The Employment Rights Bill has now received Royal Assent and is the Employment Rights Act 2025. It marks a significant shift in UK employment law and will introduce stronger worker protections across a wide range of topics, including sick pay, family leave, unfair dismissal, harassment, zero-hours working, contract changes and enforcement.
Most changes will be phased in during 2026 and 2027, rather than introduced all at once. This provides employers with time to prepare, but the direction of travel is clear: more rights will apply earlier in employment, with greater consequences for non-compliance.
This article summarises the most relevant changes for SMEs, and sets out a practical way to approach readiness over the next 12–24 months.
A practical way to prepare (without being overwhelmed)
Rather than trying to absorb every detail of the Act immediately, a more effective approach is to focus on three steps:
1) Map current practice (not just written policy)
- Where do you use casual, zero-hours or variable hours arrangements?
- What is your approach to sick pay and what happens in practice?
- How consistently do you manage probation and performance in the first six months?
- How are family leave requests handled day-to-day?
- What measures are in place to prevent harassment, beyond a policy document?
2) Identify priority risk areas
The Act increases exposure in a number of predictable areas, including:
- decisions and exits within the first 6–12 months of employment
- inconsistent manager practice and documentation
- contract changes without robust consultation and evidence
- holiday pay calculations and recordkeeping
- heavy reliance on variable labour with short-notice scheduling
3) Build a phased plan and align leaders
Most organisations will need a coordinated programme that covers:
- employment contracts and templates
- policies and internal guidance
- manager training and tools
- systems, recordkeeping and payroll readiness
- employee relations strategy
The most important changes for HR teams and business leaders
1) Unfair dismissal: a shorter qualifying period and higher potential cost
What is proposed: the qualifying period for ordinary unfair dismissal is expected to reduce from two years to six months, and the cap on compensation for unfair dismissal claims is expected to be removed.
Why it matters: employers will need to manage performance and conduct issues earlier and more consistently, with stronger documentation. Early exits will require greater discipline and may carry higher cost and risk if mishandled.
Actions to prioritise
- ensure probation periods are included in contracts and used properly
- introduce consistent checkpoints (for example at 1, 3 and 5 months)
- improve documentation of performance concerns and support provided
- refresh disciplinary/dismissal processes and train managers accordingly
2) Harassment at work: stronger prevention duties and wider liability
What is proposed: a strengthened duty to take “all reasonable steps” to prevent sexual harassment, additional protection for sexual harassment complainants via whistleblowing rules, restrictions on confidentiality provisions preventing discussion of discrimination/harassment, and protection from third-party harassment (for example clients or suppliers) unless reasonable steps are taken.
Why it matters: employers will need to demonstrate prevention steps in practice, not simply have policies in place. Third-party risk is particularly relevant for client-facing businesses and workplaces involving events, travel or off-site activity.
Actions to prioritise
- review the effectiveness of harassment controls (training, reporting routes, investigations, follow-up)
- conduct risk assessments for high-risk settings (events, travel, client premises)
- review supplier/client contracts to support behavioural expectations and escalation routes
- ensure managers understand the heightened risk of detriment or dismissal following complaints
3) Family rights: more day-one rights and stronger protection from dismissal
What is proposed: day-one rights for paternity leave and unpaid parental leave, stronger dismissal protection during pregnancy and family leave (including a period after return), and expanded bereavement leave rights.
Why it matters: the legal risk often arises from inconsistent decisions, unclear processes, or managers acting without guidance. Clear internal frameworks and training reduce both risk and employee relations issues.
Actions to prioritise
- update policies and manager guidance so processes are clear and consistent
- train managers on decision-making during pregnancy, leave and return-to-work periods
- introduce or update bereavement and pregnancy loss guidance where not already in place
4) Fire and rehire: reduced flexibility for contract changes
What is proposed: tighter restrictions on dismissing and re-engaging employees to force changes to contractual terms, with certain dismissals expected to become automatically unfair in defined circumstances (subject to regulations and limited exceptions).
Why it matters: employers may have less flexibility when making changes to terms and conditions, increasing the importance of early planning, consultation quality, and contract drafting.
Actions to prioritise
- review contract templates to ensure appropriate, lawful flexibility where needed
- strengthen consultation practice and documentation for changes
- plan changes earlier, with a clear rationale and communication strategy
5) Zero-hours and irregular hours: greater predictability and compensation risk
What is proposed: rights for eligible workers to be offered contracts reflecting regular hours where working patterns are established, plus rights to reasonable notice of shifts and compensation for short-notice cancellations/changes (including for agency workers, with allocated responsibilities between hirer and agency).
Why it matters: organisations relying on variable labour may face operational and cost impacts, particularly where scheduling is short notice or frequently changed.
Actions to prioritise
- audit working patterns to identify roles likely to qualify for regular-hours offers
- assess shift notice and cancellation practices and reduce avoidable changes
- prepare scheduling processes and guidance for managers/operations teams
6) Pay, holiday and sickness: more requirements and stronger enforcement
What is proposed: statutory sick pay (SSP) available from day one with no waiting period and no earnings threshold, new duties around holiday recordkeeping for six years, longer Tribunal time limits for claims, and establishment of a Fair Work Agency with enforcement powers.
Why it matters: these changes increase the importance of payroll readiness, accurate holiday pay calculations (especially where overtime or commission is relevant), and auditable recordkeeping.
Actions to prioritise
- review SSP policy, eligibility rules and payroll processes
- ensure holiday pay and holiday records are accurate and demonstrable
- strengthen governance over documentation and retention practices
Suggested priorities for 2026
For many SMEs, a sensible readiness sequence will be:
- Probation and early performance management
- Harassment prevention and complaint handling
- Family leave processes and manager training
- Contract templates and change management approach
- Casual labour and scheduling discipline
- SSP readiness, holiday pay accuracy and recordkeeping
