How to prepare your small business for the Employment Rights Bill overhaul 

The Employment Rights Bill hit the headlines this week when The Resolution Foundation, a major think tank that champions worker rights, suggested the day-one right to an unfair dismissal was a step too far.

While emphasising that the Bill is "important and welcome", it also suggested that this one specific element – which is set to land in 2027 – "has the potential to inhibit hiring, potentially getting the protection-flexibility balance wrong".

Its analysis warned that making this change would affect young people's job prospects more than older workers' and pointed out that, in today's economy, workers are already half as likely to lose their jobs as they were 30 years ago.

But is that right? With the first phased implementation set for April 2026, we asked HR specialist and Enterprise Nation adviser Rona Loweth to help us work through the new legislation on a practical level – and help to get over any myths and misunderstandings.

Don't panic!

Rona says the first point is not to panic.

"Because although there are lots of proposed changes, some will have less impact on small businesses. You need to consider which changes will have an immediate impact and are your priority.

"If you're an employer that works to best practice, a lot of the changes will  actually complement what you're already doing.

"These changes represent a fundamental shift towards promoting good working conditions and fair treatment, and they underscore the government's commitment to updating employment practices, which can work to the advantage of good employers."

Misunderstandings

Rona points out that many concerns about the legislation stem from misunderstanding.

The day-one unfair dismissal right, for example, doesn't prevent fair employers from dismissing employees who don't meet probationary period requirements. In fact, it requires following robust procedures. And that practice should already be in place.

Rona adds:

"Unfair dismissal on the grounds of discrimination is already a day-one right. Guidance already in place today is to follow a fair and reasonable dismissal process for any termination to ensure decisions are balanced, fair and reduce risk."

"The proposed changes are not a 100% done deal. The government is listening, and employers still have an opportunity to input into consultations."

How the legislation will be introduced

With the aim of modernising workplace practices while making sure employees get fair treatment, the new legislation is set to roll out in clear phases, giving companies the opportunity to prepare thoroughly and adapt.

For statutory sick pay changes coming on 6 April 2026, there will be genuine cost implications for small businesses currently operating on statutory minimums, and the day-one right to paternity leave could have implications for resourcing.

As HR services manager for McKinney HR, a Scottish HR consultancy with a core team of six, Rona specialises in supporting SMEs with outsourced HR services.

She says that while the parental rights measures didn't have huge cost implications, small firms need to be aware of them when it comes to managing payroll, leave and resourcing.

"Under the new legislation, employees can apply to take two weeks' paid leave from day one. Previously, there had been a 26-week qualifying period."

Flexible working as the default

The day-one right to request flexible working came into force earlier this year. But the further change planned for 2027 will make flexible working the "default".

This means small businesses will need to consider how flexible working could be possible in the context of their business. On the flip side, offering flexible working can be a competitive advantage.

Next year will see the implementation of standardised regulations on zero‐hours contracts.

These aim to clarify the responsibilities and rights of both employers and employees, as well as introduce enhanced whistleblowing protections designed to foster ethical practices in the workplace.

The Employment Rights Bill is being implemented in phases, with commencement dates of 6 April and 1 October.

That gives small businesses time to prepare rather than face overwhelming changes all at once.

Rona adds:

"Early preparation is essential. By breaking the legislation down into manageable phases, consulting the government's roadmap and taking advice where clarity is needed, small businesses can update their policies and procedures, implement the changes smoothly, and ensure they remain competitive and compliant."

The government will continue to release guidance and conduct consultation sessions throughout 2025. (Last week, it opened four consultations under its Make Work Pay agenda.)

Businesses are encouraged to take part, stay updated via the roadmap and connect with local business support networks for expert advice.

Rona's top tips for small businesses

• Don't panic: Look to break down the Employment Rights Bill into chunks that are your priority, rather than trying to tackle everything at once.

• Start with education: Read the government roadmap document and seek expert advice to understand how the changes apply to your business.

• Focus on timing: Concentrate on changes coming in April 2026 first, as later measures may still change after the consultation.

• Do an impact assessment: Identify which changes will affect your business and how, then prioritise accordingly.

• Participate in consultations: Make your voice heard while there's still an opportunity to influence the legislation.

• Build good practices now: If you already have fair working practices, much of the legislation will complement what you're doing.

• Focus on people management essentials: For growing businesses, prioritise engagement, managing absences and managing performance as your key HR foundations.

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