The 5 Biggest Employment Rights Act Changes That Directly Affect Your Business

Let's cut straight to it.

The Employment Rights Act is the most significant overhaul of UK employment law in a generation. And if you run a small or medium-sized business, the noise around it can feel overwhelming — or so abstract that it's easy to keep putting it off.

Neither overwhelm nor avoidance is going to serve you here.

So here are the five changes that matter most if you employ people — and why they directly affect your bottom line, your risk profile, and the way you manage your team day to day.

1. Unfair Dismissal Rights from Day One

Currently, employees need two years of service before they can bring an unfair dismissal claim. Under the ERA, that qualifying period is being significantly reduced to just 6 months.

What this means in practice: you can no longer rely on the two-year buffer as your safety net when things aren't working out. Probation periods still exist — but they need to be properly structured, clearly communicated, and documented from day one. If you haven't reviewed your onboarding and probation processes recently, now is the time.

The businesses most at risk here are those that hire quickly, manage informally, and assume the two-year rule means they have time to figure things out. That assumption is going away.

2. Guaranteed Hours for Zero-Hours and Variable-Hours Workers

If you employ people on zero-hours or variable contracts, this is one to pay close attention to.

The ERA introduces a right for workers to request a contract that reflects their regular hours — based on a reference period of actual hours worked. Workers will also have the right to reasonable notice of shifts, and to compensation if shifts are cancelled at short notice.

For businesses in hospitality, retail, events, care, and any sector that relies on flexible staffing, this requires a proper look at how you structure and communicate work schedules. It's not necessarily a reason to panic — but it does require a process that you probably don't have in place yet.

3. Strengthened Collective Redundancy and Consultation Rules

The rules around collective redundancy — when you're making 20 or more redundancies within 90 days — are being tightened. This includes changes to how thresholds are calculated and what's required in terms of consultation.

Even if you're a smaller business unlikely to hit the collective threshold, the direction of travel here matters. Employment tribunals are already scrutinising consultation quality more closely, and the ERA signals that the bar is being raised.

If you're anticipating any restructuring, or if your business is in a sector where redundancies are a realistic possibility, get the process right before you need it.

4. Enhanced Protections Against Fire and Rehire

The practice of dismissing employees and re-engaging them on less favourable terms — often used when employers need to change employment conditions — is being effectively curtailed.

Under the ERA, fire and rehire will only be legally defensible in very narrow circumstances. The message is clear: if you need to change someone's terms and conditions, you need to go through a proper consultation process and genuinely explore alternatives first.

For businesses that have relied on this approach — or who might have considered it as a last resort — this is a significant shift that needs to be reflected in how you handle workforce changes from now on.

5. Statutory Sick Pay Changes

The lower earnings limit for SSP eligibility is being removed, which means more of your employees will qualify. The waiting period before SSP kicks in is also being changed.

On the surface this might seem like a relatively minor operational tweak. But for businesses where absence is already a management challenge — or where SSP costs add up quickly — it's worth revisiting your absence policies and processes now, before the changes come into effect.

So What Should You Be Doing?

The honest answer is: starting. Not in a panic, but in a planned, methodical way.

The ERA changes are rolling out across 2026, and 2027 — which means you have a window to get this right rather than scrambling when each deadline hits. But that window requires actually using it.

The businesses that will navigate this best are those that take a clear-eyed look at their current HR practices, identify the gaps, and address them in a structured way. Not all at once. Not overnight. But deliberately, and with the right support.

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Need help with this?

If you'd like support preparing for the Employment Rights Act, The People Consultancy offers practical, plain-English HR guidance for businesses across the South East and beyond.

We work with SME owners and in-house HR teams — whichever camp you're in, we can help you get ahead of this.

Get in touch for a no-obligation conversation.