Third of bosses to cut hiring over Labour’s workers’ rights reforms

Eir Nolsoe

Mon, February 16, 2026 at 3:50 PM GMT+9 3 min read

The reforms risk leaving workers with fewer protections if employers increase their reliance on temporary or contractual staff - Johnny Greig

More than a third of bosses plan to reduce hiring because of Labour’s workers’ rights reforms, as jobseekers battle the toughest market in years.

Around 37pc of employers said they would hire fewer permanent staff as a consequence of the Employment Rights Act, which Sir Keir Starmer has described as “the biggest upgrade to workers’ rights in a generation”.

Forecasts of a fresh hiring slump emerged in a survey of more than 2,000 employers by the Chartered Institute of Personnel and Development (CIPD), which also revealed that 75pc of companies believe the legislation will increase hiring costs.

The Employment Rights Act has imposed greater demands on employers by forcing them to pay statutory sick pay from day one of illness and reducing the unfair dismissal qualifying period from two years to six months.

The new rules have also made it easier for trade unions to launch industrial action and enter workplaces.

Bosses’ worries about the impact of higher employment costs have emerged as overall hiring intentions are at their lowest level on record outside Covid, according to the CIPD. Its figures go back to spring 2014.

The industry body warned that the Employment Rights Act risks backfiring and leaving workers with fewer protections as employers increase their reliance on temporary staff and contractors.

Ben Willmott, head of public policy at the CIPD, said: “Against a backdrop of low business confidence and already weak hiring intentions, our research suggests there is a real risk that the measures will act as a further handbrake on job creation and recruitment.”

A majority of bosses also said they expect to see more disputes as a result of the legislation, as workers can use bolstered rights to raise more official grievances.

It comes after warnings from economists that the UK’s unemployment rate could hit an 11-year high of 5.4pc in 2026.

The latest figures covering September to November last year put unemployment at 5.1pc, the highest since 2020. The Office for National Statistics will publish new figures on Tuesday.

Hiring has also been under pressure ever since Labour came to power, fuelled by Rachel Reeves’s move to raise employer National Insurance rates alongside increases in the minimum wage.

British employers now face paying one of the highest minimum wages in the world, limiting their ability to hire and hampering overall growth.

Separate analysis from KPMG shows the UK economy will record growth of just 1pc this year, behind the eurozone’s 1.1pc.

While jobseekers in the UK are facing the toughest hiring conditions in years, KPMG says the eurozone will benefit from “resilient labour markets and strong nominal wage growth”.

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The CIPD research shows that just 57pc of private sector bosses plan to hire in the next three months, the lowest on record outside the pandemic.

This is compared to 70pc of employers in the public sector.

However, the research also suggests that the public sector is where staff numbers will decline the most, with the net employment balance plunging to -11.

That means more employers expect staff levels to decrease rather than increase in the next three months.

The research notes that the number of new entrants into the Civil Service plunged by 30pc in the year to March 2025, marking the biggest drop in 14 years.

The Government was contacted for comment.

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