I am, on the whole, in favour of strong workers’ rights. I have been a small-business employer for the better part of three decades; I have, in that time, seen the casual British employment market behave both better and worse than it ought. So no, this is not the column where I argue that the British worker is too much protected.
But the Workers’ Rights Bill, six months in, is now meaningfully damaging the British labour market, and I think someone has to say so before the present trajectory gets worse.
Let me give you the picture as it is on the ground. Day-one rights to claim unfair dismissal. Day-one rights to flexible working applications. New, more generous, statutory sick pay. Tightened restrictions on zero-hours contracts. New protections against fire-and-rehire. New duties on harassment. A fresh framework for trade-union recognition, with a lower threshold. A new “probationary” concept, the legal architecture of which has not, despite repeated industry pleading, yet been settled.
Each of these reforms, taken on its own, has a defensible policy case behind it. Each of them, taken in isolation, would probably do more good than harm. The trouble is what happens when you put them all together, in a single piece of legislation, with implementation rules that arrive in tranches over eighteen months, in front of a labour market in which around 96 per cent of all employment relationships are run by SMEs that do not have an HR department.
What happens is this. The SME owner sits down with her perfectly nice high-street solicitor in early March, walks through the new exposures, and concludes, quite rationally, that hiring an additional UK employee is now an exposure of approximately £80,000 to £150,000 over the first 18 months, on a tribunal-risk-adjusted basis. She doesn’t hire. She uses an agency contractor. She uses a part-time freelancer. She uses, increasingly, a Lisbon-based subcontractor on a B2B services agreement, because the legal architecture of that arrangement is, by happy coincidence, simpler in 2026 than the legal architecture of an employer-employee relationship in Britain.
Multiply this by the country’s 1.5 million SMEs, and you get the data the Office for National Statistics published last month. Net hiring in firms below 50 employees has fallen for the third consecutive quarter, the longest contraction in any non-recessionary period since records began. Use of contractors and consultants has risen 22 per cent year on year. Graduate hiring at SMEs, which was already declining for AI-related reasons, is down a further 14 per cent.
I want to be careful here. I do not blame the people who designed the Bill. The intentions are recognisably good. The impact on the worst-behaved British employers, the call-centre operators, the gig economy edge cases, the Sports Direct end of the warehouse industry, has, on the available data, been broadly positive, and I am pleased about that. The damage is being done in the middle: in the small office, the small studio, the small manufacturer, the small specialist consultancy, where the additional legal exposure is meaningful relative to revenue and the absence of an HR function makes compliance disproportionately expensive.
What would I do? Reverse, immediately, the day-one unfair dismissal right, and replace it with a six-month probationary period during which fair-process protection applies but no tribunal route exists. Couple this with a statutory cap on tribunal awards in firms below 50 employees, indexed to turnover. Give an unequivocal carve-out for under-25 employment to address the hidden graduate-hiring effect we are about to see in earnest. And, finally, set out, in plain English, the “probationary” framework that has been left, deliberately or otherwise, ambiguous.
There is nothing in any of this that compromises the worker who has been with a firm for years and has been treated badly, which is the case the legislators were thinking about when they drafted the original. There is, however, a great deal in it that lowers the legal exposure of taking on the next graduate, the next mother returning to work, the next 19-year-old leaving school in Stoke. We have, in the present design, made it materially harder for those exact people to find a foot on the ladder.
Labour came into office promising to be the party of work. The Workers’ Rights Bill, on its present implementation track, has begun to be the party of unemployment, by quiet accident. Six months from now, the data will be unambiguous. There is still time to fix it. There is, increasingly, not much time after that.
