After months of parliamentary ping pong, the Employment Rights Bill is finally over the line. With so much speculation, uncertainty, discussion and debate, SMEs can be forgiven for tuning out at times to focus on more pressing matters.

While some parts of the new legislation will not affect the average employer’s day-to-day operations, the Act really does represent a huge shift in workplace regulation - affecting every business, regardless of size. From hiring to contracts, probation periods to policies, the scale of the impact cannot be underestimated.

Included in the Act:

• Stronger protections for pregnant women and new mothers
• Measures to support flexible working
• Day One rights to sick pay and paternity leave
• Qualifying period for unfair dismissal cut from two years to six months
• Removal of the unfair dismissal compensation cap
• Minimum hours guarantee for zero-hours staff

With numerous and wide-reaching changes covering many aspects of employment law, a certain amount of complexity is inevitable. While we now know what will be in the Act, over the coming weeks and months expert input via government consultations will shape and finalise the full details. These details will become part of secondary legislation.

The path to unfair dismissal claims is to be cut by 18 months. What will this mean for smaller employers?

• Employees will require six months’ continuous service to bring an unfair dismissal claim, rather than the current two years. As usual, no qualifying period will apply where the dismissal is automatically unfair or discriminatory. This will come into force on 1 January 2027, so the reality is that businesses should really start taking steps to prepare for this change ahead of 1 July 2026 if they haven’t already done so, given that anyone employed from that date will reach six months’ service on 1 January 2027.
• The Act will also remove the compensation cap on unfair dismissal claims (which is currently the lower of either 52 weeks gross pay or £118,223). It’s expected that the cap will be removed as of 1 January 2027, meaning anyone unfairly dismissed on or after that date would be entitled to unlimited compensation. However, the exact timing has not yet been confirmed. For obvious reasons, that will make it even more important for employers to get their dismissal processes legally and procedurally correct. 

How Can You Prepare?

• Ensure that your probationary period allows for a full review cycle well before the six-month point, rather than (as many employers do) relying on a meeting at six months only.
• Diarise probationary reviews at regular intervals; probably monthly.
• Ensure that probationary reviews are well documented with clear feedback and evidence, and followed up with training, mentoring, or performance plans early on if appropriate.
• Look at your notice provisions. You should carefully consider whether to shorten your notice requirements during probation, remembering if you fail to provide an employee with at least a week’s notice, that 1 week can be added to their period of continuous service for the purposes of obtaining unfair dismissal rights. 
• PILON (Payment in Lieu of Notice) clauses will likely be required for all staff at any level, to prevent employees from inadvertently passing the 6-month limit simply by serving out their notice period.
• Review and tighten your recruitment process and procedures.  
• Train your managers to help them identify issues early, and how to properly undertake the probationary review process throughout; waiting until month five is almost certainly too late to raise concerns.

With more complexity and potential risk to navigate around your people management, keeping on top of ‘paperwork’ is crucial.

WorkSmarter’s suite of online HR tools helps every customer stay compliant with changing legislation. We can also put you in touch with one of our specialist HR Partners for bespoke advice and guidance in relation to your specific business.
Get in touch.

This article has been prepared for general information only and does not constitute legal advice. It has been created based on information available in December 2025. Specific legal advice should be taken in any specific circumstance.