The number of UK job vacancies fell to its lowest level for five years as businesses cut back on recruitment

Labour's plans to strengthen workers' rights could have an unintended consequence, with lawyers warning employers are bringing forward dismissals and redundancies before the new rules take effect.

The warning comes as Britain's jobs market is already weakening, with vacancies falling to their lowest level in five years.

Businesses across the UK are speeding up decisions on senior staff, underperforming employees and redundancies before the Employment Rights Act comes into force on 1 January 2027.

The new law will reduce the qualifying period for unfair dismissal protection from two years to six months.

It will also remove the current cap on unfair dismissal compensation, which is limited to the lower of an employee's annual salary or £123,543.

Employment lawyers say the changes are already influencing boardroom decisions, with many employers choosing to act now rather than risk facing unlimited compensation claims under the new rules.

Companies in the finance and technology sectors are said to be among those moving quickest to prepare.

Alex Mizzi, legal director in the employment team at Howard Kennedy, said employers were "trying to clear out deadwood in senior leadership teams before it gets more expensive".

Jo Keddie, head of employment at law firm Forsters, said her team was "actively supporting employers on what to do with weaker employees and conduct issues."

She added: "Any management or strategic decision that could lead to people being made redundant or removed will be accelerated."

Sarah Henchoz, global head of employment at A&O Shearman, said many employers were already reviewing senior leadership teams, high-earning employees and overall workforce numbers ahead of the changes.

The reforms are part of a compromise between the Government, businesses and trade unions.

As part of the agreement, Labour dropped its manifesto pledge to give workers unfair dismissal protection from their first day in a job, instead introducing the right after six months of service.

However, employment lawyers caution that earlier legal safeguards may not translate into improved job security for workers.

James Townsend, head of employment at Payne Hicks Beach, observed: "For employees, the reforms provide earlier legal protection, but that does not necessarily translate into greater job security.

Some employers may simply make probation and performance decisions sooner, meaning difficult conversations happen earlier rather than later."

Sinead Casey, head of UK employment at Linklaters, noted that traditional six-month probationary periods could prove problematic, as employees would gain legal protection by the time their trial period concluded.

Many firms are consequently shortening probation terms and implementing stricter assessment procedures for new recruits.

The broader labour market context adds further complexity to the employment landscape.

Official statistics from the Office for National Statistics reveal that job vacancies dropped to 707,000 in the March to May period, marking the lowest figure since early 2021.

Unemployment fell marginally to 4.9 per cent in the three months to April, down from 5 per cent in the preceding quarter.

Yet the number of people in work also declined, particularly within retail and hospitality, suggesting employers have grown reluctant to take on new staff.

According to HM Revenue & Customs data obtained through a freedom of information request by TWM Solicitors, roughly 840,000 workers earned above the current £123,543 compensation threshold in 2025-26.

These high earners stand to benefit most significantly from the cap's removal.