Zarah ChoudharyThe Chartered Institute of Personnel and Development (CIPD) has warned that the Employment Rights Bill could lead to job losses and a rise in employment tribunal claims as employers anticipate increased costs.
A survey of more than 2,000 employers found that 79% expected the bill to raise employment costs, with 30% planning to cut jobs through redundancies or reduced hiring, 23% looking to introduce or expand automation, 22% intending to cut training budgets, 17% reducing staff hours, and 17% increasing the use of temporary workers.
The bill includes changes to unfair dismissal rules, Statutory Sick Pay reforms, and a right to guaranteed hours for zero-hours contract workers.
The CIPD raised concerns about the removal of the unfair dismissal qualifying period and the introduction of a statutory probation period, which it said is the change most likely to result in redundancies.
The Government’s impact assessment estimated a 15% increase in employment tribunal claims due to the bill.
The CIPD also warned that planned changes to trade union recognition rules, which will make it easier for unions to access workplaces, will require greater focus on developing employment relations skills.
It called on the Government to consult meaningfully with employers, provide clear guidance, and develop an implementation plan to prevent unintended consequences, particularly for smaller businesses that may struggle with compliance.
Peter Cheese, chief executive of the CIPD, said: “Our research shows that employers are already starting to seriously think about how the Employment Rights Bill could affect their workforce plans and costs, even without the full detail being clear and it not being implemented for at least another 12 months.
“It’s positive the Government has committed to phasing in elements of the bill, with amendments this week underlining the complexity of the changes facing employers.
“It’s essential that businesses, and smaller firms in particular, have adequate understanding and time to prepare for the changes.
“The success of the bill depends on effective consultation, a clear implementation plan, appropriate support and proper enforcement.
“Without this, there is a risk that new laws which the Government hopes will improve working lives, could have the unintended consequences of undermining job creation and efforts to boost labour market participation and growth.”
The CIPD cautioned that the complexity of the bill’s measures could add to the financial burden already facing employers due to rising National Insurance costs, the National Living Wage, and business rates.
It has also warned that accidental non-compliance could put further strain on the employment tribunal system, which is already overstretched.
The organisation has urged the Government to provide additional resources for Acas, the Central Arbitration Committee, and employment tribunals to manage the expected increase in employer demand for guidance and the rise in claims.
Employers have also highlighted the need for support, with 40% saying Government guidance would be helpful, 34% calling for training materials for HR and managers, and 31% seeking assistance in aligning policies with the new legal requirements.
While some businesses plan to improve productivity and efficiency to manage increased costs, 42% expect to raise prices, 26% plan to cancel or scale down investment and expansion, and the same proportion anticipate slowing the rate of basic pay growth for employees not covered by National Living Wage increases.
