The Employment Rights Act 2025: What UK SMEs Missed (And What's Still Coming)

The biggest change to UK employment law in decades went live on 18 December 2025, and most of the country barely noticed. Just a 300-page Act quietly becoming law in the run-up to Christmas.

For SMEs, that quiet arrival is the problem. The Employment Rights Act 2025 is being rolled out in phases through to 2027, and some of it is already in force. If your business hasn't looked at this since it was still a Bill, here is what has changed, what changes next, and what to do about it now.

What's already live

A first wave of measures took effect from April 2026, with more following after the summer.

Record-keeping on holiday pay: Since 6 April 2026, employers must keep records of annual leave and holiday pay, and hold onto them for at least six years. This sounds administrative until an employee raises a historic pay dispute and you cannot produce the paperwork.

The Fair Work Agency: A new enforcement body, chaired by Matthew Taylor, launched on 7 April 2026 with an expanded civil penalty regime and the power to bring tribunal cases on workers' behalf. Employment law enforcement in the UK has historically leaned on individuals bringing their own claims. That is changing.

Sexual harassment disclosures are now protected: Since 6 April 2026, a disclosure about sexual harassment counts as a protected whistleblowing disclosure. Note: the bigger change here — a duty on employers to take ‘all reasonable steps’ to prevent harassment, plus new liability for harassment by third parties such as customers or clients — hasn't landed yet. That's due on 30 October 2026.

Gender pay gap and menopause action plans, voluntarily. Since April 2026, employers with 250 or more staff can choose to publish an action plan alongside their gender pay gap report, setting out concrete steps rather than a narrative paragraph. This becomes mandatory from spring 2027. The goal of this action plan is to support employers to take effective action to improve workplace gender equality.

What's landing in the next few months

Two further key changes arrive before the end of 2026, ahead of the bigger unfair dismissal changes in January 2027.

Electronic and workplace balloting for trade unions. From 25 August 2026, statutory ballots for industrial action and union elections can be held electronically or in workplace settings, not just by post.

The full sexual harassment duty. From 30 October 2026, the bar moves from ‘reasonable steps’ to ‘all reasonable steps’, and employers gain a standalone duty not to permit harassment of staff by third parties (such as customers or clients).

What's Still Coming in 2027

This is where most of the Act's weight sits, and where the biggest surprise for small businesses is what did not survive the legislative process.

• Unfair dismissal, not from day one. Labour's original manifesto commitment was a day-one right to claim unfair dismissal. That commitment did not make it into the final Act. What SMEs are actually getting, from 1 January 2027, is a cut to the qualifying period, from two years down to six months. Still a major shift from where the law sits today, just a narrower one than first announced, and worth correcting if your compliance briefing still says “day one.”

• Guaranteed hours for zero and low-hours workers. Workers on these contracts will gain a right to request guaranteed hours that reflect what they actually work over a reference period.

• Paid notice for cancelled shifts. Employers will need to give reasonable notice of shifts and shift changes, and pay workers when a shift is cancelled, moved, or cut short at short notice.

• A narrower path to rejecting flexible working requests. Employers who turn down a flexible working request will need to select their reason from a defined list of eight acceptable grounds, rather than relying on a general business justification.

• Statutory bereavement leave. A new unpaid right to bereavement leave is due to land in 2027.

• Tighter restrictions on fire and rehire. Also from 1 January 2027 — pushed back from an original October 2026 start date — dismissing staff to force through contract changes they have not agreed to will become automatically unfair in most cases, with a narrow exemption for employers in genuine financial difficulty.

Why SMBs Should Start Preparing Now

The temptation with a staggered rollout is to file it under “later” - which is not recommended.

First, some of the record-keeping and policy groundwork needs to start well before the enforcement date. Six years of holiday pay records only exist if you started keeping them from April 2026, not from whenever you eventually read this. A defined list of flexible working reasons is only usable if your HR team knows the list before the first request lands under the new rules.

Second, SMEs are typically the ones with the least slack to absorb a compliance gap discovered late. A tribunal claim, a Fair Work Agency inquiry, or a gender pay gap action plan assembled in a rush costs a 40-person company proportionally far more than it costs a corporate one with a dedicated employment law team on retainer.

The practical move is to treat 2026's changes as done and start 2027's changes as a project today. Map which of the changes above touch your contracts, your shift patterns, and your HR policies, and get the paperwork right while there is still time to do it properly rather than urgently.

UK employment law rarely stays still for long, and Rippling's compliance monitoring keeps tracking these changes automatically so they do not get missed a second time.

*All of these policies and laws are subject to parliamentary process and may change. Please refer to the GOV.UK website for further clarification.