The upcoming Employment Rights Bill in the UK is no small shakeup. It looms as a significant shift in UK employment law, introducing over 28 reforms aimed at stronger workforce protections. But for employers, the employment law changes in the UK are a massive hurdle. For starters, employers must now rush to work on key obligations such as mandatory equality action plans, stricter outsourcing rules in the public sector, and proactive measures to prevent sexual harassment. This means HR professionals in the UK are working day and night to reform policies. What’s not being discussed is how these UK employment law changes could further add layers of bureaucracy in the long run.
The British Chambers of Commerce warns that 92% of small employers are now fearing waves of disruption amid rising National Insurance Contributions.
Critics such as the Federation of Small Businesses (FSB), have called the Employment Rights Bill a “chainsaw to job-killing measures.” It is being argued that the bill’s well-intentioned reforms overlook the real-world issues of running a company. The government’s own impact assessment estimates an annual £5 billion hit to businesses.
What’s clear is that the Employment Rights Bill of 2025 isn’t just about fair play. The question of survival comes into being at some point. SMEs, which shoulder an estimated 60% of these costs, are now vulnerable. Umbrella companies in labor supply chains also face scrunity, while public sector outsourcing could soon turn into a compliance minefield.
Employment Rights Bill (Key Updates)
The Employment Rights Bill has highlights a disproportionate burden on companies. For micro-enterprises with tighter margins, introducing fair pay agreements in sectors such as social care or mandating bereavement leave from day one means juggling new payroll expenses.
According to a recent CIPD survey, 62% of employers expect cost hikes, with one in five anticipating a “large extent” increase. This means companies will now have to brave strained budgets and potential hiring freezes.
Sarah Erdich, founder of a boutique recruitment agency in Manchester, says, “We’re already living in a world strained by post-Brexit talent shortages. Now, with rules banning zero-hours contracts and requiring guaranteed hours, our flexibility evaporates.”
The British Chambers of Commerce warns that 92% of small employers are now fearing a wave of disruption amid rising National Insurance Contributions.
There’s also the question of tribunal overload. With day-one rights expanding access to claims, experts predict a surge in cases, overwhelming an already backlogged legal system. This can turn into expensive legal support and time away from core operations, turning HR departments into makeshift courtrooms.
An overview of rising unemployment
Compounding these woes is the larger economic backdrop. UK unemployment edged up to 4.7% in the three months to June 2025, with payrolled employees dropping by 149,000 over the past year.
Employers are now concerned over higher costs amid falling vacancies. Many believe it’s the perfect recipe for economic stagnation.
Vacancies decreased by 44,000 in the latest quarter, signaling caution in hiring as companies brace for the Employment Rights Bill’s rollout in 2026.
There’s still hope as HR professionals are now pivoting to proactive adaptations. They’re investing in HR training, using workshops on preventing harassment and crafting equality plans. Many have invested in automated compliance software to streamline outsourcing rules, turning major issues into gains.
There’s more to come
Does the Employment Rights Bill create a “fair and level playing field,” as Labor touts, or does it stifle growth? The debate rages. While unions celebrate protections for vulnerable workers, business lobbies like the IoD prove major pitfalls. With most provisions delayed until 2026, there’s a window for discussions to voice their concerns.
For more on adapting to these shifts, check our in-depth guide on HR compliance best practices or flexible working trends in 2025.
Subscribe to The HR Digest for the latest HR news and employment updates.