Workers’ rights reforms spark concerns for jobs market, say think-tank and watchdogs

Labour’s proposed Employment Rights Bill could bolster sick pay and curb zero-hours contracts, but day-one unfair dismissal rights raise alarm bells

A leading UK *think-tank has warned that Labour’s proposed Employment Rights Bill could have unintended consequences for the jobs market, arguing that certain elements, particularly day-one rights against unfair dismissal, may deter employers from hiring.

Law hammer in focus as think-tank cautions that Labour’s Employment Rights Bill could affect hiring and tribunal workloads.

Key concerns from the Resolution Foundation

• The Resolution Foundation cautions that moving to day-one rights for unfair dismissal is high risk and should be amended in the Bill before it is too late.
• While the think-tank backs several aspects of the legislation, including stronger sick pay provisions and the elimination of most zero-hours contracts, it says changes to unfair dismissal rules could harm the broader economy.
• Ruth Curtice, chief executive of the Resolution Foundation, emphasised the potential impact on hiring and the tribunal system if day-one dismissal protections proceed as proposed.

Broader official warnings

• The Office for Budget Responsibility (OBR) has already signalled that the Employment Rights Bill could negatively affect jobs, prices, and productivity, highlighting potential macroeconomic costs alongside microeconomic effects on firms and workers.

Government stance

• A government spokesperson defended the reforms, stating that changes to labour market rules are essential to drive economic growth.
• The spokesperson added that ministers are balancing workers’ rights with business needs and are working to make the tribunal system more resilient as part of a broader reform package.

What’s in the bill?

• Supportive elements, according to advocates:
  • Strengthened sick pay provisions.
  • Moves to eliminate most zero-hours contracts, aiming to provide more predictable work for some employees.

• Contested elements:
  • Day-one rights against unfair dismissal, which critics say could create hiring disincentives or increased tribunal demand.
  • Overall impact on the flexibility of the labour market and on business investment decisions.

Policy implications and expert perspectives

• Proponents argue that stronger rights, better sick pay, and more secure working arrangements can boost productivity, reduce employee turnover, and enhance consumer confidence.
• Critics warn that certain protections, if implemented too quickly or rigidly, may raise costs for employers, reduce job creation, and place strains on tribunal resources.

What to watch next

• How the Bill is amended in Parliament, particularly around the day-one unfair dismissal provisions.
• OBR assessments on the economy, inflation, wage growth, and productivity in light of the reforms.
• Developments in tribunal caseload management as rights reforms roll out.

Readers’ takeaways

• The Employment Rights Bill aims to modernise the UK’s labour rules with notable protections for workers, but its critics warn that some provisions could inadvertently curb hiring and slow economic growth.
• As the debate continues, businesses and workers alike will be watching how the legislation shapes hiring practices, wage dynamics, and the efficiency of the employment tribunals.

*About the sources

• The analysis references commentary from the Resolution Foundation, a think-tank known for its work on living standards and public policy, and the Office for Budget Responsibility, the government’s independent fiscal watchdog.
• Coverage context also includes official statements from a government spokesperson emphasising growth and resilience in the tribunal system.

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