UK retailers are preparing for a tougher labour-cost environment as the Employment Rights Act moves from legislation into implementation. A new survey by the British Retail Consortium (BRC) of retail CFOs and finance directors found that labour and employment costs have surged up the agenda in the past six months, with many finance leaders now planning changes to staffing, hiring, and automation.
The BRC’s latest CFO survey found 84% of respondents ranked labour and employment costs among their top three concerns, up from 21% in July 2025. The shift comes as the Employment Rights Act 2025 begins to be phased in, with secondary legislation still out to consultation and further changes scheduled across 2026 and 2027.
For employers, the policy detail matters as much as the headline. The Act received Royal Assent on 18 December 2025, and Acas’ guidance sets out a staged timetable that includes statutory sick pay being paid from the first day of illness, and removing the lower earnings limit for sick pay eligibility, from 6 April 2026. Other changes — including further trade union provisions and additional reforms — follow later in 2026 and into 2027.
In the near term, retailers appear to be planning for cost containment. The BRC says 61% of finance chiefs expect to reduce the number of hours staff work and/or cut overtime, while 45% anticipate freezing recruitment. Headcount reduction is also on the table: 55% plan to reduce head office roles, and 42% plan to reduce store roles. To offset a smaller workforce, 68% plan to drive productivity gains, and 61% plan to invest in automation.
Helen Dickinson, chief executive of the BRC, warned that delivery choices could shape how employers adapt: “If the Government fails to consider business needs on policies including guaranteed hours and union rights, they will add complexity and reduce flexibility”.
The survey lands amid a cost base that finance teams say is already under strain. The BRC estimates retail employment costs rose by £5bn in 2025 owing to higher employer National Insurance contributions and a higher National Living Wage, and it calculates that the cost of employing a full-time entry-level worker rose by 10% over that period. For retailers, wage bills and staffing models are now being assessed alongside consumer demand — which the BRC describes as fragile — and the ability to invest in productivity improvements without eroding service levels.
There are early signs of wage pressure feeding through. Reuters reported that John Lewis and Sainsbury’s have announced above-inflation pay rises for their workers, partly reflecting another increase in the main government-mandated minimum wage. That dynamic is not limited to retail: a separate Reuters report on a Chartered Institute of Personnel and Development (CIPD) survey said more than one in three UK employers plan to cut their hiring of permanent staff because of costs introduced by the reforms, underlining that businesses across sectors are reassessing their staffing plans.
For retailers, the next few months will be defined by consultation detail and operational choices: which roles remain flexible, how guaranteed-hours provisions are implemented in practice, and how quickly automation and process redesign can substitute for hours without pushing costs into other parts of the business. The BRC’s data suggests finance leaders are already moving from concern to action, with staffing, productivity, and capex decisions being pulled into the same strategic conversation.
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