Laying Foundations | How the Construction Sector Is Preparing for a New Era of Workers' Rights

Why It Matters

The reforms increase labour costs and compliance complexity, threatening traditional employment models and potentially driving greater reliance on contractors, which could affect safety, skill retention, and productivity in construction.

Key Takeaways

• New Employment Rights Act adds day‑one sick pay, paternity benefits.
• Unfair dismissal rights extend to short‑term project staff from June.
• Seddon fears increased contractor use to avoid new obligations.
• Direct employment already 50% turnover, now at risk.
• Fair Pay Agreements may force sector‑wide wage negotiations.

Pulse Analysis

The Employment Rights Act marks a watershed for the UK construction industry, introducing day‑one statutory sick pay and more generous paternity provisions that were previously tied to long service. By extending unfair dismissal rights to workers hired on short‑term projects from June, the law removes a long‑standing loophole that allowed firms to rotate staff without the risk of costly claims. For a sector that traditionally relies on flexible labour pools, these changes force a reassessment of hiring strategies and budgeting practices.

Seddon Construction illustrates the dilemma facing many mid‑size builders. With 600 employees and a commitment to direct employment—50 % of its turnover comes from staff on permanent contracts—the company now confronts the prospect of higher payroll liabilities and administrative burdens. Executives fear that the new protections will make contractor arrangements more attractive, especially as National Insurance rises already strain growth ambitions. Moreover, the company must navigate complex questions around project managers and other short‑term roles that will suddenly qualify for unfair dismissal claims, potentially triggering costly re‑hire or redeployment processes.

Beyond Seddon, the sector is likely to see a ripple effect as the Fair Pay Agreement mechanism expands into construction. Employers may be compelled to negotiate binding wage terms across regions, reducing the ability to bid competitively on price alone. While the reforms aim to improve worker health and safety—addressing the 22 % injury rate linked to working while ill—they also raise strategic challenges around talent retention, cost control, and compliance. Companies that proactively adapt, perhaps by investing in robust HR frameworks and exploring hybrid employment models, will be better positioned to maintain productivity while meeting the heightened legal standards.