiring or investment, and that the real test will be whether it can strike the right balance between supporting employees and maintaining the confidence employers need to grow the economy.

From 30 October, independent trade unions will be given new legal rights to access workplaces both physically and digitally to support, meet, and recruit workers. Richard Harvey, partner at Fisher Phillips, advised that businesses should get their procedures in order now. This includes deciding who handles requests, how workplace access would operate, and how confidentiality and data protection will be protected. Harvey suggested that employers should also look at the underlying relationship with their workforce, noting that those who communicate openly and deal with concerns early will be better placed to navigate these changes than those who only consider employee relations when a union approaches.

The Office for Budget Responsibility, Britain’s fiscal watchdog, stated that the changes are expected to hit economic growth. The OBR said the cost to businesses will likely outstrip any boost to workers’ productivity. In its economic and fiscal outlook published alongside the Budget on 28 October, the body said the workers rights overhaul will likely have a negative economic impact due to the effects on businesses. Shazia Ejaz, director of campaigns at the Recruitment and Employment Confederation, described this as a fresh blow to UK growth. She said the OBR’s analysis adds weight to concerns that employers are being asked to shoulder too many additional costs at once, and urged the government to change its approach on taxation and workers’ rights to create better conditions for employment and economic growth.