The UK’s employment landscape is on the brink of its most significant transformation in a generation.
With the Labour government’s Employment Rights Bill expected to gain Royal Assent in autumn 2025, small and medium-sized enterprises (SMEs) face a wave of regulatory changes that will reshape how they manage, support, and protect their workforce.
For many business owners, the sheer scale and complexity of these reforms are daunting—and the pain points are real.
The challenge: Sweeping changes, tight timelines
Within just 100 days of taking office in July 2024, the government began enacting sweeping employment reforms.
The changes will roll out in phases from April 2026 through 2027, but the time to prepare is now. SMEs, often without the luxury of large HR teams, must act early to avoid costly missteps.
Key pain points include:
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Unfair dismissals and tribunal claims
The two-year buffer before employees can claim unfair dismissal will be scrapped. Instead, all employees will have day-one rights, with a new nine-month “initial period of employment” where dismissal tests are lower. This means every new hire from now on could soon be eligible to bring a claim. The window for tribunal claims is also doubling from three to six months, increasing the risk and potential cost of disputes. SMEs must tighten their probation processes, document every step, and consider employment tribunal insurance as a critical safeguard.
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Zero-hour and agency worker contracts
If your business relies on zero-hour or agency staff, prepare for a major operational and financial shift.
Workers will soon have the right to guaranteed hours, reasonable notice of shift changes, and compensation for cancelled shifts. Now is the time to review your staffing models and explore alternatives like fixed-term or annualised contracts.
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Protection from harassment
Employers will be required to take “all reasonable steps” to prevent third-party and sexual harassment. This means conducting risk assessments, providing staff training, and ensuring robust reporting procedures. Contracts with suppliers and contractors must also explicitly prohibit harassment.
For public-facing or lone-working businesses, this is a significant new burden.
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Statutory sick pay from day one
Statutory sick pay will be available from the first day of absence, not the fourth, and to all employees. While this supports staff wellbeing, it may also lead to more non-genuine absences.
SMEs must implement clear absence monitoring, hold return-to-work meetings, and train managers to spot patterns.
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Parental, bereavement, and flexible working rights
Day-one rights for paternity and adoption leave, expanded bereavement leave (including for miscarriage), and flexible working as the default will require policy overhauls and may disrupt operations. Employers must update handbooks and prepare for increased requests, ensuring refusals are only on reasonable, documented grounds.
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Collective redundancies and trade union reforms
Medium-sized businesses, especially those with multiple sites, face stricter collective redundancy rules and harsher penalties for non-compliance. Trade union reforms will make it easier for unions to organise and act, so managers need training to spot early signs and respond appropriately.
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The fair work agency
A new enforcement body will have sweeping powers to investigate and enforce compliance. SMEs must ensure all processes—especially around pay, right to work, and holiday—are fully documented and compliant.
The Solution: Act now, not later
The Employment Rights Bill may seem far off, but the smartest move is to get ahead. Update your policies, train your managers, and seek expert advice to futureproof your business. The HR Dept is already helping thousands of businesses like yours navigate these changes with up-to-date guidance and employment tribunal insurance.
Need help?
If you need any support navigating these changes, contact David Hudson at the HR Dept Clapham, Highbury & Islington:
[email protected]
0207 781 8208
https://www.hrdept.co.uk/clapham
You can also find useful and updated information on our HR Dept Employment Rights Bill Hub including a white paper with more details on the above:
https://www.hrdept.co.uk/lp/employment-rights-bill/
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