Finance and technology companies across the UK are facing growing pressure to rethink their workforce strategies as sweeping employment law reforms move closer to implementation. While job cuts across both sectors have been driven by slower economic growth, rising operating costs and increased investment in artificial intelligence (AI), employment lawyers say the forthcoming Employment Rights Act is adding fresh urgency to restructuring decisions.
The legislation is expected to strengthen workers' rights by reducing the qualifying period for unfair dismissal claims from two years to six months and removing the statutory cap on unfair dismissal compensation. For businesses already planning restructures, making those changes before the reforms take effect could reduce future legal and financial risks.
Although economic conditions remain the primary driver of redundancies, legal experts say the new employment framework is increasingly influencing when employers choose to act.
The Employment Rights Act represents one of the most significant overhauls of UK employment law in recent years, prompting employers to reassess hiring, dismissals and redundancy planning.
Among the headline changes is the reduction in the qualifying period for unfair dismissal claims from two years to six months, meaning employees will gain legal protection much earlier. The legislation will also remove the statutory cap on unfair dismissal compensation, allowing tribunals to award damages based on an employee's actual financial losses.
Legal experts believe these changes will increase both compliance requirements and litigation risks for employers.
Philippa Mullett, Marketing Director and Legal Assistant in HR Law at The Legal Partners, said businesses should review dismissal procedures, redundancy planning, employment contracts and workplace policies well before the reforms take effect.
Her view is echoed across the legal sector. Mishcon de Reya has warned employers they have 'less time than they think to act', highlighting changes to unfair dismissal rights, collective redundancy consultation requirements and third-party harassment liability. Wilsons LLP has similarly advised businesses to prepare for a much larger pool of employees who will become eligible to bring unfair dismissal claims.
Employment specialists at Macfarlanes, Brodies, Farrer & Co and DID Law have also urged employers to strengthen dismissal procedures, improve documentation and review litigation strategies ahead of the reforms, warning that employment disputes could become significantly more costly under the new regime.
While the legislation applies across the economy, finance and technology employers are facing unique challenges.
Banks continue to digitise services and streamline operations, while technology companies remain focused on improving efficiency following years of rapid recruitment. At the same time, businesses across both sectors are investing heavily in AI, reshaping workforce requirements and redirecting spending towards automation.
Reuters reported earlier this year that one in three UK employers planned to reduce hiring or cut jobs in response to the Labour government's proposed employment reforms, citing higher employment costs and increased regulatory obligations.
Separately, companies including Microsoft, Amazon, Meta and Autodesk have continued workforce reductions as they prioritise investment in AI infrastructure. Thomson Reuters has also announced plans to eliminate up to 500 engineering roles while creating more than 250 AI-focused engineering positions over the next two years, highlighting how many employers are redesigning their workforces rather than simply reducing headcount.
For businesses already restructuring because of economic pressures and technological change, the Employment Rights Act is adding another strategic consideration: whether major workforce changes are better completed before the new legal protections come into force.
Employment lawyers say delaying restructures until after the legislation is implemented could expose employers to significantly greater legal risk.
