New Rights, New Risks | Looming Employment Rights Could Create More Contract & Temporary Work, Expert Warns

Why It Matters

The shift could undermine the Act’s intent, leaving many workers without sick pay, guaranteed hours, and benefits, while reshaping cost structures for SMEs.

Key Takeaways

• 20% small firms plan more contractors post‑Act.
• Part‑time growth fell 0.3% in February.
• Gen Z part‑time decline reached 3.6%.
• Full‑time jobs grew 0.9% nationally.
• Shift may create two‑tier labour market.

Pulse Analysis

The Employment Rights Act, slated for April, aims to extend core protections—such as sick pay, guaranteed hours and statutory benefits—to a broader swath of the workforce. By codifying these rights, policymakers hope to curb the rise of insecure work and level the playing field between permanent staff and the growing gig economy. However, the legislation also introduces new compliance burdens for small and medium‑sized enterprises, prompting many to reassess staffing models ahead of enforcement.

Employment Hero’s survey reveals that 20% of small businesses intend to lean more heavily on contractors or temporary staff once the Act takes effect. This strategic pivot reflects a desire to sidestep the added payroll and administrative costs associated with full‑time hires. Concurrent platform data shows part‑time roles contracting, especially among Gen Z workers, while full‑time positions modestly increased. The trend suggests employers are reclassifying roles to preserve flexibility and margin, potentially accelerating a shift toward a two‑tier labour market where a growing segment operates outside the new statutory safety net.

For policymakers and business leaders, the emerging dynamic poses a dilemma. While the Act seeks to protect vulnerable workers, its unintended consequence could be a surge in precarious contracts that evade those very safeguards. Companies may need to balance short‑term cost savings against long‑term reputational risk and potential regulatory scrutiny. Meanwhile, workers could face reduced access to benefits, prompting calls for clearer classification rules and enforcement mechanisms. Monitoring these hiring patterns will be crucial to ensure the legislation delivers its intended equity without fostering a parallel, less‑protected workforce.