More than a third of UK employers are planning to reduce permanent hiring as a result of the government's new workers' rights reforms, according to a survey by the Chartered Institute of Personnel and Development (CIPD).
The survey of 2,000 businesses found that 37 percent intend to reduce recruitment of new permanent staff after the changes take effect, while more than half expect an increase in workplace conflict.
Employers warned that the new Employment Rights Act, which offers extended protections including first day statutory sick pay, easier trade union recognition and shorter qualifying periods for unfair dismissal claims, could act as “a further drag on job creation”.
The government estimates that the law will cost businesses around £1 billion a year. However, the CIPD said the official analysis may underestimate the real impact, particularly the additional time and administrative burden placed on HR departments to implement the reforms.
Ben Willmott, head of public policy at the CIPD, said the change risks adding to the pressures already faced by employers after a £24 billion increase in employer national insurance contributions last year.
“There is a real risk that these measures will act as a further brake on recruitment,” he said, urging ministers to consult meaningfully with business and consider compromise where appropriate.
The survey found that 55 percent of employers expect more disputes after the reforms are implemented. Businesses cited concerns over new rights for zero-hours workers and increased powers for trade unions, as well as reducing the unfair dismissal eligibility period from two years to six months.
Under the Act, unions will have better access to workplaces for recruitment and organizing activity, while employees will benefit from expanded “day one” rights.
CIPD senior labor market economist James Cockett said the findings were a sharp departure from the government's expectations. Whitehall's impact assessment predicted that greater union involvement could reduce conflict, yet only 4 percent of employers surveyed believed it would reduce disputes.
The CIPD notes that most UK businesses, particularly the 1.4 million micro and small employers, do not formally recognize trade unions. In that context, it was argued, it is not clear how expanded union rights would reduce workplace tensions.
The Trades Union Congress (TUC) has welcomed the reforms, calling them the most significant upgrades to workers' rights in a generation and arguing that they will improve dignity and well-being at work.
Business groups including the Confederation of British Industry (CBI) and the British Chambers of Commerce have previously expressed objections, particularly around guaranteed hours contracts, seasonal work and industrial action limits.
The CIPD warned that some elements of the law could have unintended consequences. Unfair dismissals, statutory sick pay and changes to zero-hours contracts may lead some employers to rely more on temporary or contract labor rather than permanent hires, potentially increasing employment insecurity.
As businesses weigh the cost of compliance against economic uncertainty, the survey shows the government faces a delicate balancing act between strengthening worker protections and maintaining job growth.
Amy Ingham
Amy is a newly qualified journalist specializing in business journalism with responsibility for news content at Business Matters, the UK's largest print and online source of current business news.