Employment Rights Act 2025: What SMEs Need to Know and How to Prepare
The Employment Rights Act 2025 is coming, and it's bringing significant changes that will affect how you recruit, manage, and support your people. If you're running a small to medium-sized business, now is the time to prepare.
This isn't about creating panic, it's about smart preparation. The provisions are being rolled out during 2026 and 2027, which means you have time to get ready. But that time will disappear quickly if you don't start planning now.
What Is the Employment Rights Act 2025?
The Employment Rights Act 2025 represents one of the most significant overhauls of employment law in recent years. It introduces new protections and obligations across multiple areas, from day-one rights to enhanced protections against sexual harassment.
For SMEs, the Act matters because it changes fundamental aspects of how you operate, from your recruitment processes to how you manage performance, absence, and workplace conduct. Some provisions are already in force, others are coming throughout 2026 and into 2027.
Which Provisions Matter Most to SMEs?
While the Act covers numerous areas, these are the provisions most relevant to small and medium-sized businesses:
Statutory Sick Pay (SSP): Changes to eligibility and payment that will affect your payroll processes and potentially your contractual sick pay arrangements.
Family-Friendly Rights: Enhanced protections around parental leave, flexible working, and support for working parents and carers.
Whistleblowing: Strengthened protections for employees who raise concerns about workplace conduct or practices.
Sexual Harassment: A new preventative duty requiring employers to take ALL reasonable steps to prevent sexual harassment in the workplace.
Fire and Rehire: Restrictions on using dismissal and re-engagement as a negotiation tactic during business changes.
Unfair Dismissal: From January 2027, employees will have protection against unfair dismissal after six months' service, rather than the current two-year qualifying period.
Each of these changes has practical implications for how you run your business. The question is, what should you be doing now to prepare?
Four Key Steps to Take Now
1. Know the Timeline
Different provisions come into force at different times. Some are already active, others arrive throughout 2026, and the unfair dismissal changes take effect in January 2027.
You need to know what's coming and when. This allows you to prioritise your preparation and avoid last-minute scrambles. Create a timeline document that maps each relevant provision to its implementation date, and share it with your leadership team.
2. Create an Internal Project Team
Preparing for these changes isn't just an HR task, it's a cross-functional project that requires input from multiple areas of your business.
Your project team should include representatives from HR, legal (or your external legal advisor), payroll, finance, IT, and leadership. Each function has a role to play. For example, IT needs to ensure your systems can track working time and probation periods accurately. Finance needs to budget for increased payroll costs and potential settlement agreements. Leadership needs to understand the strategic implications and support the necessary changes.
Cross-functional collaboration ensures nothing falls through the cracks and that everyone understands their responsibilities.
3. Brief Your Leadership Team
Your leadership team needs to understand what's coming and why it matters. These aren't just compliance changes, they're strategic shifts that will affect how you attract talent, manage performance, and operate day-to-day.
Schedule a dedicated briefing session to walk through the key provisions, the timeline, and the practical implications for your business. Ensure leaders understand the cultural and operational shifts required, particularly around recruitment confidence and performance management.
4. Audit Your Paperwork
Your employment contracts, employee handbook, policies, and procedures all need to reflect the new legal requirements. An audit will identify gaps, outdated provisions, and areas of risk.
Start now, before the provisions take full effect. Look at your employment contracts, are your probation clauses appropriate? Are your notice periods the right length? Review your policies on flexible working, absence management, grievance and disciplinary processes, and sexual harassment. Check your employee handbook for outdated references or missing procedures.
This audit isn't just about compliance, it's about protecting your business and ensuring your managers have clear, accurate guidance to work from.
What Happens Next?
The Employment Rights Act 2025 represents a significant shift in how businesses manage their people. But with early preparation, clear planning, and the right support, you can navigate these changes confidently and even use them as an opportunity to strengthen your people proposition.
At New Road Consultancy, we support SMEs through legislative changes like these, providing pragmatic, commercially focused advice that helps you prepare, comply, and thrive. Whether you need a Legal Health Check to audit your current position, support updating your contracts and policies, or training for your managers, we're here to help you move forward with confidence.
If you'd like to discuss how these changes affect your business, or if you'd like support preparing for what's coming, get in touch. Let's make sure you're ready.
This article is for general information purposes only and does not constitute legal advice. Specific legal or strategic advice should be sought separately and tailored to the particular circumstances of your business. If you would like to discuss how these issues apply to your organisation, please get in touch.
