More than eight in 10 business leaders believe the Employment Rights Act will have a negative impact on economic growth.
The new research from the Institute of Directors showed an increase in negative sentiment towards the legislation since last year – in 2025 72% of leaders felt the Act would slow the economy, compared with 86% this year.
The business lobbying group has released a policy paper calling on the government to loosen some of the provisions of the legislation, which received Royal Assent five months ago.
It claims that the time available for employers to prepare for changes has been compressed due to delays with the legislation getting through parliament and only minor changes to its implementation timeline to compensate.
It adds that much of the detail on certain policies remains unconfirmed – for example the reference period for offering workers guaranteed hours contracts.
The IoD said that the impact of this “colossal shift in employment relations within a short timeframe” had been amplified by other employment reforms such as the increase in employers’ national insurance and increases to the national living wage.
“The decline in employers’ hiring intentions over the past 18 months cannot be solely attributed to one factor; they are the result of a perfect storm of employment policies which have combined to significantly weaken the business case for hiring,” the policy paper states.
In February 2026, 63% of IoD member employers said they were less likely to...
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