Government concedes workers’ rights overhaul will spark surge in tribunal claims
The government’s flagship workers’ rights overhaul will spark a 17 per cent surge in employment tribunal cases, according to an official government analysis that claims the radical employment shake-up should reduce joblessness and boost growth.
In a paper released on Wednesday, civil servants warned that measures in the act – including bolstering employees’ rights from day one and banning ‘exploitative’ zero-hours contracts – promise to further inundate a tribunal system that is already suffering a record backlog.
Researchers wrote that the Employment Rights Act, which was ratified in December after months of legislative scrutiny, was likely to “increase the volume of cases in the individual enforcement… system by around 17 per cent”. Some of the load would be offset by the introduction of the Fair Work Agency, a new government quango that will oversee firms’ adherence to the measures, the authors added.
The finding will compound fears that the workers’ rights shake-up will swamp a legal system that is still struggling to recover from the delays wrought by the coronavirus pandemic over five years ago. Last month, Ministry of Justice figures showed there were a record 515,000 open claims of individuals or groups waiting for their employment disputes to be resolved at tribunal in the third quarter of 2025.
Single employment tribunal claims also rose by 33 per cent compared to the same period last year, in a further indication of the issues faced among employment lawyers well before any impact from the measures included in the act will begin to be felt.
Workers’ rights package to boost growth?
Businesses and industry had already warned that some elements of the government overhaul, which formed a key part of Labour’s pre-election manifesto in 2024, will leave UK businesses exposed to ambitious legal claims, leading many to postpone hiring plans and investment in staff.
The Federation of Small Businesses previously said its members were especially vulnerable to “vexatious lawsuits”, which they are more likely to settle rather than engage in years-long process involving costly legal advice.
Additionally, lobby groups have warned the act, which also includes plans to ban so-called fire and rehire behaviour and hands more powers to unions, will force bosses to freeze employment plans and have “deeply damaging” implications for ministers’ efforts to kickstart growth.
As many as seven in 10 executives polled by the Institute of Directors said the shake-up would dent economic activity, while half said it would make them less likely to hire new staff.
But the government’s latest analysis, which is mostly based on economic modelling rather than interviews or surveys with bosses, claims the workers’ rights shake-up will have “small or negligible” impact on unemployment and boost the economy if it is introduced effectively.
“The package could have a small positive direct impact on growth,” researchers wrote, estimating it would improve GDP by 0.04 per cent.
The government’s updated assessment follows ministers announcing a major U-turn over one of the policy’s most contentious promises. In November, business secretary Peter Kyle ditched plans to hand all new staff production from unfair dismissal on day one of employment amid concerns the bill would not be approved by the House of Lords.
Under the act approved by parliament, businesses will now have a six-month probation period during which they can freely remove staff, a reduction from the current period of two years but considerably longer than the ‘day one’ protection promised in Labour’s manifesto.
In the wake of climbdown, researchers revised down their estimate for the cost of the workers’ rights measures on business to £1bn. In an earlier analysis, they had suggested the cost to bosses could have been as high as £5bn.
Reforms ‘will hit young people’
Tory shadow business secretary Andrew Griffith, said:
“The government spent a whole year denying it, but even after they’ve fudged the figures to favour them, the truth is clear: their Unemployment Act will cost businesses billions.
They also admit it will cost young people and the vulnerable their jobs — just as we always warned.
Rather than speak to businesses, they’ve tried to back this up with “analysis” from some lefty academics. Independent analysis this is not.
Labour are destroying jobs because they don’t understand business. The conservatives will scrap the most damaging aspects f this Act as part of our plan to Get Britain Working Again.”