Labour’s flagship workers’ rights reforms have sparked a business backlash, with employment experts warning companies are accelerating dismissals and redundancy decisions before tougher new rules come into force.
Employers are reportedly bringing forward decisions on senior staff, struggling employees and workforce cuts ahead of the Employment Rights Act, which is due to take effect in January 2027.
The warning comes as Britain’s jobs market is already showing signs of strain, with vacancies falling to their lowest level in five years.
Under the new rules, workers will gain protection against unfair dismissal after just six months in a job, compared with the current two-year qualifying period.
The reforms will also remove the existing cap on unfair dismissal compensation, meaning some high earners could potentially claim significantly larger payouts if they are dismissed unlawfully.
Employment lawyers say the changes are already affecting boardroom decisions, with some companies choosing to act now rather than face greater legal risks later.
Alex Mizzi, legal director at Howard Kennedy, said employers were looking to make changes before the reforms arrive.
He said firms were “trying to clear out deadwood in senior leadership teams before it gets more expensive”.
Jo Keddie, head of employment at Forsters, said businesses were already seeking advice on weaker performers and conduct issues.
She warned: “Any management or strategic decision that could lead to people being made redundant or removed will be accelerated.”
Finance and technology companies are among those moving fastest, with employers reviewing leadership teams, high-paid roles and staffing levels before the new protections begin.
But critics warn the reforms could have the opposite effect to Labour’s intention — creating more uncertainty for workers rather than greater security.
James Townsend, head of employment at Payne Hicks Beach, said earlier protection did not automatically mean stronger job stability.
“Some employers may simply make probation and performance decisions sooner,” he warned.
The changes were designed as a compromise between Labour, business groups and unions after the Government dropped its original manifesto pledge to introduce unfair dismissal protection from the first day of employment.
Instead, ministers settled on a six-month threshold.
However, legal experts say the new system could create problems around probation periods, with companies potentially shortening assessment windows to avoid future disputes.
Sinead Casey, UK employment head at Linklaters, said traditional six-month probation periods could become complicated because employees would gain legal protection just as they completed them.
The reforms arrive at a difficult moment for the UK labour market.
Official figures show vacancies have fallen to around 707,000, the weakest level since early 2021, while unemployment remains elevated.
The number of people in work has also fallen in sectors including retail and hospitality, raising fears that employers are becoming more cautious about hiring.
The biggest financial impact could be felt by higher earners.
HMRC figures suggest around 840,000 workers earned above the current compensation threshold in 2025-26 — meaning they could benefit most from the removal of the cap.
Ministers argue the reforms will give millions of workers greater protection and security.
But business leaders fear the unintended consequence could be a rush of decisions before the rules change — leaving some workers facing the very uncertainty the legislation was designed to prevent.
Leave a Comment