The CIPD’s Labour Market Outlook shows that three in 10 (30 per cent) employers in Scotland plan to hire fewer permanent staff due to key reforms in the ERA, while overall hiring intentions remain at their lowest level on record outside the first year of the pandemic.

The subdued hiring intentions are not surprising given three in four employers (72 per cent) in Scotland expect the incoming employment law reforms to increase their employment costs to some extent. Close to half (47 per cent) of Scottish employers also expect workplace conflict to increase because of at least one or more of the key legislative reforms being introduced.

These are the headline findings of the CIPD’s quarterly Labour Market Outlook report which surveys more than 2,000 UK employers on their hiring, pay and redundancy intentions.

In response, and to prevent the ERA “undermining employment growth”, the CIPD is calling on the UK and Scottish governments to:

• continue to consult meaningfully with employers and business bodies and, where necessary, compromise on key measures still to be finalised to ensure they can be implemented without adding to the costs and legal risks of recruiting and managing staff;
• launch a communications campaign as soon as possible to ensure employers, and small firms in particular, understand, are aware of and can prepare for new legal obligations in advance of them coming into force; and
• as part of the review of the dispute resolution system, ensure that Acas has sufficient resources to help employers – and SMEs in particular – comply and avoid costly and disruptive conflict and employment tribunal claims.

Further findings from the survey found that:

• One in six organisations (16 per cent) in Scotland don’t know whether their employment costs will increase as a result of the reforms in the ERA.
• Changes to the unfair dismissal qualification period and the day one right to Statutory Sick Pay are expected to impact recruitment of permanent staff the most, said around a fifth of Scottish employers (21 per cent and 20 per cent respectively).

Marek Zemanik, senior public policy advisor for the UK nations at the CIPD, said: “Greater certainty about the impact of the Scottish and UK budgets and the Employment Rights Act has yet to translate into increased confidence in hiring. Against a backdrop of low business confidence and already weak hiring intentions, our research suggests there is a real risk that the Employment Rights Act measures will act as a further handbrake on job creation and recruitment in Scotland.

“In response, it’s important that the UK and Scottish governments try and mitigate these potential negative consequences, through meaningful consultation and where necessary compromise on key measures still to be decided in secondary legislation.”