The Government’s flagship Employment Rights Bill (ERB) legislation radically reforming workers’ rights and employers’ obligations is still going through Parliamentary scrutiny and revision. Many of its most contentious measures will not come into effect until some as undefined date in 2027. Yet it’s fundamental importance to the business community and the UK economy are plain to see from the ongoing and increasingly strident commentary coming from a wide range of influential voices.

The challenges in undertaking such a comprehensive re-defining of industrial relations are also clear from the quandary being acknowledged by so many of those speaking their minds on the topic. Everyone agrees that change is urgently required, but nobody likes the practical implications for British businesses, whether on the financial or operational fronts.

The most striking recent intervention has come from arguably the most successful British business leader of his generation, Lord Wolfson, the CEO of Next in a speech in the House of Lords. Among other criticisms, he warned that the government’s plans risk leaving companies “chronically overstaffed” and “take a wrecking ball to the part-time working practices of millions of people in shops, restaurants, care homes, pubs and many other consumer-facing businesses”.

The major changes

The ERB contains many provisions, but among its most important are:

• Enhancing protections for gig economy and agency workers, especially tightened notification requirements for shifts and compensation for cancelled shifts.
• Restricting the use of zero-hours contracts by replacing them with guaranteed ‘low hours’ contracts.
• Triggering unfair dismissal, redundancy and sick pay protections as from Day One instead of after various qualifying periods of service.
• Introducing the right to request a more predictable contract after 26 weeks.
• Improved family leave provisions and flexible working rights.
• Stricter penalties for non-compliance with employment law.

The government’s impact assessment

The government’s own analysis published in October 2024 estimates the annual cost to businesses at £4.5 billion a year, but it warned that the total impact could rise to £5 billion and predicted that the new measures could increase the total wage bill for UK businesses by 0.4%.

It also concluded that the bill would only deliver a “small” positive effect on economic growth. The report highlighted that while some businesses may benefit from having more productive and secure workers, others may reduce investment or cut jobs to cope with rising costs.

Sectoral impact

The costs of the reforms are expected to hit certain sectors harder than others. Businesses in lower-paid industries, such as retail, hospitality, and social care, are likely to bear the brunt of the additional financial burden and face the most challenging operational changes.

Retail

The British Retail Consortium (BRC) has commented regularly on the ERB, but in April 2025 it released research  into its likely impact, confirming that over half of retail HR Directors it surveyed say it will reduce hiring and job flexibility, while 70% say the ERB will have a negative impact on their business.

Hospitality

Like the BRC, UKHospitality has been flagging the challenges of the ERB for its sector regularly, most recently commenting in July 2025 that hospitality businesses are understandably wary about the cost and complexity of the more immediate changes in the Employment Rights Bill, particularly alongside the major increases to NICs, employment costs and business rates from last year’s Autumn Budget. It warned that hospitality businesses have absolutely no more capacity to absorb additional costs, pleading that the Government must not increase the sector’s cost burden once again.

Social care and the voluntary sector

A hard hitting assessment of the ERB’s likely impact on its part of the social care sector is provided by the Homecare Association in its most recent comments, which predict that an already highly-fragile industry is at risk of being seriously compromised by its implementation.

Business impact

Smaller businesses

It is a perennial and inescapable commercial reality that the smaller a business is, the less resilient it is likely to be to significant change, both in financial and operational terms. Our recent reports on the Retail and Hospitality sectors both highlight the extreme financial vulnerability of small businesses.

The latest quarterly Sentiment Survey released by the Federation of Small Businesses (FSB) in July 2025 highlights the deep concerns that its members have over the ERB. The FSB policy chair branded the ERB “a massive dampener on small firms’ appetite to take on staff”. Of particular concern are the increased rights it would hand workers from day one of employment, including protection from unfair dismissal, about which the FSB has previously said its members are “really worried”. FSB members had previously warned that the sick pay changes pose a major threat to profitability for narrow-margin small businesses.

Business confidence

Setting aside the financial and operational concerns at the ERB expressed right across the business spectrum, a less obvious but possibly more important worry is the effect it is having on business confidence and by extension, the strong probability that it is causing a major hiatus in business investment, without which the UK economy will never escape from its present narrow band of sluggish performance.

What next?

The ERB is still in its formative stage, with consultation and revisions ongoing. Until the legislation has been finalised, passed and implemented, its full impact remains a matter of speculation. Unfortunately, coming hard on the heels of the last Autumn Budget’s measures, ahead of inevitable tax rises in the next Budget and amid such severe geopolitical uncertainty, the timing of such speculation is less than ideal.

If you are seeking professional advice for your business, Opus is here to help. You can speak to one of the members from Opus, who can discuss options with you. We have offices nationwide and by contacting us on 0203 995 6380, you will be able to get immediate assistance from our Partner-led team.