Four key trade bodies in the UK have warned that Employment Rights Act (ERA) measures will threaten jobs and working conditions without intervention from the Government.
In a joint letter to the Secretary of State for Business and Trade, Peter Kyle MP, the British Retail Consortium, Food and Drink Federation, Recruitment and Employment Confederation (REC) and UK Hospitality describe the guaranteed hours provisions as a “substantial threat to good jobs”. The letter, dated 24 April 2026, calls on the Government to make targeted changes to the policy’s design before it takes effect.
Without those changes, the four bodies warn, the UK risks a “double whammy of increasing unemployment and fewer young people entering the labour market”.
Why are trade bodies worried about the guaranteed hours policy?
The letter’s central concern is timing. With consumer and economic demand already subdued, the organisations say poorly designed guaranteed hours measures under the ERA risk becoming “a tipping point, pushing employers to reduce hiring, limit hours or withdraw flexible roles altogether, denying work to those who need it most, or moving to less secure, more casual models of engagement.”
Their specific asks include setting the reference period for assessing regular hours to a minimum of six months – with 12 months preferred as the most accurate reflection of genuine regularity – raising the low hours threshold to eight hours, treating agency and temporary workers separately from direct employees, and entering immediate discussions with business groups on the proposals.
What does Employment Hero’s data show is already happening?
Research from Employment Hero, drawing on a survey of 1,047 UK business owners and senior leaders, suggests these concerns are already playing out in real hiring decisions.
One in five small businesses say they intend to use more contractors and temporary staff as a direct result of the reforms. Employment Hero’s platform data, covering around 4,500 businesses and more than 120,000 employees, adds further context: in February, month-on-month employment growth in part-time roles fell 0.3%, while full-time employment grew 0.9% over the same period.
The gap points to a jobs market beginning to split in two, with full-time roles becoming more competitive as some businesses pivot to flexible arrangements to manage compliance costs. For workers who want the security of a permanent contract, that’s precisely the outcome the Employment Rights Act was meant to prevent.
Of those surveyed, 84% expect to make changes to their workforce in response to the legislation, and 78% say it will have a direct financial impact on their business. To absorb the additional cost, 30% say they may raise prices, while 29% are reviewing salaries and benefits.
Kevin Fitzgerald, UK Managing Director at Employment Hero, said: “Businesses may rationally respond to added complexity by shifting toward contractor and freelance models, but that shift could come at a cost to workers who end up outside the system entirely. The conversation so far has focused on what the reforms mean for businesses. We think it’s time to ask what they mean for the people they were supposed to help.”
What are small businesses most worried about?
The Employment Rights Act change causing the most anxiety among small business leaders is the National Minimum Wage increase, cited by 40% of respondents. Flexible working requests (35%) and the move to make statutory sick pay a day-one right for all employees (25%) also rank highly.
Between this and the state of the jobs market more broadly, it makes sense why the aforementioned trade bodies are urging the Government to send “an urgent and clear message to businesses that they should continue to hire with confidence.”
