The UK’s largest business lobby group warned that the government’s proposed Employment Rights Bill risks undermining growth and slowing recruitment, as new data shows many employers are already planning workforce changes in response to the potential legislation.
Speaking at the Confederation of British Industry’s (CBI) annual conference in London on Monday, chief executive Rain Newton-Smith said the bill lacked compromise and had not been developed with sufficient input from business. She said the proposed measures could restrict hiring flexibility, increase compliance burdens and push up operational costs.
The bill, expected to form a key part of next year’s legislative programme, would introduce stronger protections against unfair dismissal, grant more predictable working patterns and expand day-one employment rights. While ministers argue that the legislation will strengthen workplace fairness, employer groups and business leaders expressed concern about its impact on operations and growth.
Newton-Smith told delegates that eight in 10 companies believed the bill, in its current form, would make hiring more difficult. “They are brakes on growth. With real consequences for real people. We want reform that works and endures,” she said. “For that, government must change course and ask business and unions to forge consensus through compromise.”
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Employers ‘already planning changes’
New survey data released on Monday by Indeed Flex, an online marketplace for flexible and temporary work, showed that businesses were already adjusting strategy in anticipation of the bill’s possible passage.
The research, based on responses from 800 UK employers across sectors including retail, manufacturing and hospitality, found that 88 percent were aware of the proposed legislation, with 63 percent expressing concern about its impact. Over a third of respondents (36 percent) identified expanded day-one rights as the biggest operational risk, while 37 percent expected to increase their use of fixed-term and part-time contracts.
The survey also pointed to broader structural shifts. Sixty percent of employers said they were considering increased investment in automation or technology to help manage costs and administrative complexity. Two-thirds of those not currently using a managed service provider (MSP) or third-party workforce partner said they were now more likely to do so. Among businesses already using such services, 89 percent expected their reliance to increase.
Respondents expressed concern about cost pressures and the risks of early legal obligations. One said, “[D]ay-one rights could turn out to be a nightmare if new staff immediately turn out to be unsuitable,” while another added, “It’s another cost increase for struggling businesses.” But some employers also saw potential long-term benefits, with one noting it “will improve my business and growth in the long run, workers should be taken care of and made a priority”.
Novo Constare, chief executive of Indeed Flex, said his organisation was prepared to support clients as the regulatory landscape evolved. “Increased admin and compliance risk is an understandable concern – a lot is changing, but that’s where an MSP like ours can make everything easier, for businesses and workers,” he said.
Political and economic context
The CBI, which represents around 170,000 companies, said the bill should be revised through direct engagement with employers and unions. Newton-Smith said that while reform was needed, progress depended on collaboration. “Lasting reform takes partnership, not a closed door. But with this bill, though government said it wanted to listen, there has been no meaningful change. It’s disappointing and it’s damaging.”
Peter Kyle, the business secretary, told the conference that the government was committed to supporting growth through reduced costs and improved infrastructure. He announced a plan to lower electricity bills by 25 percent from April 2027 for more than 7,000 energy-intensive firms, including those in automotive and steel.
“In recent years, our most promising innovators and industries have been hamstrung by some of the highest electricity prices in the G7 and poor access to finance… In the months ahead, I will be going further to address business concerns, reverse our industrial decline and make the UK the best place to start and scale a business,” he said.
Conservative Party leader Kemi Badenoch also addressed the event and promised to repeal the bill if elected. “We will repeal every job-destroying, anti-business, anti-growth measure in this bill,” she said.
The CBI also voiced concern about a possible new cap on salary sacrifice pension contributions expected in the upcoming budget. The Association of British Insurers and the Reward and Employee Benefits Association have warned that nearly a third of employers would reduce their contributions if the cap were introduced.
Newton-Smith said this would further damage hiring prospects. “You will never be able to tax your way to growth,” she said. “How can business hire for growth when key government choices pull the other way? When national insurance contribution rises and likely changes to salary sacrifice make it more costly to take a chance on people?”
Long-term workforce impact
Speakers at the event included Sean Doyle, chief executive of British Airways, and Sir Charlie Mayfield, former chair of the John Lewis Partnership, who recently led a government-commissioned review into how to help people stay in employment.
Employer groups said the combined effect of legislative reform, rising tax costs and administrative uncertainty risked slowing momentum in the labour market. Many companies were already rethinking job structures, workforce partnerships and compliance strategies as they awaited the bill’s final wording.
Indeed Flex said the strong interest in automation and third-party support showed that businesses were treating the issue as a broad strategic concern. The organisation said firms were aiming not just to comply with future regulation, but to stay agile in an increasingly complex employment landscape.
