Mike Rogers, Chief Services Officer at recruitment agency Kingdom People, discusses the steep rise in businesses turning to high-value contractors as opposed to permanent hires in the wake of the Employment Rights Bill.
In the UK, businesses are waiting to see how their hiring will change due to the Employment Rights Bill. A timeline set out in July suggests that many key changes to employment law will be introduced from April 2026, such as statutory sick pay from day one of sickness, and day one rights for paternity and parental leave, while other changes such as unfair dismissal will be introduced from 2027.
So, what is the Employment Rights Bill?
The Employment Rights Bill is a UK government bill aimed at modernising employment law and boosting workers’ rights. It seeks to update and enhance existing employment protections, make provision regarding pay and conditions in specific sectors, and introduce reforms related to trade unions and industrial action. And while it is still being scrutinised by the House of Lords, and is not expected to reach Royal Assent until autumn, there are several changes businesses are bringing in to tide over until there is more clarity around the law.
At the moment, key changes expected from April 2026 include:
- Doubling of maximum awards for collective consultation failures;
- Statutory Sick Pay from day one (no Lower Earnings Limit);
- Day-one rights for paternity and unpaid parental leave;
- Simplified trade union recognition and balloting;
- Launch of the Fair Work Agency with expanded enforcement powers; and
- Stronger whistleblower protections.
How are businesses preparing for these changes?
We are noticing a big increase in companies choosing to hire high-value individuals as contractors through their recruitment agency, rather than hiring them as new staff. While this could be a mutually beneficial partnership in many cases, offering both the business and the individual flexibility, the increase signifies the hesitancy around permanent hiring, as businesses are thinking more strategically about hiring decisions. In the hopes that there will be more clarity in the coming months, businesses are holding out on hiring.
We have seen an increase hiring of contractors and temporary staff for professional services of 130% from January 1st, and this is happening across many industries – such as IT, health and safety, and engineering. We have also seen an in increased demand for temporary contractors in some semi-skilled roles within manufacturing.
Likewise, the 2025 KPMG and REC UK Report on Jobs, permanent staff appointment fell at a substantial pace that was the quickest in nearly two years, while temp billings decreased at the fastest rate since February.
However, economic optimism is at a 10-month high, according to Lloyd’s June Business Barometer. Business confidence rose one point in June, further offsetting the 10-point fall in April. Businesses might be changing the way they are hiring, however most firms expect higher staffing levels in the coming year, as industries will inevitably adapt their methods to make the new laws work best for them. Wage growth has seen improvement in June, contributing to more optimism around the future.
What happens next?
With the Employment Rights Bill is currently still being scrutinised by the House of Lords and is not expected to reach Royal Assent until the autumn, there will be time for businesses to adjust hiring decisions and processes to the new normal.
Further consultations are expected this year on:
- Dismissal protections;
- Pay negotiations in schools and social care;
- Umbrella company regulation;
- Bereavement leave;
- Gender pay gap action plans;
- Collective redundancy consultation; and
- Full ban on zero-hours contracts (from 2027).
Overall, while many businesses may not know yet how the Employment Rights Bill will impact them, they should still be taking steps now to prepare, and this includes looking at hiring, and seeing if temporary contractors are a better solution in the short-term. As well as this, many businesses still expect to hire in the next year, suggesting an overall optimism amidst relative uncertainty.
