Britain’s fragile employment tribunal system risks being plunged into chaos under Labour’s radical new employment reforms, business leaders have warned, as Deputy Prime Minister Angela Rayner prepares to hand workers the right to sue employers for unfair dismissal from day one on the job.
Labour’s flagship Employment Rights Bill, part of its “New Deal for Working People”, abolishes the long-standing requirement that staff must work two years before claiming unfair dismissal. Employers now fear a deluge of claims, choking a tribunal system already drowning under a soaring backlog.
According to official Ministry of Justice figures, the number of employment tribunal claims jumped 32% in the year to March, with a staggering 45,000 new individual claims piling up. Yet no new funding has been allocated to deal with the mounting crisis.
Craig Beaumont, executive director at the Federation of Small Businesses (FSB) told The Telegraph: “The system was already swamped before this sustained surge. With no extra resources… a broken system could be opened up by the Employment Rights Bill funnelling in spurious claims from day one of unfair dismissal.
“Small employers will be pressured to settle vexatious claims just to avoid a years-long legal headache, even when they’ve done absolutely nothing wrong. It’s another blow to Britain’s backbone businesses.”
And the numbers back him up: The Telegraph report the FSB’s legal advice line took a record 13,529 calls in the first quarter of 2025 — up 10% from the previous three months — as bosses scramble for guidance under growing legal pressure.
Worryingly for firms, these claims are now completely free to lodge after the Supreme Court scrapped tribunal fees in 2017. And while Chancellor Rachel Reeves has pledged £450 million for the wider courts system, including criminal and Crown Courts, not a penny has been earmarked for employment tribunals, despite the clear warning signs.
Business leaders are sounding the alarm over the broader economic impact. The Institute of Directors found that more than 70% of bosses believe Ms Rayner’s reforms will damage the British economy, with over half saying they’re now less likely to hire new staff.
“The result?” said one furious business owner online. “We won’t recruit anyone who hasn’t been at their last job for two years. Quite simply, we will not take the slightest chance on employing the ‘wrong’ candidate.”
Others echoed the sentiment:
“Rayner and Reeves will increase unemployment — if people can even find jobs in the first place.”
“The only prudent way for UK SMEs to obtain manpower will be via agencies — or move the work offshore.”
“This is what you get when you elect a bunch of student union activists with no private sector experience.”
Even Rupert Soames, president of the Confederation of British Industry (CBI), joined the criticism, warning the policy would discourage firms from hiring those with “spotty CVs” or those currently on benefits, hardly the recipe for inclusion or growth.
This comes at a time when businesses are already reeling from Labour’s latest tax hikes. April saw a painful rise in employers’ National Insurance contributions and a lowering of the threshold, driving some firms, particularly in retail and hospitality, to slash jobs and halt investment.
Critics argue that with the system already buckling and employers under siege, it’s little more than utopian idealism masquerading as policy.
As one commentator wrote:
“At some point people will realise… Starmer et al are Marxists. When unemployment, inflation and interest rates all rise, they’ll say, ‘not my fault’, and ask us to pay their pensions.”
In the eyes of Britain’s business owners, the message from Labour is now loud and clear: hire at your own risk.
Main Image: For illustration purposes only. Image created with AI.
