News

The UK labour market is in a period of development and transition, shaped by shifting employment trends, evolving worker expectations and, now, the proposed Employment Rights Bill, which is at its third reading stage in the House of Lords. For employers in the public sector and for those relying on high-volume staffing models, this legislation could represent a fundamental change in workforce management.

According to the Association of Labour Providers (ALP), 97% of labour providers and 100% of employers believe that the Bill will dramatically impact their operations, with over half describing the implications as ‘disastrous’. As the Bill moves closer to becoming law, an understanding of its implications and potential effects is vital for organisations that need to plan ahead.

The Labour Market Backdrop

The latest Office for National Statistics’ (ONS) Labour Market Overview shows mixed results:

• Unemployment has risen to 4.7%, equating to 1.67 million people (April - June 2025), and representing a 0.1% rise since the last figures, although youth unemployment fell slightly to 12.2%
• The employment rate has edged up to 75.2%, with 34.1 million people in work
• Economic activity remains high at 9.1 million people, 549,000 higher than pre-pandemic figures
• Vacancies have now fallen for the 36th consecutive quarter, down to 727,000, with decreases in 14 of 19 sectors
• Pay growth remains robust at 5% annually, although this equates to just 1.1% in real-terms growth, after inflation.

Further insights from Indeed’s Hiring Lab Mid Year Labour Market Update point to modest declines in hospitality and retail job postings, a scarcity of graduate roles, reduced use of zero-hours contracts and continued high demand for hybrid working.

The results are that employers face persistent labour shortages in certain roles such as healthcare and social care, hospitality, accommodation and food services and professional, scientific and technical activities, coupled with rising cost pressures and shifting worker expectations. The Employment Rights Bill, therefore, is presented at a critical time for both employers and employees.

What the Employment Rights Bill Proposes and Why Employers Are Concerned

While the Bill is positioned as a way to ‘make work pay’ and protect workers’ rights, it comes with significant compliance requirements. Key provisions include:

• Guaranteed hours for workers, even in fixed-term contracts
• 24-hour minimum notice for shift changes and entitlement to compensation for cancelled shifts
• Enhanced workers’ rights around grievance procedures
• Stricter rules on zero-hours arrangements.

Although the Bill has been designed to strengthen protections for workers, employers and labour providers warn that these measures could have unintended consequences.

How Might the Bill Affect Employers?

The ALP’s Labour Supply Chain Survey Results (May 2025) highlight widespread concern about the operational effects of the Bill.

Day one rights

One of the most concerning elements of the Employment Rights Bill is the introduction of day one rights. Under the proposed legislation:

• Employees will gain the right to claim unfair dismissal from the first day of employment
• Businesses may be liable for sick pay or other entitlements even if a new hire goes off sick immediately
• The ability to “hire and fire” flexibly, which many businesses rely on to test suitability, will be heavily restricted
• Employers risk paying higher costs without having the chance to properly evaluate new starters in practice

This fundamentally changes the risk profile of bringing in new hires, particularly in high-volume or entry-level roles.

• Several other factors raise concerns, such as:
• Higher costs – cited by 76% of respondents who anticipate increased costs due to greater administrative burdens, compensation requirements and more rigid scheduling
• Reduced demand for labour – 71% of employers expect to scale back work, particularly for flexible and entry-level roles
• Business closures – 61% warn that they may not be able to absorb the increased costs
• Disincentives to hire – stricter shift rules and guaranteed hours may reduce opportunities for those with barriers to employment, thereby undermining inclusivity efforts.

The Bill, while seeking to protect workers’ rights, might actually risk reducing flexibility, increasing costs and constraining employers’ ability to respond to fluctuating demand. For public sector organisations and those operating in high-volume staffing environments, the effects could be profound.

Proactive Steps You Can Take Now

Although the full scope and timeline of the Employment Rights Bill are still being discussed, employers should begin preparing now. Early planning and partnership will be key to staying ahead:

• Audit workforce models - review where flexible or zero-hours arrangements are in place and assess how guaranteed hours and notice requirements could affect you.
• Analyse your history - look at length of service, attrition trends and seasonal peaks to understand where the risks are likely to fall.
• Review cost structures - model potential increases in labour costs and explore efficiencies that could help absorb them.
• Strengthening workforce planning - accurate forecasting and scheduling will become critical under stricter rules.
• Engage early with providers - treat your labour provider as a consultant, not just a supplier. Early collaboration can help you design workforce strategies that are both compliant and flexible.
• Stay informed - track government consultations and industry feedback through reliable sources such as ONS, ALP and Indeed Hiring Lab to avoid being caught off guard.

In Conclusion

The UK labour market is under pressure but remains resilient. Rising unemployment, persistent inactivity and falling vacancies signal a more challenging future for both employers and employees. Against this background, the Employment Rights Bill has the potential to reshape workforce practices that will be felt most acutely in high-volume staffing and the public sector.

While the goals of the legislation are laudable, and even with the majority of employers stating that the plans will benefit their business and their employees, as the Institute for Public Policy Research (IPPR) recently discovered, its implementation may introduce rigidity, cost pressures and hiring disincentives at a time when organisations need flexibility the most.

That’s why it’s so important to work with a workforce partner such as TaskMaster that understands compliance inside and out, and can help you navigate the changes with minimal disruption and maximum efficiency.

Unsure how the proposed Employment Rights Bill changes could affect your workforce? Get in touch with TaskMaster to discuss how you can stay compliant and plan ahead with confidence.