What Does The Employment Rights Act Contain?

The Employment Rights Act targets several different areas of legislation. Here, we will only address points we believe will affect the majority of SMEs. Read on for a quick summary of points of interest for small business owners…

 

Addressing One-Sided Flexibility

• The act will end zero-hour contracts by introducing rights to guaranteed hours, reasonable notice of shift changing and working hours, and payments for short-notice cancellations.

• There will be an end to ‘fire and rehire’ and ‘fire and replace’ practices. Dismissals caused by failing to agree to a change in certain core contractual terms will be classified as automatically unfair. 

• The qualifying time period of employment for the right to claim unfair dismissal will be reduced from two years to six months. 

• There will be a strengthening of collective redundancy rights by ensuring obligations apply when employers propose 20 or more redundancies at one establishment or propose a number of redundancies across their entire organisation which meets a new threshold which will be set in secondary legislation. 

• Redundancy rights will also see changes with the doubling of the maximum period of the protective award for failure to properly consult on collective redundancies, increasing the maximum period from 90 to 180 days’ pay.

 

Ensuring Workers Receive Fair Pay

• Statutory sick pay will be strengthened by removing the lower earnings limit and removing the waiting period entirely. 

• Establishing a new School Support Staff Negotiating Body to ensure school support staff in England have a sector specific voice for their advocacy. There will be provisions to establish a Fair Pay Agreements process in the adult social care sector in England and social care sectors in Scotland and Wales.

• The existing tipping law will be strengthened and require employers to consult with workers when developing or revising tipping policies, increasing transparency, worker voice and accountability.

• There will be a re-introduction of the two-tier code on workforce matters ensuring that employees from the private sector working on outsourced contracts will be offered terms and conditions broadly comparable to those transferred from the public sector.

 

Improving Family Friendly Rights

• Existing entitlements to Paternity Leave and Unpaid Parental leave will be made available from ‘Day 1’ of employment.

• Parents will be allowed to take their paternity leave and pay after their shared parental leave and pay.

• A new right to unpaid bereavement leave will be introduced.

• New protections will be introduced against dismissal for pregnant women, mothers on Maternity Leave and mothers for at least six months after they return to work.

• The existing ‘day-one’ right to request flexible working will be strengthened by introducing clearer processes for employers to follow when a request cannot be agreed, requiring employers to explain their rationale for denying a request and adding the requirement that a rejection of a request be reasonable.

 

Strengthening Fairness, Equality, and Wellbeing Of Workers

• The duty on employers will be increased to take ‘reasonable steps’ to prevent sexual harassment of their employees by requiring them to take ‘all reasonable steps’.

• An obligation for employers to not permit harassment of their employees by third parties will be introduced. 

• Protections will be strengthened for whistleblowers by making it clear that workers who ‘blow the whistle' can benefit from whistleblowing protections against adverse treatment and unfair dismissal.

• Large employers will be worked with to improve gender equality by requiring large employers to produce action plans, setting out how they are addressing the gender pay gap and supporting employees through menopause. Voiding any provision in a Non-Disclosure Agreement between a worker and employer which seeks to stop a worker from speaking out about harassment and discrimination they have experienced.

 

Improved Enforcement

• The Fair Work Agency will be established, which will bring together the enforcement of domestic agency rules, the National Minimum Wage, licensing of gangmasters, and action against serious labour exploitation. It will also take on additional functions and create flexibility to bring in additional legislation to respond to future challenges. The Act will give the FWA tools it needs to do its job, including an expanded civil penalty regime, clear gateways for sharing information, and the power to bring tribunal cases on behalf of workers.

• The time limit will be increased within which employees are able to make an Employment Tribunal claim from 3 months to 6 months.

• Umbrella companies, also known as payment intermediaries, will be brought within scope of the Employment Agencies Act 1973, allowing for their regulation and state enforcement. The FWA will be able to take action against those umbrella companies who do not fulfil their legal obligations, allowing for their regulation and state enforcement.

 

When Does The Employment Rights Act Come Into Effect?

The act will be delivered in phases across 2026 & 2027, giving employees and employers time to plan and prepare. A roadmap was made available whilst the act was still in approval stages and is still acting as the general plan, you can find the roadmap here. The earliest actions being implemented will commence in April 2026, with further actions taking place after. 

 

Will Small Businesses Be Impacted By The Employment Rights Act?

 The Employment Rights Act will impact small businesses. However, the amount and degree to which a business will be affected will depend on the model and size of the company. 
 

The good news is that there is plenty of time to get ready. 

 

How Can Small Businesses Prepare For The Employment Rights Act

 The first step is a thorough self-assessment of the above points. Some will affect all companies, some will affect some, and there are a few points that will only affect certain sectors. Remember, not all changes are going to occur this year, you may have time to address certain aspects down the line - utilise the government timeline for a better idea of when exactly you need to act. After reviewing and gathering information on exactly what will impact you and your business, take these steps.
 

Start with a thorough audit of your documentation and policies. Your handbooks, procedures, and checklists will all need updating. Additionally, contracts will need amending. 

 

Keep in mind that there are updates to compliance regulation and record-keeping so be sure to monitor, date, and keep a hold of your updated documentation. Maintain thorough records and make them easily accessible. Back up your records too, as regulatory retention requirements can now reach as long as six years for some records. 

 

Review your practices and operations for compliance to new regulations too. Your recruitment processes, flexible working requirements, and leave processes will need attention. The earlier and more transparently you have this set up, the easier it will be in the long run.

 

Make sure to spend time training. Your managers and HR teams will need to thoroughly understand new rules and new entitlements. The better practiced and trained they are for the oncoming changes, the better position your company is. It could be worth considering bringing in external professionals to run workshops and ensure the entire team understands new processes and requirements. 

 

Communicate with your employees. Explain new changes and how they will be affected by their new rights and benefits. Update them when policies and processes come into effect, and open a clear channel for feedback. This way, you can reduce any issues, demonstrate good faith, and get ahead of any teething issues by giving your employees the relevant information upfront. 

 

Lastly, consider bringing in external help, such as an employment lawyer or consultant, to audit your actions. This way, any unforeseen issues will be caught early enough to stop them and you’ll guarantee your compliance.

 

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On the 11th and 12th of November, The Business Show will return to Excel London for its 2026 edition. It’s the place to be for SMEs who want to stay on top of news, industry trends, network, make connections that count, and find the services that will help you take your business to the next level. Save the date and join us this year for plenty of discussion surrounding the 2027 regulations of The Employment Rights Act alongside so much more. Find out more about attending The Business Show here.