ERA Measures Risk Being a ‘Further Handbrake on Hiring’

Why It Matters

The reforms risk suppressing job creation and nudging firms toward temporary or gig labour, reshaping the UK labour market and raising dispute risk.

Key Takeaways

• 37% plan cutting permanent hires due to ERA reforms.
• Hiring intentions hit record low outside pandemic.
• 74% anticipate higher employment costs from ERA.
• 55% expect increased workplace conflict under new law.
• Net employment balance +7, lowest outside pandemic.

Pulse Analysis

The Employment Rights Act 2025 represents the most sweeping overhaul of UK labour law in decades, bundling new union powers, a day‑one right to statutory sick pay, and a shortened unfair‑dismissal qualifying period. CIPD’s research highlights how these changes intersect with already fragile business confidence, creating a regulatory environment that could deter firms from expanding permanent workforces. By tightening employee protections, the Act aims to improve job security, yet the immediate administrative and financial demands may outweigh those benefits for many employers.

Employers surveyed by CIPD reveal a stark reaction: 37% intend to scale back permanent hiring, and overall recruitment intent has slipped to its lowest point since the early pandemic. The projected rise in employment costs—cited by 74% of respondents—combined with expectations of heightened workplace conflict (55%) suggests a shift toward more flexible, lower‑cost staffing models such as temporary contracts or self‑employment. This pivot could erode the traditional full‑time job pipeline, amplifying labour market segmentation and potentially inflating the gig economy’s share of employment.

Policy makers face a delicate balancing act. While the government estimates the Act’s direct cost at £1 billion, CIPD argues that hidden expenses—policy updates, payroll system changes, and extensive training—will impose a heavier burden, particularly on micro and small businesses. Effective mitigation will require clear communication campaigns, robust support from bodies like Acas, and possibly phased implementation to give firms time to adapt. Without such measures, the legislation risks becoming a handbrake on growth, fueling disputes and undermining the very employment stability it seeks to protect.