Zarah ChoudharySmall businesses are scaling back on jobs aimd increasing concerns over rising labour costs and proposed changes in the upcoming Employment Rights Bill, according to new research from the Federation of Small Businesses (FSB).
New data showed that in the last quarter of 2024, 33% of small employers expected to reduce staff, nearly doubling from 17% in the previous quarter.
Hiring intentions have also declined, with only 10% of small firms planning to take on more staff, down from 14%.
Meanwhile, 56% of small employers expect to keep their workforce at the same level.
Labour costs remain a significant concern for small businesses, with 51% of employers citing them as one of the biggest barriers to growth.
The Employment Rights Bill has also added to uncertainty, with potential changes that could expand the grounds for unfair dismissal and increase the costs of Statutory Sick Pay (SSP).
In a separate FSB survey conducted last year, 75% of small employers expressed concerns about changes to unfair dismissal rules, while 74% raised issues with proposed reforms to SSP.
Two-thirds of small businesses said the Employment Rights Bill would lead them to curb hiring, while 32% planned to reduce employee numbers before the measures take effect.
Tina McKenzie, policy chair at FSB, said: “The figures speak for themselves – plans to allow employees to sue their employers on their first day on the job will wreak havoc on our already fragile economy, while changes to Statutory Sick Pay will make employers think twice about their hiring plans.
“Of course, existing protections against unfair dismissal for protected characteristics from day one are essential and should remain.
“But extending these rights to any and all cases from day one risks opening the door to frivolous claims.
“Ministers should recognise the risk to jobs and resist any approach that comes across as out of touch with business reality, instead of brushing off their concerns.”
McKenzie added: “The Prime Minister should ditch these reckless changes to unfair dismissal and reinstate the one-year qualification period that worked under the last Labour Government.
“It’s a zero-cost fix that would show he understands what it takes to create and sustain jobs.
“If taking on staff becomes a legal minefield, businesses will simply stop.
“That means more people on benefits, a ballooning welfare bill, and a devastating hit to living standards.
“Those who will be shut out of work because of this Bill deserve better from the Government.”
