How prepared is your SME for the Employment Rights Act 2025?

Every week, our HR consultants speak to SME owners and managers across Manchester, Cheshire and Altrincham who are fearful, overwhelmed and confused about what the Employment Rights Act means for their business and employees. Usually, after speaking to an employment law expert, things become clearer, more manageable, and much less overwhelming. Helping clients navigate changes in employment law is just one of the areas our HR Consultants can assist. Take a look at our other HR Consultancy services.

In this blog, we explain:

• What is the Employment Rights Act 2025?

• The key changes to employment rights legislation

• The timeline of changes and when they come into effect

• Your responsibilities as an SME employer under the ERA

• How employment law changes will impact your business

• How best to assess ERA business readiness

• The risks of being underprepared

• Actions you can take right now to ensure your SME is fully prepared

• 10 questions SMEs are asking about the Employment Rights Act

• Four ways our HR experts can support you to get up to speed and meet your employer obligations

The biggest challenge for SMEs preparing for the Employment Rights Act (ERA)

The biggest issue facing North West SMEs is the volume of noise around the ERA. There are hundreds of so-called ‘experts’ offering conflicting advice, and it’s easy to become overwhelmed. The best place to find reliable guidance is through official government publications, ACAS, and reputable, experienced HR Consultants, as one of our clients discovered.

An SME client in the automotive sector was advised they would need to invest almost £2,000 in legal expertise to create brand new ERA-compliant employment contracts. When our HR Consultant reviewed their standard employment contract, they saw no need for substantial change. Minor edits here and there were all that was required to bring the contract in line with the ERA. We guided them through the necessary changes in a friendly, informative manner - major expense avoided and relief all round for that small business.

What is the Employment Rights Act 2025?

The Employment Rights Bill sets out fundamental changes to employment rights for UK workers. It aims to give employees improved rights at work on emotive topics such as sexual harassment, fire and rehire, collective redundancy, and flexible working.

The Employment Rights Bill had its first reading in Parliament in October 2024. It subsequently passed through the Parliamentary approval process and gained Royal Ascent in December 2025. The first phase of legislation under the ERA came into force in April 2026.

The measures included in this first phase were:

• Reforms to Statutory Sick Pay (SSP) and the removal of the Lower Earnings Limit

• Establishment of the Fair Work Agency

• Increase to the maximum protective award in collective redundancy consultation situations

• Removal of the qualifying service requirement for paternity and parental leave

• Inclusion of disclosures relating to sexual harassment in the list of “qualifying disclosures” for whistleblowing, strengthening protection for workers.

Trade Union balloting and recognition process reforms were also included in this first phase and took effect in February 2026.

Employment Rights Act 2025: where are we now?

Following the rollout of these initial measures, further legislation will be passed in October 2026, and the final phase of changes in 2027. SME owners and managers should be well into planning for the next phase amendments.  

Employment Rights Act: a timeline of measures

December 2025

• Repeal of the Strikes (Minimum Service Levels) Act 2023

February 2026

• Repeal of major parts of the Trade Union Act 2016

• New protections preventing dismissal for participating in industrial action

April 2026

• Doubling the protective award for collective redundancies

• ‘Day 1’ paternity and unpaid parental leave

• Enhanced whistleblower protections for disclosure of sexual harassment

• Establishment of the Fair Work Agency

• Statutory Sick Pay improvements (removal of Lower Earnings Limit and waiting period)

• Simplified trade union recognition

• Voluntary gender pay gap and menopause action plans

August 2026

• Digital/workplace balloting systems for Statutory Trade Union Ballots

October 2026

• Employer duty to take ‘all reasonable steps’ to prevent sexual harassment - for more on this, read Worker Protection Act 2024: What Every Employer Must Do

• An obligation for employers to prevent harassment of employees by third parties

• Expanded trade union rights, including the duty to inform workers of their right to join a trade union and new rights and protections for trade union representatives

• Stricter employment tribunal limits and protections for those taking industrial action

• Launch of a Fair Pay Agreement Negotiating Body for adult social care

• An obligation to offer outsourced private sector employees working on public sector contracts no less favourable terms and conditions to public sector workers.

• Strengthening of tipping laws

• Time limits on employment tribunals expected to increase from three months to six months

January 2027

• Ban on fire and rehire

• Unfair dismissal qualifying period to reduce to 6 months with compensation uncapped

Additional ERA measures expected in 2027

• Mandatory gender pay gap and menopause action plans

• Enhanced dismissal protection for pregnant women and new mothers

• Bereavement leave - to include pregnancy loss

• Specific steps employers must take to prevent sexual harassment (following consultation)

• Flexible working

• End to zero-hours contracts, including rights to guaranteed hours, reasonable notice, and short-notice payments

• Umbrella company regulation

• Industrial relations framework

• Extension of blacklisting protections to prevent discrimination against trade union members/representatives

• Digital/workplace balloting for recognition and derecognition

• Prevention of misuse of non-disclosure agreements in cases of discrimination or harassment

Removing the fear and overwhelm from the ERA

When our HR consultants discuss employment law with clients, these are the most common reactions we encounter:

• It’s too complicated and overwhelming.

• It’s going to cost me too much to implement the changes.

• The changes aren’t law. They might not happen.

• I don’t know how the legislation applies to my small business.

How will the changes to workers’ rights affect your organisation?

With additional phases of legislation change still to come, there’s still a lot we don’t know. Rather than trying to understand all the measures at once, our advice is to take small steps. Right now, your priority should be to tackle the changes that will impact your business from April 2026 onwards.

The best way to understand where you need to take action is to assess where your business is now. We’ve created a simple audit, designed to test your knowledge of the ERA, identify policy gaps, and assess business readiness. The results will signpost where you need to act.

Instead of succumbing to overwhelm, consider the ERA an opportunity to refresh and refine policies and procedures, and an opportunity to work smarter, not harder.   

What are my employer responsibilities under the Employment Rights Act?

Let’s take a look at some of the changes in employment law that specifically apply to SMEs, and the actions you can take to prepare before further legislation comes into effect.

Unfair Dismissal

The two-year qualifying period for unfair dismissal will reduce from two years to six months for dismissals from 1 January 2027. The cap on compensation awards will be removed. This means it will be easier for employees to make a claim for unfair dismissal and employers found to be in breach of the rules could be subject to huge payouts.

Take action!

Given the implementation date falling during the festive season, it would be wise to prepare well in advance of the changes coming into effect.

• Review and/or intensify your recruitment processes.

• Consider introducing additional pre-employment screening and a more comprehensive interview process to ensure you recruit the right person for the role.

• Amend contracts and policies to reflect the new procedure for dismissals.

• Reduce your probation periods to 3 or 4 months.

• Review and update your induction programmes to ensure new starters are fully supported through probation with regular feedback, clear objectives and robust training.

• Refresh management training to help line managers apply the legislation changes consistently.

• Set clear standards and objectives for new employees and closely monitor their performance against them.

Fire and Rehire

The Employment Rights Bill proposes to end fire and rehire practices, with limited exceptions for organisations at risk of bankruptcy. This means that, if an employer proposes changes to an employee’s contract of employment and the employee does not agree to some or all of the contractual changes, dismissing the employee would be an automatic unfair dismissal. The change is designed to prevent employers changing core employment terms, such as pay, hours and shift changes, and protect jobs and workers’ rights.

Take action!

• Build in flexibility by making changes to employment contracts, and terms and conditions now, e.g. add specific clauses to cover changes in shifts or workplaces.

Did you know we offer Pay As You Go HR Advice? It’s ideal for finding answers to one-off questions, and for ad-hoc policy and contract updates.

Collective Redundancy Consultation Threshold

A new two-fold test will be introduced in 2027 to determine when consultation is required, and increased penalties for non-compliance will rise from 90 days' pay to 180 days' pay per individual.

Take action!

• Develop a tracking system to monitor redundancies across multiple sites to ensure compliance and avoid financial penalties.

Zero-Hours Contracts and the Right to Guaranteed Hours

New rights for workers on zero-hours contracts and agency workers in the gig economy will come into effect in 2027. These are set to include the right to a guaranteed hours contract, reasonable notice for shifts, short-notice payments, and compensation for cancelled shifts.

Take action!

• Audit contractual arrangements with temporary workers to identify those on zero-hours contracts and assess whether they are suitable for current business needs.

• Consider alternative arrangements if they no longer match your requirements.

• Review your processes and systems (including online software) to ensure compliance and train your people to ensure they understand their employment rights.

Sexual Harassment in the Workplace

The wording change to this section is minor, yet it increases the scale of employer responsibility. The current requirement under the Worker Protection Act 2024 is that employers must take ‘reasonable steps’ to prevent sexual harassment in the workplace. From October 2026, the wording will change to ‘all reasonable steps’ to prevent sexual harassment along with an obligation to prevent harassment of employees by third-parties.

Take action!

• Conduct a workplace risk assessment to identify potential risks and prevention measures

• Update sexual harassment policies and procedures to reduce exposure to risk

• Train staff about their updated rights and how to report an incident, maintaining a thorough and complete paper trail to demonstrate compliance

• Train managers on best practice in preventing and handling incidents.

Access detailed guidance on what every employer must do to prepare for the Worker Protection Act.

Stop sexual harassment before it starts: discover our new elearning course on Preventing Sexual Harassment in the Workplace.

Explore our HR Support Services for help with record keeping, documentation and compliance.

Flexible Working Requests

Under the ERA, employers will be required to give careful consideration to all flexible working requests and provide a clear reason for refusal. This highlights the importance of documenting your decision-making process and building a culture where flexible working requests are properly considered. Measures will come into effect in 2027.

Take action!

• Consider introducing trial periods for flexible working arrangements to assess feasibility and demonstrate that you are giving each request a fair and equal chance.

Family-Friendly Rights and Equality

Employees gained the right to paternity and unpaid parental leave from day one of employment from April 2026. Further changes planned for 2027 include an extension of bereavement leave (which will also cover pregnancy loss), and enhanced dismissal protections for pregnant women and new mothers.

Take action!

• Update your family-friendly employment policies and provide employee training, so they understand their individual rights.

Fair Work Agency

Fair Work Agency will enforce a wide range of employment rights issues, including national minimum wage, statutory sick pay, and holiday pay. We recommend auditing current practice to ensure compliance with new record-keeping requirements. This part of the Bill will come into effect in 2027.

A simple HR system can ensure you remain compliant and reduce the time spent on admin and spreadsheets.