Businesses brace for costs as new workers’ rights kick in

Businesses across Britain are bracing for a sharp hike in costs and hiring struggles as the government’s new workers’ rights laws begin to take effect this week.

The British Retail Consortium (BRC), a leading trade body, said the Employment Rights Act risks adding to an onslaught of rising cost pressures facing firms, including wage hikes and supply chain costs caused by the Iran war.

The new rights which kick in from this week include statutory sick pay, day-one family leave and collective redundancy protections. 

The BRC said it welcomes the aspects of the law change which strengthens protections for workers, including the more secure access to bereavement leave. 

But the trade body said other aspects of the new reforms raise “real concerns” for employers. 

The government’s loosening of the trade recognition threshold has come into force this week, which means that only 10 per cent of relevant employees need to be members of a union for it to be formally recognised.

Flexible work at risk, BRC says

Previous rules required those voting in favour of strike action to make up at least 40 per cent of the group of workers the union claims to represent.

Helen Dickinson, the BRC’s chief executive, said: “Thresholds ensure trade union recognition reflects genuine workforce support and removing them risks undermining that balance.”

The Employment Rights Act also includes a legal requirement for bosses to offer guaranteed hours to “qualified workers” on zero or low-hour contracts if they consistently work more than their contracted hours.

The implementation of this part of the new law must be “carefully considered so they work in practice for both employers and employees,” Dickinson said.

She said: “Retailers are facing significant cost pressures, with rising employment costs and the conflict in the Middle East adding further strain on businesses’ ability to keep prices manageable with customers.”

Last week, supermarket bosses met with the Chancellor to discuss the supply chain and energy costs incurred by the Iran war will affect prices for consumers.

Retailers are split over how badly they are being hit by events in the Middle East.

The boss of Sainsbury’s said price rises will not come until the summer, while the chief executive of Next has said he will put costs up slightly in a few months – potentially to be followed by double-figure hikes in the autumn. 

Employers could butt heads with new workers’ rights agency

The BRC has also warned Labour risks creating a “jobless generation” if it cracks down on the flexible work in retail and hospitality which often gives young Brits their first jobs.

There were 2.8m retail jobs in 2025, according to the Office for National Statistics’ four-quarter average, some 383,000 fewer than a decade earlier.

“Get it wrong, and there is a real risk of reducing job opportunities and limiting the flexible roles that millions of people rely on,” Dickinson said.

The new laws also saw the creation of the Fair Work Agency, which formally opened on Tuesday and will act as a centralised body to enforce workers’ rights.

Anna Vishnyakov, workforce partner at consultancy firm PWC, said enforcement of the new rules will be complex and potentially costly for employers, and could lead bosses to butt heads with the new agency.

She said: “With enforcement activity likely to become more visible, the potential reputational and employee relations implications of non‑compliance will increase. 

“Employers should be using this moment to stress‑test their data, payroll systems and governance, rather than waiting for enforcement activity to expose gaps.”