The rules of employment in the UK are starting to shift for small businesses (SMEs). From April 2026, the Employment Rights Act is set to introduce a swathe of reforms that will fundamentally transform the employment landscape. While most of the changes won’t land overnight, preparation needs to start well in advance.

For SMEs without relevant in-house teams, the risk isn’t just non-compliance. It’s being caught out by timelines, systems, or processes that were built for a set of rules that will soon be out of date. The good news is that getting ready doesn’t require a full policy overhaul all at once. In fact, a few targeted changes now can remove a lot of pressure later.

The Roadmap: What’s landing and when

Simon Obee, Head of HR Advisory at Employment Hero points out that “while many of these changes won’t take effect immediately, the direction of travel is clear”. He continues: “Reviewing policies, training managers and stress-testing existing processes early will put your business in a far stronger position when the new rules come into force.”

The biggest shift for employers is the move towards earlier employee rights. From April 2026, statutory sick pay (SSP) will become a day-one entitlement (doing away with the current three-day waiting period) and the Lower Earnings Limit will be removed. Day-one rights will also apply to unpaid paternity leave and parental leave, with wider bereavement leave rights extending to more family relationships over time.

Looking slightly further ahead, unfair dismissal protection will kick in after six months’ service rather than two years, with compensation caps removed from January 2027.

Hack one: Move your “decision points” forward

The reduction of the unfair dismissal qualifying period is one of the most significant operational changes for SMEs.

If unfair dismissal protection starts at six months, waiting until the end of a traditional probation period to assess performance is a high-stakes risk. By moving structured reviews significantly earlier, employers will gain a clear window to address issues, provide support, or make critical staffing decisions before full protections apply.

That means tightening probation processes now, and making sure managers understand that a “wait and see” approach is no longer a viable option. 

Hack two: Future-proof your payroll logic

SSP becoming a day-one right will catch out businesses relying on outdated payroll logic. Because SSP is a direct cost for employers, forecasting and budgeting now is essential.

One thing to keep an eye on is that for anyone earning below the Lower Earnings Limit, SSP will be capped at the lower of the flat rate or 80% of their average weekly earnings. 

In the face of those changes, a simple three-step check can help to prevent issues:

• Confirming your payroll software can calculate SSP from day one.
• Updating logic to factor in the new 80% payment cap for low earners.
• Reviewing absence reporting so short-term sickness is captured accurately.

Hack three: Sync your policies for 2027

Many of the Employment Rights Act’s changes won’t sit neatly with older templates. Family leave, sickness policies, disciplinary procedures, and sexual harassment guidance will all need updating.

Taking a unified approach, i.e. reviewing policies together even if some provisions don’t activate until 2027, will save time and avoid inconsistency. That’s particularly important when it comes to sexual harassment rules, where employers must demonstrate they took “all reasonable steps” to prevent it.

Hack four: Prep for the end of “Fire and Rehire”

While initially expected sooner, major restrictions on “fire and rehire” practices are now planned for 2027. However, SMEs should begin adjusting their strategy now.

What this means for employers:

• Contract variation: Strategies for changing terms must be handled with extreme care.
• Dismissal risk: Threatening dismissal to force agreement will carry significantly higher legal risk.
• Agency restrictions: Replacing staff with agency workers on different terms will be heavily restricted.

Hack five: Documentation is your new best friend

The creation of the Fair Work Agency, launching 7 April 2026, signals a shift away from employment law being enforced mainly through individual tribunal claims. From the spring, the agency will have powers to investigate breaches and take enforcement action directly.

Combined with tribunal claim windows extending from three to six months later in the year, it’s clear that record-keeping is no longer optional for SMEs. That means: 

• Keeping clear, dated records of all staffing decisions.
• Documenting every consultation and performance review.
• Ensuring managers follow established processes rather than instinct.

Getting ready before the deadlines hit

The Act isn’t about catching businesses out, but it does raise the bar for readiness. For SMEs, hacking compliance isn’t about shortcuts – it’s about acting early enough that the changes don’t disrupt your growth when they arrive.

For a detailed compliance guide on the Employment Rights Act by Simon Obee, Head of HR Advisory at Employment Hero, click here.