More than a third of UK employers are planning to scale back permanent hiring as a result of the government’s new workers’ rights reforms, according to a survey by the Chartered Institute of Personnel and Development (CIPD).

The poll of 2,000 businesses found that 37 per cent intend to reduce recruitment of new permanent staff once the changes take effect, while more than half expect an increase in workplace conflict.

Employers warned that the new Employment Rights Act, which introduces expanded protections including day-one statutory sick pay, easier trade union recognition and a shorter qualification period for unfair dismissal claims, could act as a “further handbrake on job creation”.

Government estimates suggest the legislation will cost businesses around £1bn annually. However, the CIPD said the official analysis may underestimate the true impact, particularly the additional time and administrative burden placed on HR departments to implement the reforms.

Ben Willmott, head of public policy at the CIPD, said the changes risked compounding pressures already faced by employers following last year’s £24bn rise in employer national insurance contributions.

“There is a real risk that these measures will act as a further brake on recruitment,” he said, urging ministers to consult meaningfully with business and consider compromises where appropriate.

The survey found that 55 per cent of employers anticipate more disputes once the reforms are in place. Businesses cited concerns over the reduction in the unfair dismissal qualifying period, from two years to six months, alongside new rights for zero-hours workers and enhanced powers for trade unions.

Under the act, unions will gain improved access to workplaces for recruitment and organising activity, while employees will benefit from expanded “day one” rights.

James Cockett, senior labour market economist at the CIPD, said the findings diverged sharply from government expectations. Whitehall’s impact assessment predicted that greater union engagement could reduce conflict, yet only 4 per cent of employers surveyed believed disputes would decline.

The CIPD noted that most UK businesses, particularly the 1.4 million micro and small employers, do not formally recognise trade unions. In that context, it argued, it is unclear how expanded union rights would materially reduce workplace tensions.

The Trades Union Congress (TUC) has welcomed the reforms, describing them as the most significant upgrade to workers’ rights in a generation and arguing they will improve dignity and wellbeing at work.

Business groups, including the Confederation of British Industry (CBI) and the British Chambers of Commerce, have previously expressed reservations, particularly around guaranteed hours contracts, seasonal work and industrial action thresholds.

The CIPD warned that some elements of the legislation could have unintended consequences. Changes to unfair dismissal, statutory sick pay and zero-hours contracts may lead some employers to rely more heavily on temporary or contract labour rather than permanent hires, potentially increasing employment insecurity.

As businesses weigh the costs of compliance against economic uncertainty, the survey suggests the government faces a delicate balancing act between strengthening worker protections and sustaining job growth.

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.