Employment Rights Act 2025: What Small Businesses Need to Do Before January 2027
If you run a small business, the Employment Rights Act 2025 is the biggest change to UK employment law in years.
It isn't arriving all at once. It's coming in stages. Some changes started in April 2026. More arrive in October 2026. And one of the biggest, unfair dismissal rights after six months, starts on 1 January 2027.
So if you've been putting it off, now is a good time to catch up.
I've written this for small business owners and managers who don't have an HR team to lean on. It's not legal advice, and you should check anything specific with an employment lawyer. But it should help you see what's coming and where to start.
What has already changed?
Several changes came into force on 6 April 2026. If you haven't looked at these yet, start here.
Statutory Sick Pay from day one. SSP is now paid from the first day of sickness, not the fourth.
Paternity leave and unpaid parental leave are day one rights. Employees no longer need a minimum length of service to qualify.
Holiday records. Employers must keep records of holiday for at least six years.
Whistleblowing. Reporting sexual harassment now counts as a protected disclosure.
For most small businesses, the SSP change is the one that shows up fastest. It affects payroll straight away, and it might change how you think about short-term absence.
If your absence policy or contracts still talk about "waiting days", they need updating.
What changes in October 2026?
Two changes this autumn are worth getting ready for.
From 1 October 2026, the time limit for most employment tribunal claims goes from three months to six months.
That means a former employee has longer to bring a claim. It also means you need to keep good records for longer, and remember what happened.
From 30 October 2026, the duty to prevent sexual harassment gets tougher. Employers must take "all reasonable steps" to prevent sexual harassment of their staff. That's a step up from the previous "reasonable steps" duty.
Employers can also be liable for harassment of their staff by third parties, such as customers, clients or suppliers, unless they've taken all reasonable steps to prevent it.
If you work in hospitality, retail, care or anything customer-facing, this one matters. I spent a lot of my career in contract catering and hospitality. Staff dealing with customers all day can be really exposed to this.
"All reasonable steps" isn't a box you tick once. Think about:
Do you have a clear policy on harassment, including from customers?
Have managers been trained on what to do if someone raises a concern?
Do staff know how to report something, and do they trust that you'll act?
Have you looked at where the risks are in your business, like late shifts, lone working or events with alcohol?
Write down what you've done and why. If something goes wrong, you'll want to show you took it seriously before it happened.
What changes in January 2027?
This is the one most small businesses are talking about.
From 1 January 2027, employees will be able to claim unfair dismissal after six months' employment.
At the moment it's two years.
The cap on compensation for unfair dismissal is also being removed.
Dismissing someone and re-hiring them on worse terms (often called "fire and rehire") will also become automatically unfair in most cases.
In practice, the six-month change means you can't let a new starter drift for 18 months before deciding they aren't right. You'll need to know much earlier.
That's where probation periods come in.
Is your probation process up to the job?
In a lot of small businesses, probation is a date in a contract and not much else.
Someone starts. Everyone's busy. The probation date comes and goes. And nobody has a proper conversation until there's already a problem.
From January 2027, that gap gets more expensive.
Here's what I'd want in place:
A clear probation period in your contracts, with a review date well before six months.
Regular check-ins in the first few months, not only a meeting at the end.
Notes of those conversations, even short ones.
Managers who feel confident raising concerns early and fairly.
This isn't about making it easier to get rid of people. Good probation is fairer for everyone. New starters know where they stand, and problems get picked up while they can still be fixed.
What's still to come?
Other changes are expected in 2027, but the dates haven't been confirmed yet. These include:
Stricter rules on refusing flexible working requests.
New rights for zero-hours workers, including guaranteed hours and compensation for cancelled shifts.
A new right to bereavement leave.
Stronger protections for pregnant employees and new mothers.
Limits on using non-disclosure agreements to stop people speaking about harassment or discrimination.
There's also a new tipping law requirement, due by the end of 2026, for employers to consult staff on their tipping policy.
I'd keep an eye on the Acas website for updates. It's clear, free, and keeps a timeline of when each change starts.
Where would I start?
If you're a small business owner and this all feels like a lot, here's the order I'd tackle it in:
Payroll and sickness. Check SSP is being paid from day one and your absence policy is up to date.
Harassment. Review your policy, brief your managers and write down the steps you've taken. Aim to have this done before 30 October 2026.
Probation. Tighten up your process before 1 January 2027. This will apply to people already working for you, not only new starters.
Contracts and handbook. Look at what needs updating, including any wording on sick pay, probation and holiday records.
Managers. Most employment problems start with a conversation that didn't happen, or didn't go well. Make sure your managers know what's changing.
You don't need to do everything at once. But you do need a plan.
Where I've landed
I think a lot of these changes are sensible. Most good employers are already doing much of this.
The businesses that will struggle are the ones where HR happens "when there's time". Where contracts haven't been looked at in years, probation isn't really managed, and managers are left to work things out on their own.
If that sounds familiar, you're not alone. It's really common in growing businesses.
If you'd like help working through what the changes mean for your business, that's exactly the kind of thing I help with through my HR support. I also offer a free 30-minute call if you'd like to talk it through first.
Which of these changes are you least prepared for?
Frequently asked questions
When does the six-month unfair dismissal rule start?
On 1 January 2027. From that date, employees with six months' service will be able to claim unfair dismissal, down from two years.
Does the Employment Rights Act 2025 apply to small businesses?
Yes. The changes apply to employers of all sizes, including very small businesses.
When does statutory sick pay become payable from day one?
It already has. Since 6 April 2026, SSP has been payable from the first day of sickness.
What does "all reasonable steps" to prevent sexual harassment mean?
From 30 October 2026, employers must take all reasonable steps to prevent sexual harassment, including by third parties such as customers. In practice that means clear policies, trained managers, easy ways to report, and a record of what you've done.
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