Employment Rights Act Changes: What Small Businesses Need to Know in 2026 and 2027

The UK's employment law framework is undergoing a major transformation through the Employment Rights Act 2025. These reforms are being introduced in phases across 2026 and 2027, with the government aiming to modernise worker protections and enforcement.

For small businesses, the key issue is timing. The changes are already beginning to take effect, meaning preparation is required now rather than later.

The government has confirmed that implementation will happen in stages to allow businesses time to adapt.

You can review the official rollout and policy detail here:

Employment Rights Act timeline and "Make Work Pay" plan 

Employment changes guidance for employers 

Key changes affecting small businesses

Day one employment rights

From 2026, certain family related rights will be available from the first day of employment, including paternity leave and unpaid parental leave. This removes the traditional qualifying period and means new employees may request leave immediately after joining.

Statutory Sick Pay reform

One of the most immediate and financially significant changes relates to Statutory Sick Pay. From 6 April 2026:

• Payment begins from the first day of sickness absence
• The lower earnings limit is removed
• More employees will qualify for payment

Official guidance can be found here:

Statutory Sick Pay employer guidance 

Statutory Sick Pay changes explained 

These reforms increase cost exposure and require payroll systems to be updated.

Changes to dismissal and employee protection

The Act introduces stronger protections for employees, alongside increased expectations on employers.

This includes expanded whistleblowing protection and increased penalties in certain redundancy situations.

Guidance on handling dismissal and workplace issues is available here:

Dismissal and disciplinary procedures (Acas guidance) 

Small businesses will need more structured and well documented HR processes to manage risk.

Regulation of zero hours arrangements

The government has signalled a move towards restricting exploitative zero hours contracts and increasing predictability of working hours.

This is likely to affect sectors that rely heavily on flexible staffing models.

Practical steps for small businesses

1. Review contracts and policies: Ensure all documentation reflects new day one rights and updated statutory obligations.
2. Train managers: Managers should understand absence management, dismissal procedures, and workplace conduct expectations.
3. Review workforce structure: Consider whether current staffing models remain sustainable under reduced flexibility.
4. Strengthen record keeping: Accurate documentation will be essential in defending tribunal claims.
5. Plan financially: Budget for increased payroll costs and compliance investment.