Some British firms are rushing to fire employees before tougher new dismissal rules come into force at the start of next year, lawyers say.
Employment lawyers told The i Paper that some firms are racing to cut jobs before new workers’ rights legislation on unfair dismissal claims and compensation takes effect from 1 January.
But they said this was not the only reason for redundancies, citing higher employment costs for businesses and rising inflation. Figures reveal the number of jobs employers are proposing to cut through redundancies has risen by almost 10 per cent in a year.
Under the Employment Rights Act, which is being introduced in stages, employees will be able to bring a claim for unfair dismissal after six months in a job instead of two years.
The cap on compensation that employment tribunals can award in unfair dismissal cases will also be removed, potentially exposing employers to much larger payouts.
Employment lawyers said the new laws were making employers more cautious about hiring and retaining staff.
Adrian Hoggarth, head of employment at Jurit LLP, told The i Paper: “Employers are looking at their contracts and probationary policies and are making decisions on who to let go before the unfair dismissal qualifying period reduces to six months. It is affecting senior level employees because the cap on unfair dismissal claims is being abolished.
“We have also seen a large increase in numbers of employees being let go before they accrue unfair dismissal rights.”
Under UK employment law, an employer must notify the Insolvency Service government body, when it proposes to make 20 or more employees redundant.
Cabinet minister Angela Rayner was the driving force behind the legislation, which was a flagship Labour manifesto commitment and promised the biggest upgrade to workers’ rights in a generation.
The Government’s new laws are designed to ensure employees are entitled to “fair” compensation for wrongful dismissal, and it believes that removing the cap will only affect a very small number of cases.
Figures from the Insolvency Service show it was notified of 288,139 potential redundancies between January and October 2026, up from 263,133 over the same period last year – an increase of 9.5 per cent.
September alone saw 50,904 potential redundancies recorded, almost double the number recorded for any other month so far this year.
An industry expert argued that the Employment Rights Act was not the main driver of redundancies – but said it was adding to pressure on businesses who are grappling with rising costs.
James Cockett, senior labour market economist at the CIPD, the professional body for HR and people development, said: “While the wider economic environment is the main driver, the Employment Rights Act is adding to the pressure. The change in regulation stands to add significant costs as further measures come into force, and there is continued uncertainty over how reforms will work in practice.
“Whilst the intention of the Employment Rights Act is to protect those in employment, it is instead making employers more wary about whether they can keep people in jobs.”
Will Burrows, of employment law firm Bloomsbury Square, acknowledged that some employers were making decisions to dismiss staff before they acquired the new protections.
But he said the rise in potential redundancies reflected a broader squeeze on businesses, with rising operating costs forcing employers to look for savings.
He pointed to higher employer National Insurance contributions, increases in the National Living Wage, rising fuel costs and wider inflation as factors. Higher employer NI contributions increase the cost of employing staff, adding to the financial pressure on businesses.
“The increased cost of doing business is squeezing profit margins and meaning that businesses are cutting costs in the form of salaries to remain profitable or, in some cases, solvent,” he said.
He expects the effects of the Employment Rights Act would become clearer in 2027.
The Government was approached for comment.
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