UK Employment Law Changes 2026: What Small Business Owners Need to Know

The Employment Rights Bill represents the government's commitment to make work pay for millions of workers whilst modernising workplace protections. The legislation aims to deliver better living standards, job security, and workplace rights for approximately 15 million workers—half of the UK workforce.

The Bill encompasses 28 distinct employment measures spanning workers' rights, trade union regulations, pay gap reporting, harassment protections, and family leave entitlements. Unlike previous reforms, these employment law changes adopt a phased implementation approach, giving employers time to adapt whilst ensuring workers benefit from improved protections.

The Employment Rights Bill pursues several interconnected objectives:

• Strengthening Worker Protections: Extending rights like unfair dismissal protection from day one of employment, removing barriers that previously left many workers vulnerable during their initial employment period.
• Promoting Equality: Introducing mandatory gender pay gap action plans and menopause support policies, alongside future ethnicity and disability pay gap reporting requirements.
• Modernising Industrial Relations: Reforming trade union legislation and taking industrial action procedures to create fairer, more collaborative workplace environments.
• Enhancing Family Rights: Making paternity leave and parental leave day-one rights, removing the lower earnings limit for statutory sick pay, and introducing bereavement leave entitlements.
• Preventing Exploitation: Ending exploitative practices including unfair use of zero-hours contracts, fire-and-rehire tactics, and inadequate protections against sexual harassment.

Understanding when specific employment law changes become effective helps small businesses prioritise preparation activities and budget appropriately for compliance costs.

The first wave of reforms takes effect approximately two months after Royal Assent:

• Industrial Action Reforms: Notice period for taking industrial action reduces from 14 to 10 days. Trade unions require only simple majority for action votes. The Strikes (Minimum Service Levels) Act 2023 will be repealed.
• Protected Industrial Action: Dismissal for participating in industrial action becomes automatically unfair, removing the current 12-week limitation.

April 2026 marks the implementation of significant reforms affecting most employers:

• Statutory Sick Pay Reform: The lower earnings limit for statutory sick pay will be removed, meaning all workers qualify regardless of earnings. Additionally, SSP becomes payable from the first day of absence rather than after three waiting days.
• Family Leave Rights: Paternity leave and ordinary parental leave become day-one rights, allowing employees to give notice from their first day of employment. The restriction preventing paternity leave after shared parental leave will be removed.
• Collective Redundancy Protections: The maximum protective award for failure to consult on collective redundancy doubles from 90 days' pay to 180 days' pay.
• Whistleblowing Protections: Sexual harassment disclosures become qualifying disclosures under whistleblowing law employment, protecting workers who raise concerns about harassment.
• Fair Work Agency: A new enforcement body will be established with powers to support workers in recovering underpaid statutory payments and bringing employment tribunal claims.
• Trade Union Rights: Further protections for trade union representatives and modernised balloting procedures, including introduction of e-balloting.

October 2026 introduces reforms addressing workplace harassment and employment practices:

• Sexual Harassment Prevention: Employers must take "all reasonable steps to prevent sexual harassment" (strengthened from current "reasonable steps" requirement). New regulations will specify what constitutes reasonable preventive measures.
• Fire and Rehire Ban: Dismissing employees to re-engage them on inferior terms becomes automatically unfair dismissal in most circumstances.
• Public Sector Outsourcing: New measures protect workers when services transfer between public and private sectors, preventing detrimental changes to terms and conditions.
• Tipping Regulations: Enhanced protections ensuring workers receive tips and gratuities fairly.
• Industrial Action Protections: Workers taking industrial action receive protection against detriment (being treated less favourably) in addition to existing unfair dismissal protections.

The most significant changes to employment law arrive in 2027, though specific dates within the year remain unconfirmed:

• Day-One Unfair Dismissal Rights: Protection from unfair dismissal becomes available from the first day of employment. Employers can operate statutory probationary periods (likely 9 months, subject to consultation) with lighter-touch dismissal procedures for performance issues.
• Zero-Hours Contract Reforms: Workers gain rights to guaranteed working hours reflecting actual patterns and payment if shifts are cancelled or cut short.
• Bereavement Leave: Statutory bereavement leave becomes a day-one right.
• Pregnancy Protections: Strengthened protections against dismissal for pregnant workers and those returning from maternity leave.

The transformation of unfair dismissal law employment represents perhaps the most significant element for small businesses.

Under existing legislation, employees must complete two years' continuous service before they can claim unfair dismissal (except for automatically unfair reasons like whistleblowing, discrimination, or pregnancy-related dismissals). This qualifying period has provided employers with flexibility in managing new hires and correcting recruitment mistakes without tribunal risk.

From 2027: Protection becomes available from day one, fundamentally changing the employment relationship and requiring businesses to implement fair procedures from the moment of hire.

Duration: Likely 9 months (subject to consultation and final regulations)

Lighter-Touch Dismissal: During this period, employers can use simplified procedures for dismissing unsuitable employees based on performance, conduct, or capability.

Redundancy Exception: The lighter-touch procedure does not apply to redundancy dismissals, requiring full fair procedures from day one.

Lower Compensation: Unfair dismissal compensation will likely be capped at lower levels during the probationary period.

Key challenges include:

• Recruitment caution: Businesses may become more risk-averse when hiring
• Documentation requirements: Clear records of performance discussions become critical from day one
• Manager training: All supervisors need training on fair dismissal procedures
• Contract updates: Employment contracts and policies require comprehensive review

At Yousign, our electronic signature platform helps businesses implement updated employment contracts efficiently. Our simple electronic signature solution ensures rapid, legally compliant deployment without administrative delays.

The standard strengthens from "reasonable steps" to "all reasonable steps to prevent sexual harassment"—requiring proactive, comprehensive approaches.

New obligations include:

• Regulatory Guidance: Government will specify steps deemed reasonable
• Third-Party Harassment: Preventing harassment by customers, suppliers, and contractors
• Whistleblowing Protection: Sexual harassment disclosures become protected under whistleblowing law

To meet enhanced obligations:

• Develop clear anti-harassment policies with behavioural examples
• Implement regular training for all staff
• Establish confidential reporting mechanisms
• Conduct risk assessments identifying elevated harassment risks
• Take swift action on allegations with clear investigation procedures

From 2027 (voluntary from April 2026), employers subject to pay gap reporting (250+ employees) must develop action plans addressing identified gaps. Similar requirements apply to menopause workplace support.

Future Requirements: The Department for Business and Trade has consulted on ethnicity and disability pay gap reporting for larger employers.

Lower Earnings Limit Removed: All workers qualify for SSP regardless of earnings.

Day-One Payment: SSP payable from first day of absence, eliminating three waiting days.

Cost Impact: These changes significantly increase SSP costs, particularly for employers with part-time or low-paid workers.

• Paternity Leave: Becomes day-one right (currently requires 26 weeks' service)
• Parental Leave: One-year qualifying period removed
• Bereavement Leave (2027): New statutory entitlement from day one

Checklist: Prepare for 2026 Employment Law Changes

• Audit Employment Policies – Review contracts, handbooks, and HR policies against forthcoming requirements (deadline: Q2 2025)
• Budget for Increased Costs – Factor in higher SSP costs, potential tribunal claims, and HR support requirements (15-25% increase estimated)
• Train Line Managers – Ensure understanding of fair dismissal procedures, harassment prevention, and day-one performance management
• Update Contract Templates – Prepare employment contract templates incorporating new 9-month probationary provisions and updated leave rights
• Implement Digital Systems – Deploy electronic signature platforms for rapid contract deployment and compliant documentation

At Yousign, we understand that implementing contract changes can be burdensome. Our contract management platform streamlines deploying updated employment contracts, collecting signatures, and maintaining compliant documentation—all digitally.

• Stay Informed: Subscribe to updates from Acas or employment law advisers
• Document Everything: Maintain thorough records from day one of employment
• Cultural Development: Build workplace cultures prioritising respect and fair treatment
• Seek Expert Advice: Early professional guidance prevents costly tribunal claims

The Employment Rights Bill necessitates widespread contract updates. Traditional processes create challenges with distribution delays, version control issues, and storage problems.

Electronic signature platforms address these challenges through:

• Rapid Deployment: Deploy updated contracts to workforces within hours
• Audit Trails: Automatically generated records for tribunal evidence
• Secure Storage: Centralised, searchable document repositories
• Integration: Seamless connection with HR systems

Yousign's platform has helped numerous UK businesses manage employment contract transitions efficiently. When implementing the effective employee management strategies for SMEs that these changes demand, digital solutions prove invaluable.

The secure electronic signatures we provide meet UK legal requirements whilst accelerating administrative processes during major compliance transitions.

The Employment Rights Bill represents the most comprehensive transformation of UK employment law in decades. For small business owners, these changes to employment law require careful preparation, strategic planning, and ongoing vigilance to maintain compliance.

Success depends on taking action now rather than waiting until implementation dates arrive. Businesses that proactively review policies, train managers, update contracts, and embrace efficient compliance systems will navigate these changes successfully whilst those delaying preparation may face costly tribunal claims and operational disruptions.

The reforms ultimately aim to create fairer workplaces benefiting both workers and responsible employers. By embracing these changes and demonstrating commitment to fair work principles, small businesses can enhance their employer reputation, attract better talent, and build stronger workplace cultures.