What does the new Employment Rights Bill mean for retailers?

The Employment Rights Bill, slated for major implementation in autumn 2026, is being hailed by the government as a bold step forward for workers’ rights. But for the retail sector – a cornerstone of the UK economy that employs over three million people – the swift nature of the proposed changes has triggered alarm bells.

Retailers and employment law experts are warning that the Bill, while well-intentioned, could pose significant risks to business flexibility, cost management, and recruitment, particularly for part-time and seasonal staff. Key areas of concern include proposed guarantees on working hours, “day one” employment rights, new rules on fire-and-rehire practices, and strengthened protections around sick pay and harassment.

The high cost of certainty

James Major, partner and retail sector specialist in Clyde and Co’s employment practice, said the changes that come with this are “far reaching and have the potential to dramatically change the employment landscape as we know it”. According to Major, this introduces uncertainty and the “potential for significant additional costs” for any employer, particularly employers with a large number of employees like retail businesses.

He points to several proposals that were drawing particular concern from retailers, including the right to guaranteed hours for those on zero or low-hours contracts, the additional costs that could arise from making unfair dismissal a day-one right, proposed changes to collective redundancy obligations, and revisions to harassment laws.

He adds that some retailers are also wary of the planned trade union reforms. Overall, there is a widespread “fear” that these changes could significantly increase business costs, potentially resulting in price hikes for consumers or reductions in staff numbers.

Alan Delaney, partner at MFMac, echoes this. “The most pressing concern relates to the proposed new rights around guaranteed hours for zero-hours and low-hours workers”, he says. “These provisions, while well-meaning, are complex and could create a significant administrative burden.” 

Delaney adds: “Combined with other proposals—such as day-one rights to claim unfair dismissal and universal access to statutory sick pay—will clearly lead to increased employment costs. This is already a challenging time for the sector and any measures that add further financial strain are understandably being met with concern.”

Flexibility vs. job security

The tension at the heart of the Bill, experts say, is between the government’s aim to improve job security and the operational need for flexibility in the retail sector.

“Flexibility is a cornerstone of how the retail sector operates – particularly when it comes to managing seasonal peaks,” says Delaney. “Unfortunately, the guaranteed hours proposals as they stand don’t reflect that reality. They would require retailers to offer additional hours within contracts even when demand doesn’t justify it, which could have a knock-on effect on recruitment and workforce planning.”

Major adds: “For sectors like retail, flexibility isn’t just about convenience, it’s an operational necessity. While the push for greater job security is well-intentioned, without proper nuance these reforms risk constraining businesses at the very time they are striving to adapt to consumer and economic pressures.”

Meanwhile, Paul Kelly, head of employment at Blacks, warns that the Bill’s provisions could discourage the use of short-term contracts that support seasonal recruitment. “Unfair dismissal will be a ‘day one’ right (subject to an undetermined statutory probation period), as opposed to a right accrued after two years,” says Kelly. “This means that employers in the retail sector who rely on short, fixed term contracts for seasonal busy periods will likely need to follow a detailed process to ensure they are ending employment fairly. There also may be a dip in recruitment, with retailers not wanting to take the risk on individuals because they are then restricted in terminating employment.”

Impact on workers and job design

Ironically, some experts say the reforms aimed at empowering vulnerable workers may end up limiting opportunities for the very people they are designed to help.

Kelly explains: “Retailers are reliant on zero-hours contracts because of flexibility. We await clarity and development on this section, but in essence, zero-hours and other workers could qualify for an offer of guaranteed hours if they regularly work over contracted hours. 

“This clause likely won’t be ideal for retailers who have fluctuating busy periods and could then be tied to offering higher guaranteed hours, even when they don’t have the demand. In response, we might see retailers reluctant to offer zero-hours contracts because they don’t want to be subject to these obligations.”

Delaney added that the proposed shift could unintentionally create difficulties for individuals who prefer flexible working patterns. He explained that even if employees are content with their current schedules, employers might still be obligated to offer guaranteed hours periodically once certain criteria are met. This, he noted, could introduce additional administrative burdens for employers without delivering meaningful benefits to the workers themselves.

Andrew Goodacre, CEO of the British Independent Retailers Association (BIRA), puts it bluntly. “Giving employees day one rights will increase the cost line significantly and cause potentially bigger issues with sickness absence,” he says. “The insistence on employees on guaranteed hours will reduce flexibility (often at the request of the employee) and employment of part time workers (often younger people).”

Calls for Reform

All experts agree that the retail sector is uniquely vulnerable to sweeping regulatory change.

“Retailers are, in the main, high volume, low margin businesses, so increased costs have a disproportionately large impact,” says Major. “In addition, many retailers employ a large number of people, many of whom work variable hours and on a part-time or seasonal basis. The sector is also facing significant external pressures, from inflation and wage increases to changes in consumer behaviour. Layering additional legal duties on top of this creates a perfect storm of complexity and cost.”

Goodacre draws attention to the long-term structural challenges, saying that the Bill is “not the way to achieve [worker protections]”.  He says: “It promises to be detrimental to a sector that has already lost 250,000 jobs in the past five years, and most at risk are the young people – the very group this government has identified as a priority for work.”

Kelly points to statutory sick pay as another issue, noting that those who qualify will now be eligible from day one, meaning retailers could see a spike in short-term sickness absences.

Experts say there is still time to amend the legislation to better reflect the realities of modern retail.

“The proposals in the Bill require clarity and certainty,” says Major. “I am sure there are a range of proposals many retailers would like to change but for me the key is clarity as to how the proposals are to be implemented, what exceptions or exclusions will apply (e.g. for micro and small businesses) and when the changes will be implemented.”

Delaney agrees and suggests more tailored solutions: “Introducing longer intervals between guaranteed hours reviews or exemptions for seasonal roles would help,” he says. “A more flexible framework that allows for mutual agreement between employer and employees (particularly those happy with their existing arrangements) could still achieve the Bill’s aims without undermining how retail works.”

All of the experts agree that if the Bill passes in its current form, the retail employment landscape could undergo a seismic shift.

“If the Bill passes largely unchanged, much will depend on the detail in secondary regulations and the guidance for employers,” says Major. “However, the proposals are wide-ranging and intended to bring about significant change in the employment landscape… I think we are likely to see greater automation and a stronger reliance on technology in the sector, perhaps at the expense of headcount.”

As retailers await further clarification and secondary legislation, the stakes are becoming clearer: a well-intentioned but rigid implementation risks squeezing a sector already battling cost pressures, labour shortages, and shifting consumer habits. For now, retail employers are preparing not just for compliance – but for a fundamental rethinking of how flexibility, fairness, and viability can co-exist in a post-2026 landscape.

“We may see a move towards fewer flexible roles and a focus on permanent contracts to manage compliance risk,” concludes Delaney. “While that might improve stability for some, it could reduce opportunities for others – particularly those who rely on adaptable working patterns.”