More than half of SMEs have worries over Employment legislation changes

As the Employment Rights Act moves closer to being implemented, many SMEs have concerns over their ability to adapt to the changes.

Employment Rights Act

First announced in October 2024, the Employment Rights Bill received Royal Assent on the 18^th of December 2025 and is now the Employment Rights Act 2025, which will be rolled out in phases.

Most key changes are expected to start from April 2026, followed by further provisions in October and throughout 2027 and include things like:

• Changing the qualifying period to claim unfair dismissal from two years to six months.
• A strengthened right to request flexible working arrangements from day one in a role.
• Zero-hour and agency workers will gain rights to request guaranteed hours based on a 12-week average.
• It will be more difficult for employers to use ‘fire and rehire’ tactics for contract changes (except in insolvency).
• The three-day waiting period for Statutory Sick Pay (SSP) will be eliminated.
• Enhanced rights for time off work for bereavement.
• Better access to paternity and parental leave from day one.

Disproportionate impact of regulatory complexity on SMEs

A new survey compiled by Robert Half shows that while 53% of SMEs identified adapting to changing labour laws and compliance requirements as one of their top hiring challenges for 2026, this concern did not feature among the top five challenges for mid-sized or large organisations.

This, according to the recruitment firm, highlights the disproportionate impact of regulatory complexity on smaller businesses, which it says often lack the dedicated compliance resources available to larger firms.

As new employment legislation and evolving labour standards take effect, SMEs are under pressure to update policies, contracts, and processes while continuing to compete for talent in a tight market.

Matt Weston, Senior Managing Director UK & Ireland at Robert Half, explained, “SMEs are now navigating a transformed regulatory landscape, with the Employment Rights Act marking a turning point. While its measures are designed to improve fairness and flexibility for workers, smaller businesses often lack the dedicated compliance teams that larger organisations can rely on.

“This means adapting to new regulations, such as enhanced day-one rights and protections for flexible workers, could feel hard to navigate for some. At the same time, SMEs are competing fiercely for skilled talent in a market where flexibility and transparency matter more than ever.

“The businesses that succeed will be those that embrace these changes proactively, strengthen their employer brand, and create recruitment processes that are both compliant and candidate-friendly.”

To find out more about contracting, please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.