A wave of redundancies could be on the horizon in Britain, according to new research suggesting that one in three employers expect to cut staff before the start of next year. The findings point to growing unease among businesses about looming changes to employment law and the rising cost of keeping people on the payroll.
Employment lawyer James Townsend described the trend as an inevitable consequence of the government's flagship Employment Rights Act. He explained that when the legislation was passed, there was intense debate over the qualifying period for ordinary unfair dismissal claims and the level of compensation a worker should be entitled to receive.
The central change comes into force on the first of January 2027, the very date the new survey focuses on. From that point, the existing two-year qualifying period before an employee can bring an ordinary unfair dismissal claim will be abolished and replaced with a much shorter six-month period, giving workers far earlier access to legal protection.
At the same time, the cap on compensation is set to be removed. Under the current rules, payouts for unfair dismissal are limited to a year's salary or a maximum of around 123,000 pounds. Once the reform takes effect, that ceiling disappears and awards could become uncapped, a prospect that has caught the attention of employers across the country.
Faced with this shift, many companies are choosing to act now. According to Townsend, employers looking to rationalise, restructure or reduce headcount are increasingly deciding to do so before the law changes, rather than wait until the new framework makes dismissals more costly and legally complex.
The research indicates that larger organisations are more exposed than smaller ones. Firms with more than a hundred employees in particular are reviewing where they can trim, weighing up restructuring against the tighter rules ahead. For many of these businesses, the calculation is whether to make cuts now or risk far greater liabilities later.
The pressure is being compounded by wider financial strain. Employers are paying more in national insurance, while sectors such as construction and manufacturing are grappling with higher energy and operating costs. With those burdens mounting and the January deadline approaching, the lawyer warned that many companies are already trimming their workforces in readiness for the change.