August 2025
Ahead of the Employment Rights Bill’s final reading in the House of Lords, HR leaders shared their concerns about compliance pressures, legal uncertainty and the impact on SMEs.
London, UK - As members of the House of Lords prepare to scrutinise the Employment Rights Bill in its third reading tomorrow, industry leaders have expressed fresh concern over its potential impact on businesses.
While many have been vocal about the introduction of headline-grabbing measures like extending day one rights for workers, less has been said about how gaps in the legislation risk putting stretched businesses on the back foot.
On Wednesday 3rd September, the Employment Rights Bill will have its third reading in the Lords: a final opportunity for ministers to check the Bill’s text before it becomes law.
The new measures are designed to give workers greater protections. However, according to HR experts, significant questions remain over the impact these changes could have on workers and businesses.
“British businesses face a perfect storm: rising costs, a challenging economic climate, and now a wave of new legislation.
“For the most part, the Bill’s measures will benefit workers and employers. But for small and scaling businesses, it brings administrative, legal, and financial changes which will be challenging to implement.
“We still lack detail on what some changes could look like in practice. This uncertainty puts businesses on the back foot and is contributing to nervousness about the Bill.
“Leaders feeling uncertain can be proactive by nailing the HR basics first. Are essential tasks like booking time off, requesting flexible work and running performance reviews streamlined? Have you made a plan for reviewing policies and employment contracts? HR technology can automate HR admin, freeing owners up to focus on strategy, compliance and growth.”
“My greatest concern is the cumulative administrative burden. Between enhanced sexual harassment duties, trade union statements, bereavement leave tracking, and the new Fair Work Agency's enforcement powers, SMEs face significant compliance complexity without proportional resources.
“SMEs need practical implementation toolkits, not just guidance. Government-funded template policies, step-by-step compliance checklists, and subsidised HR consultancy hours would be invaluable. Sector-specific workshops and peer mentoring schemes could help businesses learn from each other's experiences.
“The upheaval will be worthwhile in principle as it creates fairer workplaces and reduces exploitation. However, for small businesses already operating on razor-thin margins with severely strained budgets, the transition will be genuinely challenging.
“SMEs often rely on business owners wearing multiple hats. The cost of implementation could push some viable small businesses over the edge.”
“Businesses should be aware of a few misconceptions about the Bill that have been amplified in the media.
“Headlines about a ban on exploitative zero hour contracts are misleading: this phrasing doesn’t feature in the legislation. There are lots of small measures that will make it less likely that zero hour contracts will exist. But there’s no outright ban.
“I also don’t expect “day one employment rights” to truly mean “day one”. There’ll be a period of time where employers can still terminate employment more easily.
“The most contentious issue in the Bill is the introduction of day one rights, meaning new starters can bring a claim of unfair dismissal from their first day of employment. Whilst the Bill proposes a statutory probationary period with a simplified disciplinary process in the first 6-9 months, no recruitment process is foolproof so we expect to see claims increase once the Bill passes Parliament.
“To help mitigate this, we would encourage all employers to put a rigorous probationary process in place now to ensure that suitability for the role is properly evaluated. This process should set realistic targets that are achievable for new starters linked to the support that they need to flourish in their new role. If this is done well and consistently, the upside for employers is that you will get an employee who feels valued and is empowered to deliver value for you”.
“The Employment Rights Bill will touch every sector, but in different ways. A universal challenge will be shorter qualifying periods for unfair dismissal. Smaller businesses without structured HR should be particularly proactive, as performance management tends to be something SMEs overlook. Waiting until problems arise will be too risky under the new law.
“Future-proofing your HR function in preparation for the Employment Rights Bill will be far easier than reacting in the moment. This means stepping back and reflecting on current HR challenges and policy gaps.
“Make a plan to identify recent HR lessons learned and pinpoint where managers have struggled. Keep your HR team updated on legislative changes using bulletins, webinars and strong relationships with advisors. Upskill and make strategic changes now to put the business in a stronger position when the Bill becomes law.”
“My biggest concern with the Employment Rights Bill is that many SMEs underestimate how significant the changes will be. These once-in-a-generation reforms will affect every aspect of employing people and are likely to increase an already litigious environment for businesses.
“The proposed ban on “fire and rehire” leaves businesses with fewer options to evolve and adapt in a fast-moving, economically uncertain, and technologically advancing world.
“Similarly, the move to extend unfair dismissal rights to newer employees shrinks the margin for error in recruitment. Without robust probationary periods, clear performance management, or a strong cultural foundation, SMEs risk being exposed very quickly.
“While some SMEs still see HR as an unnecessary cost, the reality is that good people support pays for itself, reducing disputes, cutting stress for overstretched managers, improving retention, and building healthier, more productive workplaces.
“The transition to the new ways of working will be disruptive for businesses, with mistakes being made and lessons learned. However, those who act early will be best placed for a smooth transition and long-term success.”