Hospitality industry faces potential employment crisis with approaching Employment Bill
The Employment Rights Bill, set to significantly impact the hospitality and leisure (HAL) sector, is poised to introduce expanded employee rights and protections. This move is expected to increase Employment Tribunal claims and associated pressures for employers, as highlighted in a recent report.
More Claims for Unfair Dismissal
One of the key changes brought by the Bill is the introduction of a day-one right to claim unfair dismissal, removing probationary periods and increasing the risk and cost of hiring for hospitality workers who often have precarious or temporary contracts.
Ban on Exploitative Zero-Hours Contracts
The Bill aims to give workers the right to request contracts with guaranteed hours or to opt into zero-hours contracts without exclusivity clauses. This shift will reduce employer flexibility but increase employee protections, potentially causing contractual disputes and tribunal claims related to scheduling, hours, and exclusivity.
Shift Scheduling and Cancellation Protections
Employers must now provide sufficient notice for shifts and compensate workers for last-minute cancellations or changes. This administrative complexity and associated costs create grounds for disputes likely to lead to tribunal claims, especially in a sector with fluctuating demand and workforce.
Prohibition of 'Fire and Rehire' Tactics
From October 2026, employers in the HAL sector cannot use ‘fire and rehire’ strategies to impose less favourable terms. This legal safeguard protects employees but may increase Employment Tribunals related to contract changes and dismissals.
Expanded Statutory Rights
Greater scope and eligibility for sick pay, leave, and harassment rules mean increased compliance needs. Failure to properly apply these reforms may lead to more tribunal claims from employees asserting their broader rights.
Cost Pressures Leading to Risk-Averse Employer Behavior
The Bill adds to existing cost challenges, such as National Insurance hikes and minimum wage increases. Hospitality businesses may face increased claims due to disputes over costs and staffing but may also become more cautious in hiring, potentially affecting workforce dynamics.
Dealing with a Backlog of Cases and Job Losses
The Employment Tribunal is currently dealing with a backlog of cases due to the pandemic, and the UK hospitality industry has shed 69,000 jobs since Chancellor Rachel Reeves's tax increases took effect in the autumn Budget. The number of Employment Tribunal claims in the HAL sector is 12% higher than the average across all sectors.
Advice for Employers
Employers are advised to strengthen their internal processes, provide robust training to line managers, and ensure grievances are handled effectively to avoid costly and time-consuming Tribunal proceedings. Data from the Ministry of Justice (MoJ) revealed that the open caseload at the Tribunal increased by 32% from January to March 2024/25 compared to the same quarter the previous year.
In conclusion, the Employment Rights Bill brings enhanced worker protections that address longstanding issues in the HAL sector's flexible and casual employment model. However, it also raises the potential volume and cost of Employment Tribunal claims due to greater employee rights, administrative requirements, and stricter rules on dismissal and contract management. Hospitality operators are advised to proactively review and adapt contracts, scheduling, and HR policies starting now to mitigate risks of increased tribunal claims after the Bill’s phased implementation beginning April 2026.
- The increased risk and cost of hiring for hospitality workers, as a result of the day-one right to claim unfair dismissal and the prohibition of 'fire and rehire' tactics, may lead to more employees seeking compensation from their insurance providers in case of unfair dismissal or breach of contract.
- The expanding scope and eligibility for sick pay, leave, and harassment rules, as well as the administrative complexity due to shifts scheduling and cancellation protections, may force hospitality businesses to seek finance solutions to cope with the additional costs, thereby putting a strain on the economy.
