Employment Rights Act could hinder hiring process, warns CIPD

Employers are becoming more cautious in light of upcoming changes to the Employment Rights Act, signaling concerns that permanent job growth could slow down further in an already vulnerable labor market. A recent study by the CIPD revealed that over a third of organizations, equivalent to 37%, are planning to decrease permanent hiring due to the impending Employment Rights Act reforms. This trend is occurring as overall hiring intentions have hit an all-time low outside the initial year of the pandemic, as per the CIPD’s Labor Market Outlook survey that involved more than 2,000 UK employers.

The net employment balance, which represents the disparity between companies looking to expand their workforce and those planning to reduce their staff over the coming three months, stayed at +7 this quarter, marking the lowest level reported outside lockdown periods. The Employment Rights Act is poised to introduce several reforms related to unfair dismissal, statutory sick pay, zero-hours contracts, and trade union rights. The Act is expected to add significantly to the operational costs and compliance burden faced by organizations, with around 74% of employers anticipating a rise in employment costs, including 17% who foresee substantial increases.

A considerable portion of employers, particularly in social care and hospitality, are bracing for notable cost escalations. The Act’s headline cost, estimated at £1 billion by the government, has led to concerns among employers who now need to familiarize themselves with the impending changes, some of which will be stipulated in secondary legislation. To mitigate the potential negative impact on recruitment and staff management, CIPD’s Head of Public Policy, Ben Willmott, emphasized the necessity for the government to engage in productive consultations with employers and to consider adjustments in essential provisions that are yet to be finalized in secondary legislation.

Willmott also underlined the importance of a robust communication strategy to inform smaller businesses about the implementation timeline for the new obligations and adequate support for Acas to help firms navigate these changes and avoid costly tribunal claims. In addition to financial considerations, employers remain apprehensive about the anticipated rise in workplace conflicts as a result of the regulatory changes. More than half of the employers surveyed, 55%, projected an increase in workplace conflicts, with just 4% expecting a decline, and 10% unsure of the effects of these changes.

According to Liz Sebag-Montefiore, Chief Executive and Co-Founder of HR Consultancy 10Eighty, this anxiety stems from a general unease surrounding change and the unfamiliarity with the alteration in employment relations dynamics. As the Employment Rights Act reforms loom closer, it is essential that businesses prepare proactively and stay abreast of the evolving regulatory landscape to navigate these changes effectively.