Young workers could be among the biggest casualties of the government’s new workers’ rights legislation, with retailers warning the reforms risk worsening Britain’s growing youth unemployment problem.
Industry leaders say the Employment Rights Act, which recently received royal assent, could lead employers to scale back flexible and entry-level roles as businesses adjust to higher employment costs and tighter regulation. The British Retail Consortium (BRC) argues that the changes could unintentionally restrict opportunities for younger workers who often rely on part-time or flexible jobs as their first step into employment.
The warning comes as youth unemployment continues to climb across the UK. Official forecasts suggest overall unemployment could reach 5.3 per cent this year, while joblessness among younger people has already reached its highest level in more than a decade.
Former Labour health secretary Alan Milburn, who is currently leading a government-commissioned review into youth employment and economic inactivity, has described the situation as an “existential crisis” for Britain, highlighting the scale of the challenge facing policymakers.
Retail leaders fear the new employment rules could discourage companies from offering the type of flexible roles that many younger people depend on.
The legislation introduces a number of significant workplace reforms, including giving workers on zero-hours and low-hours contracts the right to request guaranteed working hours. It also introduces day-one eligibility for statutory sick pay, shortens the qualification period for unfair dismissal protections, and makes it easier for workers to secure trade union recognition.
While the government argues the measures will improve job security for millions of workers, the BRC says they may create additional costs and administrative complexity for employers, particularly in sectors that rely heavily on flexible staffing models.
Retailers warn that if businesses respond by reducing hiring or limiting flexible contracts, entry-level positions may be the first roles to disappear.
“Local, flexible jobs are important first steps into work for young people across the country,” said Helen Dickinson, chief executive of the British Retail Consortium. “Whether it is a Saturday job around studies or shifts alongside caring responsibilities, these roles are relied upon and valued by many.”
She added that with youth unemployment already rising, policymakers must ensure reforms tackle poor employment practices without choking off opportunities for younger workers entering the labour market.
The retail sector plays a crucial role in providing early work opportunities for younger people.
According to industry data, around 780,000 retail jobs are held by workers aged between 16 and 25, representing roughly 28 per cent of the sector’s workforce.
These roles often include part-time shifts, weekend work or seasonal employment that can be combined with education, training or other commitments.
A survey commissioned by the BRC found that 70 per cent of people aged 18 to 29 consider flexibility in working hours to be important, rising to nearly three-quarters among those in part-time employment.
By comparison, only 52 per cent of adults overall rated flexible work as a key priority.
Retailers say this demonstrates how critical flexible employment is for younger workers balancing education, family responsibilities or early career exploration.
The industry warns that if employers become reluctant to offer flexible arrangements because of regulatory or financial pressures, Gen Z workers could lose a vital pathway into the workforce.
Concerns over the Employment Rights Act come amid broader tensions between retailers and the government over the rising cost of employment.
Businesses have already criticised increases to employer national insurance contributions and the national living wage, which were introduced as part of Labour’s first autumn budget.
Many employers argue that the combined effect of higher payroll taxes, wage increases and new workplace regulation is creating a more difficult hiring environment.
During an appearance before the Commons Treasury Select Committee, Chancellor Rachel Reeves acknowledged criticism surrounding the national insurance increase, saying there was a “valid argument” that it could have been avoided.
However, Reeves defended the decision, stating that the tax rise helped fund improvements to the NHS and reduce waiting lists.
Retail leaders remain concerned that further cost increases could slow recruitment, particularly in sectors with tight margins and large workforces.
The debate over workers’ rights legislation comes at a time when youth employment is already under scrutiny.
Recent official figures suggest nearly one million people aged 16 to 24 in the UK are currently not in education, employment or training (NEET).
Economists and labour market experts warn that prolonged periods outside work or education can have lasting effects on young people’s future earnings, skills development and career prospects.
Retail and hospitality sectors have historically provided entry-level roles that help young people gain experience, build confidence and develop transferable workplace skills.
If those opportunities shrink, experts fear it could make it harder for young people to enter the labour market and progress into long-term careers.
Despite industry concerns, ministers insist the legislation will ultimately strengthen the labour market rather than weaken it.
A government spokesperson said supporting young people into employment remains a priority, pointing to the ongoing review led by Alan Milburn.
The government argues the Employment Rights Act will improve job security for more than 18 million workers, including younger employees who are often overrepresented in insecure or low-paid work.
Officials also maintain that businesses will still be able to offer flexible working arrangements where both employer and employee agree.
“The Employment Rights Act will boost employment and improve job security for over 18 million workers, with young people among the biggest winners,” the spokesperson said.
“It will not mean businesses have to reduce their flexible roles and employers and employees will continue to be able to agree hours that suit them best.”
The debate highlights the broader challenge facing policymakers: how to improve employment protections without discouraging job creation.
Supporters of the legislation argue stronger rights will create fairer and more stable workplaces, helping to address insecure employment practices that have grown in parts of the economy.
Critics, however, warn that well-intentioned reforms could have unintended consequences, particularly for younger workers seeking their first job.
With youth unemployment rising and economic growth remaining modest, the effectiveness of the reforms may ultimately depend on whether businesses continue to create accessible entry-level roles.
For many young people entering the workforce, those first opportunities could prove decisive in shaping their long-term career prospects.
Jamie Young
Jamie is Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.
When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.
