- Businesses warn the rule may curb hiring and reduce flexible roles
- Concerns rise as youth unemployment edges closer to one million
- Government maintains the policy will bring stability to workers
A proposed guaranteed hours rule under the Employment Rights Act is drawing sharp pushback from major industry groups, with businesses warning it could reshape hiring across the UK labour market. The policy, aimed at offering workers more predictable incomes, is now being framed by employers as a potential risk to job creation particularly for younger workers entering employment for the first time.
In a joint letter to the government, four leading bodies including the British Retail Consortium, Food and Drink Federation, Recruitment and Employment Confederation and UKHospitality raised concerns that the approach could “strip flexibility from the labour market at precisely the wrong moment,” as quoted in a news report. They argue that requiring employers to offer fixed-hour contracts after 12 weeks of work could discourage hiring at a time when demand is already under pressure.
When flexibility starts to disappear
At the centre of the debate is how the rule might affect sectors that rely heavily on flexible staffing, such as retail and hospitality. Employers say these industries often operate on fluctuating demand, making fixed-hour commitments harder to sustain. There is also concern that workers who prefer flexible arrangements could be pushed into contracts that do not suit their needs.
Helen Dickinson reportedly said the changes could force businesses to offer more hours than some workers actually want, making flexible roles less viable. Over time, that could reduce the number of casual or part-time jobs that typically serve as a first step into employment for young people.
The warning comes as the number of young people not in education, employment or training approaches one million. Business groups suggest that even small shifts in hiring behaviour across companies could have a wider impact, with firms becoming more cautious about bringing in new staff.
Security versus access to jobs
The government, however, is standing by the policy, arguing that greater certainty over income is essential for workers. A spokesperson said the reforms are intended to give “greater certainty to over half the UK’s workforce” and that implementation will be shaped through ongoing consultation.
Still, employers are pushing for changes before the rules come into force next year. One proposal is to limit the policy to workers on contracts of up to eight hours a week, rather than applying it more broadly. The concern is that extending the rule too widely could create a situation where workers gain the right to request more hours that businesses may not realistically be able to provide.
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The wider backdrop adds to the tension. Rising labour costs, linked to increases in minimum wages and National Insurance contributions, are already weighing on hiring decisions. Some business leaders suggest the guaranteed hours rule could add another layer of pressure, potentially leading firms to scale back recruitment, limit hours, or shift towards more informal working arrangements.
What remains uncertain is how the final version of the policy will look. The government’s consultation, initially expected last autumn, has been delayed, leaving businesses and workers waiting for clarity. For now, the debate is less about whether change is needed and more about how far those changes should go, and at what cost to the job market.
