Labor rights legislation could have a major impact on Gen Z jobs, marketers warn

Young workers could be among the worst hit by the government’s new workers’ rights law, with retailers warning the changes risk worsening Britain’s youth unemployment crisis.

Industry leaders say the Employment Rights Act, which has just received royal assent, could lead employers to cut back on flexible and entry-level roles as businesses adapt to higher hiring costs and stricter regulations. The British Retail Consortium (BRC) says the changes could unintentionally restrict young workers who often rely on part-time or flexible work as their first step into employment.

The warning comes as youth unemployment continues to rise across the UK. Official forecasts suggest overall unemployment could reach 5.3 percent this year, while youth unemployment has reached its highest level in more than a decade.

Former Labor health secretary Alan Milburn, who is now leading a government-commissioned review into youth employment and unemployment, described the situation as “an existential crisis” in Britain, highlighting the scale of the challenge facing policymakers.

Business leaders fear the new employment laws could discourage companies from offering the kind of flexible roles many young people rely on.

The law introduces a number of important changes to the workplace, including giving workers on part-time and minimum-hours contracts the right to request guaranteed working hours. It also introduces first-day eligibility for statutory sick pay, shortens the eligibility period for unfair dismissal protection, and makes it easier for workers to gain union recognition.

While the government says the measures will improve job security for millions of workers, the BRC says it could create additional costs and administrative difficulties for employers, particularly in sectors that rely heavily on flexible working models.

Marketers warn that if businesses respond by reducing hiring or limiting flexible contracts, entry-level positions may be the first roles to disappear.

“Local, flexible jobs are important first steps into work for young people across the country,” said Helen Dickinson, chief executive of the British Retail Consortium. “Whether it’s a Saturday academic job or shifts with caring responsibilities, these roles are trusted and valued by many.”

He added that since youth unemployment is on the rise, policy makers must ensure that reforms address bad employment practices without closing opportunities for young workers entering the labor market.

The retail industry plays an important role in providing early employment opportunities for young people.

According to industry data, about 780,000 retail jobs are held by workers between the ages of 16 and 25, representing about 28 percent of the sector’s workforce.

These roles often include part-time shifts, weekend work or seasonal employment that may not be combined with education, training or other commitments.

Research by the BRC found that 70 per cent of 18 to 29-year-olds consider flexibility in working hours to be important, rising to almost three-quarters among those working part-time.

By comparison, only 52 percent of adults rated flexible work as very important.

Sellers say this shows how important flexible employment is to young workers who are balancing education, family responsibilities or early career exploration.

The industry warns that if employers hesitate to offer flexible arrangements due to regulatory or financial pressures, Gen Z workers could lose a valuable career path.

Concerns over the Employment Rights Act come amid wider disputes between businesses and the government over rising employment costs.

Businesses have criticized increases in employers’ national insurance contributions and the national living wage, introduced as part of Labour’s first autumn budget.

Many employers argue that the combined effect of higher payroll taxes, wage increases and new workplace regulations is creating a more difficult employment situation.

When she appeared before the Commons Treasury Select Committee, Chancellor Rachel Reeves acknowledged the criticism of the increase in national insurance, saying there was a “substantial argument” that it could have been avoided.

However, Reeves defended the decision, saying the tax increase helped improve funding for the NHS and reduce waiting lists.

Retail leaders remain concerned that further cost increases could slow employment, particularly in sectors with limited opportunities and large workforces.

The debate over workers’ rights legislation comes at a time when youth employment is under increasing scrutiny.

The latest official figures suggest around one million 16 to 24 year olds in the UK are currently not in education, employment or training (NEET).

Economists and labor market experts warn that staying out of work or education for long periods of time can have lasting effects on young people’s future earnings, skills development and job prospects.

The retail and hospitality sectors have historically provided quality roles that help young people gain knowledge, build confidence and develop transferable skills for the workplace.

If those opportunities shrink, experts fear it could make it harder for young people to enter the labor market and advance to long-term careers.

Despite industry concerns, ministers insist the law will end up strengthening the labor market rather than weakening it.

A government spokesman said supporting young people into work remained a priority, pointing to the ongoing review led by Alan Milburn.

The government says the Employment Rights Act will improve job security for more than 18 million workers, including young workers who are often over-exposed to insecure or low-paid work.

Officials also stress that businesses will still be able to offer flexible work arrangements where both employer and employee agree.

“The Employment Rights Act will improve employment and improve job security for more than 18 million workers, and young people are the biggest beneficiaries,” the spokesperson said.

“It will not mean that businesses should reduce their flexible roles and that employers and employees will continue to agree on appropriate hours.”

The debate highlights a broader challenge facing policymakers: how to improve job protection without discouraging job creation.

Supporters of the legislation say stronger rights will create fairer and more stable workplaces, which will help address insecure employment practices that have grown in some parts of the economy.

Critics, however, warn that well-intentioned reforms can have unintended consequences, especially for young workers looking for their first job.

As youth unemployment rises and economic growth remains low, the success of the reforms may ultimately depend on whether businesses continue to create accessible entry-level roles.

For many young people entering the workforce, those first opportunities can be an important decision in shaping their long-term career prospects.