Envoy Human Capital is a commercially focused HR consultancy supporting SMEs across the UK, working alongside business owners and directors to help them navigate employment legislation, manage people risk, resolve employee relations issues, and build confident, compliant workplaces.
Because for SMEs, people risk is business risk – and in 2026, that risk profile is changing significantly. Here, Director Nina McLoughlin explains what the Employment Rights Act 2025 means for business owners – and how to prepare.
What’s Changing – and When?
Simply put, the Employment Rights Act 2025 represents the most significant reform to UK employment legislation in decades.
For SMEs, the implications of not keeping up to speed can be serious. With changes being introduced in stages, it can also be difficult to track what’s coming – and when.
Below are the key dates you need to be aware of:
From 6 April 2026
- A new regulatory body, the Fair Work Agency (FWA), will be established. As an executive agency of the Department for Business and Trade, it will act as a central authority to streamline enforcement of workers’ rights – and increase employer accountability.
- Paternity and parental leave become day-one rights, removing previous service requirements (employees have already been able to give notice of their intention to take leave since 18 February 2026).
- Statutory Sick Pay (SSP) becomes payable from day one. The lower earnings threshold will be removed, and a new model introduced, paying 80% of weekly earnings.
From October 2026
- Sexual harassment responsibilities are strengthened. Employers will be required to take “all reasonable steps” to prevent harassment, including from third parties such as clients, customers and contractors.
- Tribunal time limits double from three to six months, giving employees more time to bring claims.
- The Fair Work Agency will also have powers to bring claims on behalf of workers and request compliance evidence directly from employers.
From January 2027
- The unfair dismissal qualifying period reduces from two years to six months, and applies retrospectively. If you currently rely on the early stages of employment as relatively low-risk, this will no longer be the case.
- “Fire and rehire” is effectively removed. Automatic unfair dismissal will apply where employees refuse contractual changes, with only very limited exceptions for businesses in genuine financial distress.
What Should Businesses Be Doing Now?
The direction of travel is clear: greater worker protection, stronger enforcement, and increased employer accountability.
I would strongly recommend:
- Reviewing employment contracts and policies to ensure they reflect current and upcoming legislation
- Updating your employee handbook, particularly around redundancy, SSP and harassment procedures
- Ensuring your documentation reflects where the law is going – not where it was five years ago
Just as importantly, businesses need to move beyond informal processes.
Informal performance management, conduct handling and absence management will no longer be sufficient. Managers must be trained to handle these areas consistently, lawfully, and with clear documentation.
This isn’t about expecting problems – it’s about being prepared if they arise.
Many SMEs have historically taken a more informal approach to HR, often due to smaller team sizes or close working relationships. However, under the new legislation, this approach can quickly become a liability.
Getting the basics right is no longer optional – it’s essential for protecting both your people and your business.
A Conversation Worth Having Now
At Envoy Human Capital, we work closely with SME owners to:
- Understand their exposure under changing legislation
- Update contracts and documentation
- Train managers to confidently and compliantly handle employee matters
- Put simple, practical processes in place that reduce risk
These changes may feel complex, but with the right support, they can be managed in a straightforward and commercially sensible way.
If you’re a Champion client and would like to understand what these changes mean for your business – and the steps you should be taking now – I’d be very happy to help.
Get in touch with Nina McLoughlin at nina@envoyhc.com to arrange a conversation.
