21.01.2026

Employment law: news in brief – January 2026

How much will changes to the unfair dismissal qualifying period and compensation cost UK businesses?

The Department for Business and Trade has released an impact assessment examining the impact of the Employment Rights Act 2025 on businesses and individuals.

The government estimates that reducing the qualifying period for unfair dismissal will benefit 6.3 million employees. This measure, combined with removing the cap on compensatory awards for unfair dismissal, will cost businesses between £10 million and £100 million, which is less than would have been the case had the government pressed ahead with day one unfair dismissal rights.

The government concedes that it’s “possible [this will] increase hiring and firing costs for employers, which may in turn impact on hiring and firing rates”.

The government also estimates that reducing the qualifying period to six months will lead to around 9,000 more cases being referred to Acas for Early Conciliation. And, on the basis that unfair dismissal claims accounted for 12% of all complaints to employment tribunals in 22/23, this change is expected to have the largest impact on the system.

Disciplinary hearings are a “drawn-out ordeal” for many employers

New research reveals that disciplining staff has become more complex and is taking up significant time and resources.

A WorkNest poll of HR professionals found that over half of disciplinary investigations take longer than a month to conclude, while some extend beyond three months. Only a small minority (12%) complete inquiries within a fortnight.

Numerous reasons are given for this. Employees:

Go off sick
Cite mental health problems
Involve their union; and
Submit retaliatory grievances

There’s also a problem with gathering evidence from colleagues who are reluctant to get involved.

The findings indicate that many managers don’t know what to do and are worried about making legal mistakes. Only 37% said they were “fully confident” about managing disciplinary issues.

National investigation launched to tackle ‘lost generation’ of young people

Former Health Secretary Alan Milburn has launched a major investigation into the rising number of young people not in education, employment or training (NEET), calling for a nationwide “movement” to help reverse the trend.

The inquiry, supported by the Department for Work and Pensions’ Youth Guarantee Advisory Panel and experts from health, business, and government, seeks to uncover the root causes of record youth inactivity.

With almost one million 16 to 24‑year‑olds not earning or learning, the Call for Evidence invites young people, families, teachers, coaches, and other stakeholders to share their thoughts about why this is happening and what can be done to improve the situation.

An interim report is due in the spring.

Under-40s lead surge in job switching as pay pressures persist

Younger workers are increasingly prepared to change jobs to earn more money, according to new research.

Totaljobs’ Salary and Benefits Report 2026 shows that 41% of workers are either actively seeking a new role or intend to do so this year, with better pay cited as their primary motivation.

In terms of age groups: 48% of those aged 18–29 and 47% of those aged 30–39 are looking for better paid work.

However, the findings also reveal that 41% of workers plan to stay put, prioritising security in an uncertain labour market.

FTSE 100 chief executives earn median £4.4m

New analysis from the High Pay Centre has revealed that FTSE 100 chief executives now earn a median annual salary of £4.4 million, equivalent to 113 times the UK’s median full‑time wage of £39,039. This indicates that the typical CEO will surpass a worker’s yearly earnings by around midday on 6 January.

The think tank warns that the widening divide raises significant questions about fairness and transparency in executive reward.

Permanent placements fall at fastest pace since August

Permanent hiring in the UK fell sharply in December 2025, marking the steepest drop since August, according to the latest KPMG and REC UK Report on Jobs.

Recruitment firms reported a continued decline in permanent placements, extending a 39‑month downward trend that began in October 2022. The Permanent Placements Index fell to 44.3, down from 45.5 in November, indicating a further contraction in hiring activity.

The slowdown affected most regions, with London, the South and the North all seeing declines. The Midlands was the only area to record growth, posting its first rise in permanent placements since May.

Cost pressures deepen strain on UK jobs market

New figures from the British Chambers of Commerce (BCC) reveal that rising business costs are continuing to weaken the UK labour market, with companies increasingly cautious about hiring.

According to the BCC’s latest Quarterly Recruitment Outlook, less than a quarter of businesses (23%) expect to hire new staff in the next three months, while 63% expect staffing levels to remain unchanged, and 14% anticipate reducing their workforce.

Despite rising unemployment, many organisations are finding it difficult to recruit people with the skills they need. The construction sector remains the hardest hit, with 78% of firms facing recruitment difficulties, followed by 75% in manufacturing and 63% in retail.

The report also highlights how rising costs are curbing investment in staff development. More than a fifth of businesses (22%) have cut staff training, while 57% have maintained but not increased training budgets.

Labour costs remain the most significant pressure, cited by 72% of firms, rising to 82% in hospitality and falling to 66% in retail.

Whistleblowing reports surge across UK councils

Whistleblowing reports have risen sharply across multiple UK councils, with some local authorities recording increases of more than 200%, according to new Freedom of Information (FOI) data released by compliance training provider Skillcast.

The data shows:

Doncaster Council experienced the largest spike, with a 250% year‑on‑year rise in whistleblowing allegations
Warrington Borough Council followed with a 200% increase; and
Southend, Nottingham and Wigan councils each reported a 100% rise.

At the opposite end of the scale, Leeds City Council saw reports fall by 40%, which Skillcast notes may reflect either fewer incidents or a reluctance among staff to raise concerns.

Government welfare reforms set to save £1.9bn by 2030/31

The UK government has announced a package of welfare reforms expected to save £1.9 billion by the end of the 2030/31 financial year.

The measures focus on reducing the backlog of Work Capability Assessments (WCA) and increasing the number of face‑to‑face assessments across key disability‑related benefits.

Under the reforms, the proportion of in‑person assessments will rise significantly. Personal Independence Payment (PIP) assessments will increase from 6% in 2024 to 30%, while WCA assessments will also reach 30%, up from 13%.

The government says the changes will free up health assessors, allowing more claimants to be seen in person and enabling faster reassessments that better reflect changes in people’s health over time.

The reforms will also extend the period between PIP award reviews, reducing the frequency of reassessments for claimants whose conditions are unlikely to change quickly.