Rising Costs and the Employment Rights Bill: Why UK Businesses Fear for Jobs and Growth

The UK labour market is entering one of its most challenging periods in over a decade. Rising costs, regulatory changes, and an uncertain economic outlook are creating a climate of low business confidence and stalled investment.

That’s the message from the 2025 Confederation of British Industry (CBI)–Pertemps Employment Trends Survey, which found that a vast majority of employers see the UK as a less attractive place to invest than just five years ago. Many warn that jobs, growth, and even employee benefits are under serious threat.

But behind the headlines, there are also critical legal and policy questions: What does the Employment Rights Bill mean for employers? How are companies legally obliged to respond to higher costs? And what protections do employees have as redundancies rise?

The Survey: Employers Sound the Alarm

The annual CBI–Pertemps survey provides one of the most detailed snapshots of business sentiment across the UK workforce. This year’s findings are stark:

• 86% of businesses say the UK labour market is a less attractive place to do business compared to five years ago.
   
• 82% expect this decline in competitiveness to continue.
   
• 73% rank labour costs as the top threat to competitiveness – the first time this has topped the survey since its creation.
   
• 69% identify National Insurance contributions (NICs) as one of the biggest cost burdens.
   
• 53% cite the Employment Rights Bill as a major threat to flexibility and growth.
   

Perhaps most concerning is that 27% of businesses expect to shrink in size over the next 12 months, while only 26% expect to grow. In other words, employers are bracing for contraction.

The Cost of Employing People in 2025

Employers are clear about what is driving their concerns:

1. Rising National Insurance Contributions (NICs)
    
   • The government’s increase in employer NICs adds billions in annual costs.
      
   • Survey respondents ranked NICs as the single biggest cost threat to labour market competitiveness.
      
2. The Employment Rights Bill
    
   • Businesses warn that the Bill, while designed to improve worker protections, will significantly raise compliance and payroll costs.
      
   • 78% believe the Bill will harm growth, investment, and jobs.
      
3. National Living Wage Increases
    
   • Taken together, NICs and three consecutive National Living Wage rises have added over £24 billion per year to employers’ bills.
      
4. Skills and Training Levies
    
   • Employers say the current apprenticeship levy system is “rigid” and prevents them from targeting training where it’s most needed.

What Is the Employment Rights Bill?

The Employment Rights Bill is a wide-ranging piece of legislation introduced by the Labour government in 2024, designed to strengthen workplace protections. Key measures include:

• Day-one rights to sick pay and parental leave.
   
• Stronger protections against unfair dismissal.
   
• New rights for gig economy and zero-hour workers, including more predictable hours.
   
• Expanded redundancy protections, particularly for pregnant workers and new parents.
   
• Collective bargaining rights in certain sectors.

Why Employers Are Concerned

From a business perspective, the Bill means:

• Increased payroll costs, with more staff entitled to benefits from day one.
   
• Reduced flexibility, particularly in industries reliant on seasonal or gig work.
   
• Higher litigation risk, as employees gain more grounds to bring claims for unfair dismissal, discrimination, or redundancy mismanagement.
   
• Compliance uncertainty, since many aspects of the Bill require secondary legislation and regulatory guidance.

Legal Context: Redundancies and Employer Obligations

With unemployment rising (now at 4.7%, the highest in four years), redundancies are becoming a live issue. Employers must remember:

• Consultation obligations: For 20+ redundancies in a 90-day period, collective consultation is required.
   
• Fair process: Employers must use fair selection criteria and offer alternatives to redundancy where possible.
   
• Enhanced protections: Under the Employment Rights Bill, certain groups (e.g. pregnant employees) have extended redundancy protections.
   
• Settlement agreements: Many employers are opting for legally binding settlements to avoid claims.
   

At Parachute Law, we are already seeing an increase in businesses seeking advice on redundancy processes, settlement agreements, and contract changes to remain compliant while controlling costs.

The Skills Gap and Training

The survey also highlights deep frustration with the UK’s skills system:

• 67% of businesses believe the lack of a clear roadmap for eligible training courses under the apprenticeship levy is harming workforce planning.
   
• 50% say levy rigidity prevents them from delivering training to fill urgent skills gaps.
   

This is a legal as well as economic issue. Employers who fail to provide adequate training may face claims under health and safety law, contractual obligations, or even discrimination law if training gaps disproportionately affect certain groups.

The Bigger Picture: Competitiveness and Growth

The concerns raised by employers are not just about costs in isolation. They paint a bigger picture:

• Investment flight: If businesses see the UK as “less attractive” than five years ago, future investment may shift abroad.
   
• Job creation stalling: With more than a quarter of businesses expecting to shrink, job growth is likely to stagnate.
   
• Pay squeeze: Rising costs may limit employers’ ability to fund future pay rises, despite worker expectations.
   
• Regulatory fatigue: Employers are struggling to adapt to frequent changes in employment law, from NICs to the Employment Rights Bill.

What Businesses Want

According to the CBI, businesses are calling for:

1. Consensus on the Employment Rights Bill
    
   • Employers want government and trade unions to work together on implementation to avoid damaging growth.
      
2. Reform of the skills levy
    
   • Greater flexibility to use levy funds for short-term training and reskilling.
      
3. Certainty on costs
    
   • Clearer roadmaps on tax, NICs, and wage rises to allow for long-term workforce planning.

Employee Perspective: What Rights Do You Have?

For employees, the Employment Rights Bill represents an expansion of workplace protections. However, workers should be aware:

• Unfair dismissal claims may rise, but employees must still demonstrate legal grounds and follow tribunal procedures.
   
• Day-one rights to sick pay and parental leave improve security, but disputes over eligibility are likely.
   
• Gig economy reforms may not apply to every platform worker immediately, as definitions of “worker” vs “self-employed” remain contested.
   

Employees facing redundancy or contract changes should seek independent legal advice — both to ensure fair treatment and to maximise any settlement offers.

How Parachute Law Can Help

At Parachute Law, we advise both businesses and employees navigating these challenges:

• For Employers:
   
  • Drafting redundancy policies and settlement agreements.
     
  • Updating contracts to comply with the Employment Rights Bill.
     
  • Advising on workforce planning and NIC impact.
     
  • Representing businesses in employment disputes and tribunals.
     
• For Employees:
   
  • Reviewing redundancy offers and negotiating settlements.
     
  • Advising on unfair dismissal, discrimination, or redundancy rights.
     
  • Supporting gig workers and zero-hour staff in asserting new rights.

Conclusion

The CBI–Pertemps survey confirms what many already feel: the UK labour market is under pressure from rising costs, regulatory changes, and economic headwinds. The Employment Rights Bill, while designed to protect workers, is seen by many businesses as a risk to growth and jobs.

With nearly one-third of businesses expecting to shrink in the coming year, both employers and employees need to be prepared for change.

If your business is considering redundancies, or if you’re an employee worried about your rights under the Employment Rights Bill, contact Parachute Law today for clear, practical legal advice.

Call Parachute Law today on 0207 183 4547

Contact us online for tailored support and advice

Related Reading:

Can I Sue My Employer For...?

Protect Your Share: Lock In Your Property Rights Today

UK Government to Slash 10% of Civil Service Jobs in Major Spending Review