What does the Employment Rights Act 2025 mean for small businesses, beyond compliance?
The law is the law, but how you implement it and work within it day to day is what really matters
By Deanne Walsh, Dewa Consulting. Updated October 2026.
The Employment Rights Act 2025 gives employees more rights, earlier. Sick pay now starts on day one, staff can claim unfair dismissal after six months instead of two years from January 2027, and employers must take all reasonable steps to prevent sexual harassment from 30 October 2026. For small businesses, the bigger change is cultural. Managers will need to handle performance, wellbeing and difficult conversations well from someone's first week, because the two-year safety net is going.
Key points
Statutory Sick Pay and paternity leave became day one rights in April 2026.
Tribunal claims can now be brought up to six months after an issue, increased from three months.
From 30 October 2026, employers must take "all reasonable steps" to prevent 3rd party harassment, from customers, suppliers and clients.
From 1 January 2027, the unfair dismissal qualifying period drops to six months and the compensation cap is removed.
Most of the risk sits with how line managers behave day to day, so make sure that you train them appropriately, don’t rely on your policies and handbook for compliance.
What is the Employment Rights Act 2025?
The Employment Rights Act 2025 is the biggest update to UK employment law in my 20 years in HR. Introduced in stages between 2025 and 2027 under the Labour government, most changes give workers rights from earlier in their employment and give a new body, the Fair Work Agency, the power to enforce them.
When do the changes come in?
Date | Change | What it means for managers |
6 April 2026 | SSP from day one, paternity and parental leave from day one | Short absences cost more, so spotting patterns early matters |
7 April 2026 | Fair Work Agency launched | Enforcement no longer relies on an employee going to tribunal |
1 October 2026 | Tribunal time limits extended to six months | Poorly handled issues stay live for longer |
30 October 2026 | Duty to take all reasonable steps to prevent sexual harassment, including third parties | Managers need to know what to do when someone raises a concern |
1 January 2027 | Unfair dismissal after six months' service, compensation cap removed, fire and rehire largely banned | Probation and early performance conversations become critical |
2027 (date to be confirmed) | Flexible working refusals must be justified, bereavement leave, menopause action plans for 250+ employees | Managers need to listen and explain decisions, not just say no |
How will the Employment Rights Act affect small businesses?
Small businesses feel these changes most because they have limited HR support. If a manager avoids a conversation about performance, ignores a pattern of sickness, or brushes off a harassment complaint as “banter”, that is now a legal risk much sooner than before.
The cost is not only legal. Every one of these situations is also about mutual trust. People who feel unheard leave, go quiet, or go off sick.
Why is this a culture issue, not just a compliance one?
The challenging this is, you can update all of your policies and still get this wrong. Policies tell people what should happen. Culture is what happens when a stressed manager has a difficult conversation at 4pm on a Thursday.
In my work with hospitality, tech, digital and creative businesses, the problems rarely come from bad intentions. They come from managers who were promoted for being good at their job and never shown how to manage people through pressure and change.
What should managers do differently?
Have the honest conversation early. With a six month qualifying period, probation reviews need to be real conversations, not a form. The probation review meeting should take place between month 3 and month 4, not in month 6.
Notice patterns, not just absences. Have conversations after each absence, real discussions about the absence trends – regular Monday’s off could be the impact of a heavy weekend, or stress about a Monday morning.
Treat every concern witnessed, or reported, as serious. Under the harassment duty, "it was just banter" is no longer a defence.
Explain decisions. When a flexible working request is refused, the reason will need to stand up.
Write it down. Short, factual notes after important conversations protect everyone, and with the expected increase in tribunal claims, is likely to be more important that ever.
How do I explain the changes to my managers?
Keep it practical, they don’t need a full legal rundown. They need to know what to do differently on Monday.
Focus on three things:
· how to run a good probation review
· how to respond when someone raises a concern
· how to have a supportive conversation about wellbeing or absence
Short, scenario-based training generally works really well.
What should UK employers do now to prepare?
Review your probation process now, as any employees who will reach 6 months service by January 2027 gets unfair dismissal rights at 6 months.
Brief managers on the 3rd party harassment duty before 30 October 2026, especially how to record and handle complaints.
Check your absence data for patterns, now that SSP starts on day one.
Train managers in difficult conversations and spotting wellbeing concerns.
Update your flexible working process so refusals are clearly explained.
Frequently asked questions
When does the six month unfair dismissal rule start? From 1 January 2027, employees with six months' service can claim unfair dismissal. Before that, the qualifying period was two years.
Does the Employment Rights Act apply to small businesses? Yes. There is no exemption for small employers. A few duties, such as mandatory menopause action plans, only apply to employers with 250 or more workers.
Is Statutory Sick Pay paid from day one now? Yes. Since 6 April 2026, SSP is paid from the first day of sickness, and the lower earnings limit has been removed.
What does "all reasonable steps" to prevent harassment mean? From 30 October 2026, employers must actively take every reasonable step to prevent harassment, including by third parties such as customers. Training, clear reporting routes and confident managers are all part of this.
Do I need to retrain my managers? If your managers have not had training in difficult conversations, probation reviews or handling complaints, now is the time. That is where most of the new risk sits.
About the author
Deanne Walsh is the founder of Dewa Consulting and has worked in HR for 19 years, supporting SMEs through change, restructures and growth. She is a Level 7 qualified Executive Coach and Strategic HR Manager, an MHFA Instructor and a Menopause Champion. Dewa Consulting has trained over 2,000 people in mental health and wellbeing. Deanne won the BIMA People and Talent Award in 2026 and has been featured in i-news and The Women's Journal.
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Sources: Acas: Employment Rights Act 2025, Daniel Barnett Masterclass, September 2026
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