Businesses across Britain are cutting jobs and freezing recruitment ahead of April 2026, when sweeping new employment protections take effect. The unintended consequence: workers losing their livelihoods because of legislation designed to safeguard them.
Employment lawyers at Thackray Williams report a sharp increase in clients reviewing their workforce for potential redundancies. The trigger is the Employment Rights Act 2025, which introduces day-one rights to parental leave, slashes the unfair dismissal threshold from two years to six months, and removes the cap on compensation claims.
The timing creates a cruel calculus.
Megan O’Hara, an employment partner at the South East firm, has watched the pattern emerge since January. Boardrooms are asking questions that didn’t need asking six months ago: Can we maintain current headcount? Should we restructure now, while we still can? Do we need to cut pay and benefits before the new rules lock us in?
“With the next wave of changes coming into force in April, we’re seeing businesses not only look at their recruitment practices and tightening these significantly, but also considering whether they should streamline their workforce now and/or change pay and benefits so they are in the strongest position in advance of the additional rights coming into effect,” O’Hara explained.
The Act represents the most significant overhaul of employment law in a generation. From 6 April 2026, paternity leave and unpaid parental leave—up to four weeks per year per child, capped at 18 weeks—become available from day one. Statutory Sick Pay will kick in immediately, scrapping the current three-day waiting period.
But the real earthquake arrives in January 2027.
That’s when the unfair dismissal threshold drops from two years’ service to just six months. At the same time, the compensation cap disappears entirely. What’s currently a finite financial risk becomes unlimited exposure.
For businesses operating on tight margins, the calculation is stark. Take on someone who doesn’t work out, and you’ve got six months—not two years—before they can drag you to tribunal. Get that tribunal decision wrong, and there’s no ceiling on what you might pay.
“Enhanced employment rights are, in theory, good news for workers. However, the ability to be agile and to adapt is key for businesses to be successful, profitable and meet clients’ evolving needs,” O’Hara noted. “The enhanced rights for employees potentially impact this flexibility, so this transitional period as firms prepare for the implementation of the ERA is creating new vulnerabilities for some workers.”
The Act also takes a blowtorch to practices that businesses have relied on for decades. The controversial ‘fire and rehire’ tactic—sacking employees who refuse new terms, then re-employing them under revised conditions—will be banned except when a company faces financial collapse. Changes to pay, pensions, hours and leave will require individual consent. No consent, no change.
Zero hours contracts face similar restrictions. Employers will need to guarantee hours that reflect regular patterns, provide reasonable notice of shifts, and compensate workers when shifts are cancelled or cut short.
“As part of future-proofing their organisations, we’re seeing business leaders consider whether they should retain all the staff they currently have, and whether they can maintain current pay and benefits, given the potential costs that will come into effect as these rights come into force,” O’Hara said.
Some sectors face particular pressure. “Particularly at risk are workers in industries that rely on flexibility to scale up and down in response to fluctuating demand, such as hospitality, leisure and care,” she warned.
These are precisely the sectors that depend on variable staffing—more workers when demand surges, fewer when it drops. The new rules make that flexibility expensive and administratively complex. Better, some employers are concluding, to operate leaner from the start.
The pre-emptive restructuring extends beyond headcount. O’Hara’s team is advising clients who want to revise terms and conditions now, before the Act makes unilateral changes virtually impossible. Pay structures, bonus schemes, pension contributions—all are under review now, rather than risked from January 2027.
Recruitment has frozen at multiple firms. Why take the risk on an unknown candidate when you’ll have just six months to assess them before they gain full unfair dismissal rights? The calculation that once favoured giving new hires time to find their feet—perhaps 18 months, even two years—no longer makes financial sense.
“The combination of increased costs, liabilities, admin requirements and resourcing pressures alongside reduced flexibility means many businesses are rethinking their workforce needs, making some workers more vulnerable to dismissal than they might otherwise be,” O’Hara observed. “Some organisations are also rethinking their terms and conditions before their ability to change them is restricted.”
The paradox cuts both ways. Existing staff face redundancy as firms slim down ahead of the changes. Future candidates face higher bars to entry and shorter probation periods before judgement.
“We’re also seeing recruitment freezes and increased hesitancy in taking on new staff, and we anticipate that employers may be less tolerant with new recruits, allowing them less time to ‘bed down’ and show their ability, given the new, reduced six-month service eligibility to claim unfair dismissal,” O’Hara said.
The shift in employer psychology matters. Under the current system, businesses know they have two years to work with new hires—time to train them, accommodate their learning curve, see them through difficult patches. That patience evaporates when the unfair dismissal window opens at six months.
“Decisions regarding an employee’s continued employment may be made much sooner going forwards than in the current climate, where employers effectively have a longer period to assess the suitability of recruits before they might be liable to an unfair dismissal claim,” she added.
Thackray Williams, which employs over 140 staff across offices in the City of London, Bromley, Sevenoaks and West Wickham, has built its employment practice around advising businesses through regulatory change. The firm’s partners report this transition period as among the most active they’ve witnessed.
What remains unclear is whether the government anticipated this response. Legislation designed to strengthen worker protections assumes those workers will still have jobs to protect. If the transitional period sees widespread restructuring, redundancies and recruitment freezes, the Act’s benefits may accrue to a smaller workforce than intended.
For workers in hospitality, leisure and care—sectors already marked by precarious employment—the countdown to the various changes being implemented under the ERA bring uncertainty rather than security. The protections are coming. The question is whether their jobs will still exist when they arrive.
