After months of oscillating between the House of Commons and the House of Lords, the Employment Rights Bill has finally been passed and is set to rock the UK Jobs Market in 2026.
As employers wrap their heads around the flurry of new laws, small businesses in particular are concerned about the impact they’ll have on their workforces.
Part of the concern is the fresh compliance challenges the legislation will create for employers, who are already grappling with rising costs, labour shortages and economic uncertainty.
According to the Federation of Small Businesses, 92% of small to medium enterprises (SMEs) feel worried about the Employment Rights Bill. The British Chambers of Commerce also suggest that 79% of firms don’t think the effects of the government policies have been properly assessed.
Mere weeks after the highly anticipated Budget, employers will increasingly have to ready themselves for provisions that could fundamentally change their operations for the foreseeable future. Here’s how:
1. Day-One Access to Key Family and Health Rights
One of the clearest shifts in the Employment Rights Bill is that several core protections will apply from the very start of employment. Under the new laws, workers will have day-one access to statutory sick pay, paternity leave, parental leave and bereavement and pregnancy loss leave, making key family and health-related protections available from the outset.
For workers, particularly those in lower-paid or less stable roles, that gives workers a more secure starting point. But the same won’t necessarily be the case for SMEs, who will need to account for these rights immediately.
As such, onboarding, workforce planning and payroll accuracy are set to become far more important much earlier on in the employment relationship, reducing the scope for informal arrangements during probationary periods. For any businesses who haven’t already, seeking guidance on how to remain compliant will be essential.
2. Earlier Protection Against Unfair Dismissal
Although the Government has stepped back from introducing immediate day-one protection against unfair dismissal, employees will get unfair dismissal rights after six months of employment, which is substantially earlier protection than the current two-year qualifying period.
These shorter qualifying windows will undoubtedly change the dynamics of early employment. Trial periods and short-term hiring are likely to face closer scrutiny, while employees may feel more confident raising concerns sooner.
For SMEs, that means the margin for error has narrowed. Early performance management, clear expectations and proper documentation will take on greater importance from now on, raising the stakes on early employment decisions, increasing the need for clearer HR processes, tighter payroll accuracy from day one, and more confident people management from business leaders.
3. The Fair Work Agency Takes Shape
One of the much discussed provisions of the Bll includes the introduction of a new Fair Work Agency. Led by former policy chief Matthew Taylor, it will assume broad responsibility for overseeing and enforcing workplace protections and standards. It’s an institutional change designed to give workers a dedicated body to turn to for guidance and enforcement – something beyond traditional tribunal processes, which have been increasing lately.
That institutional focus underscores the Government’s intent to formalise and normalise complaints and enforcement mechanisms. For workers, that could lead to faster access to support and clearer expectations of what rights they can assert. For employers of all sizes, especially smaller firms without in-house HR teams, it’s another reason to sharpen compliance efforts and ensure processes are robust and understood.
4. Pressure for More Predictable Working Patterns
The Bill also aims to address insecurity around hours and working patterns (particularly for workers on variable schedules) reflecting a shift away from employment models that place most of the risk on workers. Greater predictability may improve income stability, but it also challenges businesses that rely on flexibility to manage demand.
In sectors such as hospitality, retail and care, employers may need to rethink how they balance flexibility with transparency. Rotas and contracts are likely to attract more attention, even where variable hours remain essential to operations.
5. Stronger Standards for Fair Treatment at Work
Stronger expectations around fair treatment, grievance handling and dispute resolution run throughout the Bill.
As awareness of rights increases, informal approaches to managing workplace issues will not only become harder to sustain, but they could also be a hindrance too.
For many SMEs, it represents a cultural shift as much as an administrative one. Policies that once existed largely in practice may now need to be written down, applied consistently and understood by managers already juggling multiple responsibilities.
In a broad sense, none of these changes are inherently bad. But challenges could arise when it comes to implementation, particularly if guidance is unclear or enforcement outpaces employers’ ability to adapt, leaving smaller businesses exposed to risk despite best intentions.
6. A Higher Compliance Baseline
Taken together, the new laws point to a higher baseline of compliance across the UK labour market.
Survey evidence from the British Chambers of Commerce shows how business sentiment reflects that shift: one third of firms believe specific elements of the Bill would have a negative impact on their organisation, and only 2 per cent think the trade union-related proposals will be positive. Around 77 per cent say policy change is not moving at the right pace, and 69 per cent see government policies such as employment reform, tax and regulation as barriers to growth.
Updating contracts, training managers and maintaining accurate payroll records will demand time and resources, and that’s without mentioning other upcoming policy updates. While each change may appear manageable in isolation, their combined effects will influence hiring decisions, workforce structures and business confidence.
What Comes Next
The Employment Rights Bill represents a structural shift rather than a minor adjustment. It reshapes expectations around job security, flexibility and employer responsibility at a time when the labour market is already under strain.
Small businesses are likely to feel the impact first, but the effects will ripple across the wider economy. Employers that begin preparing now by tightening HR processes, reviewing payroll systems and strengthening people management will be better placed to adapt as the new framework takes shape.
The changes in the Bill will come into effect on various dates in 2026 and 2027 with many of the finer details of how the new laws will work still to be set out in separate regulations. Employment Hero will be sharing detailed guidance on how all the provisions in the Bill will operate over the next few weeks.
