The Employment Rights Act 2025: A Guide for SMEs, Charities, and Hospitality

On 18 December 2025, the UK employment landscape reached a turning point. The Employment Rights Bill received Royal Assent, becoming the Employment Rights Act 2025. This Act amends the 1996 legislation and introduces a "New Deal" for workers that will require significant adjustments from employers.

The Implementation Roadmap

Navigating these changes requires understanding the timeline. Most reforms are phased to allow businesses to adapt.

• April 2026: Day-one rights for SSP, Paternity Leave, and Parental Leave.

• October 2026: New duty to prevent third-party harassment and "Equality Action Plans."

• January 2027: The 6-month unfair dismissal qualifying period begins and the compensation cap is removed.

Sector-Specific Impacts

1. SMEs: The 6-Month Probation Reality

For years, the "two-year rule" gave small businesses a safety net. From January 2027, an employee can claim "ordinary" unfair dismissal after just 6 months.

• The Risk: The removal of the compensation cap means a single claim could now exceed a year's salary, posing a significant financial threat to small firms.

• The Action: SMEs must move from informal "chat-based" probations to rigorous, documented performance reviews at months 1, 3, and 5.

  
  

2. Charities: The Cost of SSP

Charities often employ part-time staff or those earning below the previous Lower Earnings Limit (£123/week).

• The Change: The Act removes this limit and the 3-day waiting period.

• The Impact: Every employee, regardless of earnings, is now eligible for SSP from Day 1. Charities must budget for increased payroll costs and ensure their absence management systems can handle more frequent, smaller claims.

  
  

3. Hospitality: Ending "One-Sided" Flexibility

The hospitality sector will see the most structural change regarding zero-hours contracts and tips.

• Guaranteed Hours: Workers on regular patterns have a right to a contract reflecting those hours.

• Short-Notice Payments: If you cancel a shift at the last minute, you may now be legally required to compensate the worker.

• Tipping: New requirements for mandatory consultation with staff on how tips are distributed.

How to Prepare (Your 5-Step Checklist)

1. Audit Your Contracts: Identify zero-hours staff who may qualify for guaranteed hours.

2. Review SSP Policies: Prepare for the removal of "waiting days" in April 2026.

3. Train Your Managers: Ensure they understand how to conduct a compliant dismissal under the new 6-month threshold.

4. Update Handbooks: Include new rights for bereavement and pregnancy protection.

5. Consult on Tips: (Hospitality only) Start a formal dialogue with staff regarding your tipping policy.