Four 2026/27 employment law changes SMEs should act on now

Since the Employment Rights Act 2025 received Royal Assent on 18 December 2025, UK employment law changes have been rolling out in phases across 2026 and 2027.

For many small and medium-sized businesses, keeping up with these employment law changes feels a bit overwhelming. It's not just about understanding what's changing. It's about knowing which actions to prioritise first, especially when you don't have a large HR or legal team behind you.

In our 'Employment Law 2026: what changed in April & what to do next' webinar, attendees raised a range of practical questions about what employers should be doing.

We explored those questions with HR and employment law experts Jemma Fairclough-Haynes (Orchard Employment Law), Juliet Irving (Impact HR), and Oli Moreton (Littler).

Drawing on their advice, we've pulled together the four key changes SMEs should start preparing for now, along with practical steps to take before the next wave of changes.

Skip to:

 

• Unfair dismissal changes

• Harassment prevention duties

• Tighter record-keeping and employment basics

• Changes to trade union rights for all businesses

• 2026 employment law changes checklist

• Watch the full on-demand webinar

 

1. Unfair dismissal changes in January 2027

 

Some of the biggest changes in the Employment Rights Act 2025 are the changes being made around unfair dismissals. From January 2027, the two-year qualifying period for unfair dismissal is being reduced to six months. This means more employees may be able to claim unfair dismissal sooner. The unfair dismissal compensation cap is also being removed, increasing financial risk for businesses.

 

 

And from October 2026, the time limit for most employment tribunal claims is expected to increase from three months to six months, which could give employees longer to bring a claim.

During the webinar, there was a lot of employer uncertainty around probation and dismissal risk. Questions included whether a six-month probation period is still useful and whether someone can claim unfair dismissal if they fail probation.

Our experts also highlighted that a non-renewal or early termination of a fixed term contract is legally classed as dismissal and so, businesses should make sure they follow a fair process, the same as they would when dismissing an employee on a permanent contract.

 

Practical takeaway: Pressure-test your probation and performance processes now

 

This is the time to tighten your people management processes. Don't wait until the law changes and employment tribunal time limits are increased.

Start by looking at your current probation approach, but keep in mind: probation itself is not what determines unfair dismissal risk, length of service is. The expert advice was to start thinking about this from 1 July onwards, because anyone with six months’ service by 1 January 2027 could gain unfair dismissal rights.

 

Ask yourself:

• Are managers clear on what good performance looks like in the role?

• Are review points scheduled early enough to allow time for action if things are not going well?

• Are concerns being documented properly?

• Do managers know when an informal conversation is no longer enough?

• Are notice periods being factored in when probation decisions are made?

 

This matters especially if you are hiring now for roles where performance takes time to judge, such as sales or specialist positions.

Our experts also shared that a six-month probation period may no longer be a comfortable safety net. If you do keep one, it's worth building in an official checkpoint at three or four months so you are not leaving decisions too late.

You should also revisit your approach to fixed-term contracts and casual arrangements. If you use fixed-term contracts linked to funding, or casual engagement models, make sure managers understand that the end of an arrangement does not automatically make the risk disappear. Clear documentation, fair communication and consistent decision-making will matter more, not less.

 

 

2. "All reasonable steps" and third-party harassment prevention duties from October 2026

 

Another significant change in the Employment Rights Act is the increased harassment prevention duties.

In October 2024, the law changed so that employers are now required to take reasonable steps to prevent sexual harassment in the workplace, including things like keeping policies and risk assessments up-to-date, providing regular training, and having clear communication and documentation strategies.

But from October 2026, the rules change again. Employers will have to take "all reasonable steps to prevent sexual harassment. The key word change here is "all". It will no longer be enough to just have a policy and respond when something goes wrong. Employers will need to be able to show they've actively anticipated risks, planned for them and taken practical steps to prevent sexual harassment before it happens.

 

 

The other big change is that employers become directly liable if a worker is harassed by a third-party (clients, customers, patients) unless they've taken all reasonable steps to prevent it from happening. And this doesn't just apply to sexual harassment, it's for any type of harassment. This means third party harassment and wider workplace harassment risks need much closer attention.

And the consequences for failing to take reasonable steps are already in place, including a 25% uplift in compensation if you lose a tribunal claim and enforcement action against you by the Equality and Human Rights Commission (EHRC).

Harassment prevention duties were a strong concern during the webinar. Employers were asking what these new duties mean, what "all reasonable steps" actually looks like, and what kind of training is enough for a small business.

 

Practical takeaway: Move from a harassment policy on paper to practical, visible prevention

 

There is still some uncertainty around exactly what that higher bar will require in practice, because the government has said further regulations will set out minimum steps, but those are not expected until 2027 or 2028.

But a practical starting point for these changes is to review whether your current approach is genuinely preventative. Look at things like risk assessments, reporting routes, complaint handling and regular training.

 

Ask yourself:

• Have you reviewed your harassment risk assessment recently? Does it cover all types of unlawful harassment?

• Does it cover workers as well as employees, and settings such as off-sites, conferences, travel and work-related social events?

• Have managers been trained on how to respond to concerns, including informal or off-the-cuff disclosures?

• Is there a clear reporting route for employees and workers?

• Have you considered which groups in your workforce have the most exposure to third parties?

• If you use volunteers, have you thought about where they sit in your wider approach?

 

Our speakers also highlighted that from October the third-party angle becomes much more significant. Employers may need to broaden existing thinking from sexual harassment alone to unlawful harassment more widely.

For SMEs, “all reasonable steps” doesn't necessarily mean complex programmes or

expensive interventions. But stale training is unlikely to be enough. Employers should be able to show they have identified risks, refreshed training regularly, maintained robust policies and thought about what specific preventative measures make sense in their own setting.

That could include refreshing training with real-life examples, updating reporting processes, reviewing customer-facing terms where appropriate, using event wording or signage to reinforce a zero-tolerance stance, and making sure managers know what to do if an issue is raised at a social event or by a third party.

 

3. Tighter record-keeping and employment basic requirements

 

In April 2026, a whole bunch of employment rights changes came into force. The

previous waiting period for Statutory Sick Pay (SSP) has been removed and the Lower Earnings Limit has gone, widening access to sick pay from day one.

Paternity and parental leave also became day-one rights. Sexual harassment became formally classified as a qualifying disclosure under whistleblowing law. And it became mandatory to store annual leave and holiday pay records for up to six years.

 

 

At the same time, the government launched a new enforcement body called the Fair Work Agency (FWA) to make sure employers are following the law when it comes to wages, documentation, leave from work - whether it's sick leave, parental leave or holiday.

 

 

With powers to inspect workplaces, request evidence and fine employers, the FWA has brought about a lot of questions for employers around their processes. In our webinar, attendees asked about contract updates, how records should be kept and how to handle employment admin in practice.

 

Practical takeaway: Audit your documentation and review your record-keeping process before small admin gaps become bigger problems

 

This is the kind of work that often gets pushed down the list because it feels operational rather than strategic. But when the legal landscape is shifting, operational gaps create risk quickly.

The first job is to look at your documentation. That means checking whether your employment contracts, handbook, training and standalone policies still reflect how your business actually works.

If pay has changed repeatedly over time, if policies have evolved, or if different versions of employment terms are sitting in different places, now is a good time to tidy that up. Make sure you also update policies to match the new rules enforced by the Employment Rights Act.

The second job is to look at your existing records.

 

Ask yourself:

• Are annual leave records accurate and accessible?

• Are sickness and SSP processes consistent?

• Have wage changes and contract variations been documented properly?

• Are whistleblowing and concern-raising processes clearly set out?

• Are paternity leave, unpaid parental leave and family-related policies up-to-date?

• Do HR records and payroll records match up?

 

This is also a good opportunity to sense-check where you are relying on manual workarounds. If your team is manually tracking and recording things like holiday, sick leave or contract changes across different systems, that is usually a sign a process needs tightening.

 

 

Look into systems that let you store all your records in one secure place with easy but permission-controlled access. Even better if you can request acknowledgements or read receipts from employees once they've read a policy, accepted their contract changes or completed some training.

 

 

4. New trade union laws that impact every business in 2026

 

Whichever sector you operate in and regardless of whether your employees are already trade union members or not, there are trade union changes taking effect throughout 2026 that you'll need to act on.

These reforms are designed to increase trade union visibility and engagement, especially in workplaces that don’t currently recognise a union.

We've outlined all the changes on our Employment Law Hub but the key ones you need to know about are:

 

1. From 1 October 2026, employers are required to make it clear to all employees that they have the right to join a trade union. The government has indicated that there will likely be a standardised statement, covering what trade unions do, the protections employees have as members, any unions the employer already recognises, and where to find more information.

 

 

2. It's also expected that from October 2026, independent trade unions will have rights of access to workplaces to meet with workers and recruit members. In practice, this means trade union representatives may be given more opportunities to access workplaces and speak to staff (even if you've previously denied access) . This could be in-person meetings, emails, or online calls and you'll only have 15 days to respond to these requests. If access agreements can't be reached, you could be fined up to £500,000.

 

 

During the webinar, employers asked practical questions about what these changes mean for them. They wanted clarity on what contract updates might be needed, how to communicate these rights, who the rules apply to and how they would work for small businesses with little or no previous union activity.

That is exactly why this topic deserves attention now. Even where union activity has not historically been part of the picture, new information and access expectations can still create confusion if employers leave preparation too late.

 

Practical takeaway: Prepare statements, update onboarding documents and inform workers and managers of trade union changes

 

These changes are impactful but there's no need to overcomplicate things.

Start by preparing statements you can issue to employees about their right to join a trade union after the law comes into effect. It’s also worth keeping an eye on government advice on how frequently employers need to remind their staff of this right. For example, does it need to be a regular email or could it be published on the company intranet?

This is an important step because during consultation, the government indicated that a one-line update to an employment contract is unlikely to be enough on its own to meet the new legal requirements.

From there, you'll want to look at where trade union rights information should appear across your recruitment and onboarding process.

 

Ask yourself:

• Does our onboarding documentation explain employee trade union rights clearly and consistently?

• Do managers and recruiters know what to say if employees ask questions about union rights or access?

• If trade union representatives requested access, would we know who should respond and what the process would be?

• Is there a consistent internal point of contact for trade union-related queries?

• Does our leadership team understand the likely practical implications?

 

It’s also worth stepping back and looking at employee voice more broadly. Trade unions often gain traction where there is dissatisfaction and no effective route for concerns to be heard.

 

Ask yourself:

• Are there issues that our employees are unhappy about?

• Do we have existing forums to resolve those issues without the need for a trade union?

• How effective are those forms?

 

The common thread: get your foundations in place now

 

The most useful preparation for the Employment Rights Act is not a complete legal overhaul. It's getting the basics into good shape: stronger manager processes, clearer policies, better records, more consistent documentation and a realistic view of where risk sits in your business.

If you start there, you'll be in a far better position to respond to the next wave of employment law changes with confidence rather than urgency.

Below we've pulled together a quick checklist with all the practical actions from this blog post to help you get started.

 

Your quick 2026 UK employment law changes checklist

 

• Review probation, performance and fixed-term contract processes

• Introduce earlier and more frequent employee review check points

• Train your managers on performance and capability conversations

• Audit contracts, policies and records for leave, SSP, wages and whistleblowing

• Bring all documents and records into one secure system, with permission controlled access.

• Create or update harassment risk assessments and refresh training

• Make sure there's an easy, practical way for employees to report concerns

• Prepare trade union rights statements

• Revise onboarding and recruitment documentation

 

Want a full breakdown of the Employment Rights Act 2025 changes?

 

This blog covers four of the key areas SMEs should start preparing for now, but there are more changes coming through 2026 and 2027.

Our expert speakers covered many of these in the webinar which you can watch in full here: Employment law 2026: what changed in April & what to do next.

 

 

Or for a complete date-by-date guide, download our free ebook, 2026-2027 employment law changes: the complete guide for managers. It breaks down the key changes that are confirmed and expected, and turns them into clear actions for HR teams, business owners and line managers.