Director Weekly  Dismal jobs data shows the real-world cost of the government’s employment policies

July’s ONS labour market data makes for fairly grim reading. Payrolled employees decreased month-on-month by 0.1% – and by 0.6% on the year – while vacancies are down by 63,000 on the quarter.

The slump is hardly a surprise. It is the all-too-predictable result of a series of policies that have made it more expensive and riskier for employers to hire staff – particularly the hike in Employer National Insurance Contributions and above-inflation increase in the National Living Wage that flowed from the 2024 Autumn Budget.

Unfortunately for employers, further employment costs are hurtling down the line. The Employment Rights Bill is the government’s flagship policy, a far-reaching piece of legislation that’s set to introduce some 30 changes to employment law. When Deputy Prime Minister Angela Rayner describes it as “the biggest upgrade to workers’ rights in a generation,” she’s not exaggerating.

The recent roadmap for implementing the Employment Rights Bill sets out when the Bill’s different provisions are planned to take effect. It is worth employers familiarising themselves with the timeline and planning ahead for implementation.

Unfortunately, it seems certain that, in its current form, the Bill will be a further major blow to jobs. As our recent Policy Voice survey highlights, 49% of employers say the Bill would make them less likely to hire new staff. More than a fifth (23%) say redundancies are more likely, more than half (53%) are more likely to invest in automation, and more than a third (36%) are more likely to outsource roles to other countries. Those are hardly the desired outcomes of government policy.

The IoD has voiced employers’ concerns loudly and repeatedly. Ministers would argue that they have listened – for example, by establishing a statutory probation period. Yet significant concerns remain, including on that provision. Every director knows that hiring often means taking a chance on someone: sometimes it works; other times, it doesn’t. The risk is that if the Bill proceeds as it is, the heightened risk of tribunal claims will make employers far less likely to take those chances.

The government’s commitment to consult on the detail of secondary legislation associated with the Bill is welcome, but it will have no effect on hiring unless it is genuinely used to listen to and address the concerns of employers.

As summer recess approaches, there is still a small window to make changes. Perhaps this dismal jobs data will give ministers pause – because the truth is that a significant rethink is needed if the government is to deliver on its aims of driving economic growth and increasing the employment rate.

Read the IoD’s statement on the latest employment numbers here.