The Employment Rights Act 2025
- beceenuk
- Mar 18
- 8 min read
Updated: Mar 20
What Every Small Business Needs to Know Right Now
Why this matters to you The Employment Rights Act 2025 is the biggest shake-up to UK employment law in a generation. It received Royal Assent in December 2025, and changes are rolling out throughout 2026 and 2027. If you run a small business with even one employee, this affects you — and some of the changes are already here. |
Let’s start with the truth
Most small business owners I speak to have heard the phrase “Employment Rights Act 2025” but haven’t had the time or headspace to understand what it actually means for their business. That’s completely understandable. You’re running a company, managing people, chasing invoices, and trying to grow. Employment legislation is not where you want to be spending your evenings.
But here’s the thing: this Act is not going away, it cannot be ignored, and the cost of getting it wrong — whether in tribunal awards, staff disputes, or reputational damage — is rising. The maximum penalty for certain failures has already doubled under the new law.
With 15 years of HR experience, I’ve seen what happens when businesses are caught unprepared by legislative change. This blog post is my attempt to give you a clear, jargon-free overview of what’s changing, when, and what you actually need to do about it.
The big picture: what is this Act actually doing?
The Employment Rights Act 2025 is, at its core, a significant strengthening of workers’ rights across the board. It introduces earlier access to protections, expands family-friendly entitlements, creates a new enforcement body, and raises the financial stakes for employers who fail to comply.
The Act has grown to over 300 pages and will be supported by a significant amount of additional secondary legislation. In simple terms, it does four things:
Moves many rights to day one of employment — removing qualifying periods that previously gave employers more flexibility
Expands family-friendly leave entitlements, making it easier for employees to take paternity and parental leave
Creates stronger financial consequences for employers who get things wrong, particularly around sick pay, redundancy consultation, and unfair dismissal
Introduces proactive duties — particularly around preventing sexual harassment — where employers must act in advance, not just respond to complaints
The changes are being phased in across 2026 and into 2027. The first significant wave lands in April 2026 — which means if you haven’t started preparing, the time is now.
Your timeline at a glance
Here is a summary of the key implementation dates and what they bring:
When | What changes |
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April 2026 |
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October 2026 |
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January 2027 |
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The April 2026 changes: what you need to act on now
Statutory Sick Pay from day one
Currently, employees have to be off sick for three days before Statutory Sick Pay (SSP) kicks in. Those three “waiting days” gave employers a small buffer. From 6 April 2026, that buffer is gone.
SSP will be payable from the very first day of sickness absence. The lower earnings limit — which meant lower-paid workers didn’t qualify at all — is also being removed. More workers will qualify, and they’ll qualify sooner. The flat rate also rises to £123.25 per week from April 2026.
The calculation method is also changing: SSP will be set at 80% of average weekly earnings or the flat weekly rate, whichever is lower.
What this means for your business If you have team members on lower pay or rely on staff working through short absences, this change will be felt quickly. Short illnesses that previously fell within the waiting period will now trigger SSP from the first day. This creates both a cost consideration and a process one — your reporting, return-to-work procedures, and payroll settings all need to be reviewed before April. |
What to do now:
Review and update your sickness absence policy to reflect day-one SSP entitlement
Update payroll software settings and check that your provider is ready for the new calculation method
Brief your line managers — they need to understand the new rules before they’re managing an absence under them
Consider whether your current absence management approach needs refreshing, particularly around recurring short-term absence
Paternity leave and unpaid parental leave as day-one rights
Previously, employees had to complete 26 weeks of service before taking paternity leave and 1 year of service before taking unpaid parental leave. From 6 April 2026, both will become available from the first day of employment.
This is a meaningful shift. A new employee who joins in April and whose partner gives birth in May will be entitled to paternity leave from the outset. If you run a small team, this kind of absence requires planning.
A note of reassurance These changes apply to leave entitlement, not statutory pay. The rules for Statutory Paternity Pay remain unchanged — eligibility for pay still requires qualifying service. But you do need to update your policies and make sure managers know how to handle a request from a newer employee. |
What to do now:
Update your paternity leave and parental leave policies to remove references to qualifying service
Review your onboarding documentation and employee handbook
Have a conversation with your payroll provider about how they’re handling the transition
The Fair Work Agency launches
April 2026 sees the launch of the Fair Work Agency (FWA), a new enforcement body that consolidates several existing functions under one roof. The FWA will oversee compliance with National Minimum Wage, holiday pay, and the licensing of labour providers — and it will have expanded powers to investigate and penalise non-compliance. Think of it as HMRC’s enforcement function, but for employment rights. It has real teeth.
This is why preparation matters Large businesses have dedicated HR and legal teams to manage legislative change. Most small businesses do not. The FWA’s launch is a signal from the government that enforcement is being taken seriously. Non-compliance with minimum wage, holiday pay, and related rights will be actively pursued — not just responded to when an employee complains. |
Looking ahead: the bigger changes coming in 2027
While the April 2026 changes require immediate attention, it’s the January 2027 change that will fundamentally alter how small businesses approach recruitment and people management.
Currently, an employee needs two years of continuous service before they can bring an ordinary unfair dismissal claim. That two-year window has given employers considerable flexibility — the ability to try people out, manage poor performance informally, and part ways during a probationary period without significant legal risk.
From January 2027, that window closes to six months.
This means that anyone you hire from around July 2026 onwards will have unfair dismissal rights six months in — not two years. Your hiring decisions, your onboarding, your probationary reviews, and your management conversations all matter far more under this new regime.
Start preparing now, not in December The January 2027 change sounds distant, but it isn’t. If you hire someone in July 2026, they will have unfair dismissal rights by January 2027. That means your processes need to be ready before you make that hire. Now is the time to review your probation procedures, management training, and documentation practices — not in the final weeks of 2026. |
Three mistakes small businesses make with employment law changes
In my 15 years of HR consultancy, I’ve seen the same patterns emerge every time major legislation is introduced. Here are the three most common — and how to avoid them.
Mistake 1: Waiting for it to affect them directly
Many business owners wait until they receive an employee complaint, a tribunal claim, or an enforcement notice before taking action. By then, the cost — financial and operational — is almost always far higher than it would have been if they’d prepared in advance. Prevention is genuinely cheaper than cure.
Mistake 2: Updating policies without training managers
A revised sickness absence policy sitting on a shared drive is not the same as a business that is compliant. Policies need to be understood and applied by the people managing your team day to day. If your line managers don’t know the new rules, your business is exposed — regardless of what your policy document says.
Mistake 3: Treating it as a one-off project
The Employment Rights Act is not a single event. The changes roll out across 2026 and 2027, with secondary legislation still being confirmed. Businesses that treat it as a single to-do list will miss things. A staged, ongoing approach — ideally with professional HR support — is the right way to manage it.
What small businesses should do right now
Here is a practical starting point, regardless of the size of your business:
Audit your current policies: sickness absence, paternity leave, parental leave, and flexible working. These are the areas most immediately affected by April 2026 changes.
Check your employment contracts: most contracts written more than a few years ago will not reflect the new SSP entitlements or the strengthened flexible working provisions.
Talk to your payroll provider: make sure they are ready for the day-one SSP changes and the new calculation method.
Brief your managers: they are your first line of compliance. They need to understand the changes before they encounter them in practice.
Mark your 2026 calendar: April 2026, October 2026, and January 2027 are your three key dates. Work backwards from each one.
Get professional HR support if you don’t have it: the ERA 2025 is complex, and the consequences of non-compliance are growing. This is not the year to manage employment law entirely alone.
A final word
I know that for many small business owners, this feels like a lot. And honestly, it is. The Employment Rights Act 2025 represents a genuine step-change in how employment law works in the UK, and it places more responsibility on employers to get things right from the outset.
But it’s also manageable — with the right guidance and a structured approach. The businesses that will struggle are the ones that ignore it. The businesses that will thrive are the ones that use this as an opportunity to build better, fairer workplaces with robust HR foundations.
That’s exactly what we help small businesses do. If you’d like to understand how the Employment Rights Act 2025 affects your specific business, we offer a free 30-minute consultation to get you started.
Ready to get prepared? Book your free 30-minute HR compliance call today. We’ll review where your business stands and give you a clear action plan — no jargon, no pressure, no long-winded reports.
Contact us at info@beceen.co.uk or visit www.beceen.co.uk to book your slot.
Download our free ERA 2025 Readiness Checklist below!
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About the author
This post was written by Rebecca Gibbs, co-founder of Be Ceen Consultancy and an HR professional with 15 years of experience supporting businesses of all sizes through people challenges and legislative change. Be Ceen provides HR consultancy and business management support to small and growing businesses across the UK.
Disclaimer: This blog post is intended as general guidance only and does not constitute legal advice. Employment law is complex, and individual circumstances vary. Please seek professional advice for your specific situation.
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