British companies reduce their highly paid employees before changing the law economy

The Financial Times reported that British finance and technology companies, which offer high salaries to their employees, are rushing to get rid of managers who have not achieved the required goals, reduce the number of employees, and tighten the rules for hiring new employees, before implementing a new law granting additional benefits to employees at the beginning of next year.

The newspaper quoted lawyers as saying that these companies fear paying large financial compensation to high-paid workers whose services are terminated, as the legal ceiling on compensation for unfair dismissal will be abolished in the new law.

According to the current law, the maximum compensation for unfair dismissal is 123,543 pounds sterling (about 166 thousand dollars) or the employee’s annual salary, whichever is less, which will be canceled early next year.

The newspaper quoted Alex Mizzi, director of the recruitment affairs team at the Howard Kennedy law firm, as saying that his clients in major companies are “trying to get rid of ineffective elements in senior management before the cost of doing so becomes higher.”

It also quoted other lawyers as saying that major companies in Britain are trying to limit the costs that may be caused by the new labor law, which provides additional benefits to workers, especially those who receive high salaries.

The British Tax and Customs Authority considers any income exceeding 50,000 pounds sterling (about 67,000 dollars) to be considered high income, and imposes 40% taxes on any income exceeding this amount, while the tax rate before it is about 20%, while allowing about 12,000 pounds sterling annually (16,000 dollars) to be exempted from taxes to cover the basic costs of living.

Reducing the probationary period

The new law includes an important clause regarding the period during which companies have the right to get rid of their workers without compensation, which is known as the probation period. Its duration is two years in the current law, but it will be reduced to only 6 months.

This change means that if the company dismisses an employee after 6 months, he has the right to apply to the labor court to claim compensation if he proves that his dismissal was arbitrary.

It is noteworthy that about 840,000 employees received salaries exceeding the compensation ceiling in the years 2025 and 2026, according to figures from the British Tax and Customs Authority obtained by the law firm “TWM” and published by the Financial Times.

Corporate concerns

In this context, the head of the Employment Affairs Department at the law firm “Forresters” told the newspaper that her team provides advice to companies on how to deal with less qualified employees and employee behavior issues under the new law.

She added that administrative decisions are currently being accelerated, which will lead to the layoff of workers or the termination of their employment before the new law begins to be implemented in early 2027.

Business groups have warned, according to The Guardian, that these changes in the labor law, which include improving sick leave benefits and employee rights upon dismissal, will impose additional costs on companies, and may push them to reduce available jobs to the maximum possible extent.

But Labor Minister Kate Dearden told the Guardian that these amendments put Britain on an equal footing with other countries with large economies.

The Guardian indicated that Andy Burnham, the candidate to lead the Labor Party and head the British government to succeed current Prime Minister Keir Starmer, is expected to support these changes within the framework of supporting workers’ rights, which is what the Labor Party pledged to its supporters in the last parliamentary elections, which Starmer won about two years ago with a large majority.