Running a small business in the UK? The Employment Rights Act 2025 is likely already on your radar – and for good reason. It’s one of the biggest employment law changes the UK has seen in decades, with major implications for SMEs.
From the introduction of day one employment rights to broader unfair dismissal protection and changes to flexible working rights, there’s a lot to navigate.
Ensuring your business is 100% compliant isn’t simple – but it’s critical. Slip up and you put your company at significant risk of reputation damage, fines or even being taken to tribunal.
Based on our 25+ years of combined experience, our HR experts have created a useful SME employment law checklist to help you tick off everything you need to have covered to ensure you’re compliant with these changes.
What’s covered in this article
Employment Rights Act 2025 UK: Summary
Employment Rights Act 2025 UK: key changes employers need to know about
Employment Rights Act 2025 – Compliance checklist for SMEs
Common mistakes small businesses should avoid
Employment Rights Act 2025 FAQs
Employment Rights Act 2025 UK: Summary
The Employment Rights Act 2025 is a major reform of UK employment law introducing expanded day-one rights, changes to unfair dismissal rules, and new obligations for employers. It affects all UK businesses, particularly SMEs, with phased implementation from 2026 to 2027.
This new legislation brings significant changes to the working relationship between employers and their staff, with a lot of focus on unfair dismissal, job security, pay protection and family leave.
Some of the changes came into force in April 2026, with the rest to follow later in the year and in 2027.
Employment Rights Act 2025: Full timeline of changes
Employment Rights Act 2025 UK: key changes employers need to know about
So, what’s changing as part of the Employment Rights Act 2025? Here are some key highlights you should be aware of.
Day-one employment rights expansion
- Employees can now receive Statutory Sick Pay (SSP) from the first day of illness, instead of the fourth day. The Lower Earnings Limit (LEL) has also been removed, so lower-paid and part-time workers are now eligible too
- Workers can also request flexible working from day one of employment
- Parents are entitled to paternity leave from their very first day working for you, rather than having to work for you for a set period of time in order to qualify
- Unpaid parental leave is also now available from day one
- Bereavement leave has been introduced to support parents who’ve suffered early pregnancy loss, which employees are also eligible for from day one of employment
Changes to flexible working
Flexible working rights have been significantly strengthened as a result of the Employment Rights Act 2025. Employers must now make sure any refusals are “reasonable”, following a thorough and formal consultation.
Employees must make a written application detailing their request, and the employer then has 2 months to decide. As the employer, legally you must discuss this request with the employee before you make the decision, and explore alternatives if you’re not able to accommodate their original request.
Reasonable reasons to refuse a flexible working request include:
- It being a high cost to the business
- Negative impacts on performance or quality of work
- Not being able to meet customer needs
Updates to unfair dismissal rules
The laws around unfair dismissal are due to be completely reformed in 2027. This means that employees will have the right to claim “ordinary” unfair dismissal after just 6 months of service, rather than 2 years.
The statutory cap for compensation will also be removed, giving potential to higher payouts in the future.
This means that SMEs will be at higher risk – especially with higher-earning staff – so it’s crucial that performance-management and termination procedures are reviewed and updated as needed.
Zero-hour contracts changes
By 2027, employers will have to offer guaranteed hours over a 12-week reference period and provide a contract that reflects this.
Workers will also have the right to receive reasonable notice of shifts, as well as compensation should their shifts be cancelled at short notice. In short, this will put an end to the one-sided flexibility that zero-hours contracts traditionally entail.
The Employment Rights Act 2025 includes 28 changes in total. Some have already been introduced, with the remainder to follow in 2027.
Here’s a full timeline of the Employment Rights Act 2025 changes.
Employment Rights Act 2025 – Compliance checklist for SMEs
So, as an SME, what do you need to do to ensure you remain compliant? How do you make sure nothing is missed, especially if you have limited in-house HR resources?
To support you through these changes, we’ve created a practical checklist that’s specifically designed for small businesses like yours.
Employment contracts & offer letters
- Update contracts to reflect new statutory rights introduced
- Remove outdated clauses that conflict with the new law
- Clearly define job roles, responsibilities, working hours (including flexible working agreements), pay, benefits and leave entitlements
- Ensure notice periods align with new legal requirements
- For any zero-hours workers, confirm that agreements are compliant
Important: Even the smallest teams (2-10 employees) need formal contracts. Verbal agreements are not legally binding.
Day-one employee rights
- Identify all rights that employees are now entitled to from day one of employment
- Update onboarding processes to reflect these rights
- Inform new hires of their flexible working rights, leave entitlements and protection from unfair treatment
- Provide training to managers to ensure they’re up to speed with new day-one rights
Flexible working requests
- Update your flexible working policy
- Confirm that employees are able to request flexible working from day one
- Set a clear process for handling flexible working requests: who will review them? What will the response timeframes be?
- Put process in place for documenting decisions and any refusals
- Train managers on the new process and everything they need to know
Dismissal and Disciplinary Procedures
- Review all dismissal procedures and update to align with new legislation
- Update disciplinary policy and any documentation templates
- Create a system to keep clear records of all decisions
- Train managers on new legislation to ensure they follow a fair process in every case
Common mistakes small businesses should avoid
Assuming old contracts still apply
Legislation has changed, and so must your contracts of employment. Taking the time to update these and ensure they reflect the new laws will ensure you don’t run into any issues further down the line.
Ignoring day-one rights
Your employees’ rights have changed significantly. It’s important you’re not only aware of them, but abide by them in all relevant situations. Employers who don’t risk legal, financial and reputational consequences.
Poor documentation
In light of the Employment Rights Act 2025, you’ll be updating many contracts and policies.
Set your business in good stead by ensuring you have a strong document-storage system that makes it easy to find things whenever you need them.
Solutions like Breathe are a big help when it comes to safely storing important documents.
Penalties for non-compliance
Tribunal risks
With a number of changes introduced (such as a reduction of the qualifying period for unfair dismissal to 6 months), the government has estimated that there could be a rise of 17% in employment tribunal cases.
Tribunals are something every business wants to avoid, so it’s important you take the time to understand these changes and stay compliant.
Compensation claims
With the cap on unfair dismissal compensation being abolished in early 2027, the service requirement lowered to six months and tribunal time limits extended to six months, eligibility has broadened and claims have the potential to be higher in value.
With a higher financial risk to your business, it’s more important than ever to meet legal requirements.
Reputation damage
It goes without saying that if you get caught up in tribunals or compensation claims, your reputation as both a brand and an employer takes a big hit.
You can mitigate any risk to your business by being fully aware of the changes and ensuring that you’ve done everything you need to stay compliant by using our checklist.
Employment Rights Act 2025 FAQs
Q: When does the Employment Rights Act 2025 come into force?
A: The Act officially became law on the 18th December 2025. The 6th April 2026 saw the biggest rollout of changes, with more to follow in October 2026 and 2027.
Q: What are day-one employment rights in the UK?
A: Day-one employment rights give employees access to flexible working requests, paternity leave, bereavement leave and statutory sick pay (SSP) from day one of employment, without any service requirements.
Q: How does the Employment Rights Act 2025 affect small businesses?
A: The Employment Rights Act 2025 makes it harder for SMEs to refuse flexible working requests, and puts them at higher risk of legal action with day one rights introduced. Employers will also no longer be able to offer zero-hours contracts from 2027.
Q: What’s changing with unfair dismissal in 2027?
A: From 2027, employees will be able to claim unfair dismissal from just 6 months of continuous service, rather than 2 years. Compensation for unfair dismissal will also be uncapped, presenting a higher financial risk to SMEs.
How MJV Consulting can help
At MJV Consulting, we have 40 years of combined experience in supporting growing businesses with forward-thinking HR strategies.
The Employment Rights Act 2025 brings significant changes for businesses like yours, but you don’t have to navigate it alone.
We can offer bespoke support for documentation management, compliance audits, policy development and much more. We’ll ensure you’re 100% compliant, confident and ready to move forward with these new laws.
So if you’re a small business in the Sussex, Surrey or London area and need expert support through these changes, get in touch and discover how we can help.
