Employment law in the UK applies the moment you take on your first member of staff. There is no threshold, no grace period for small businesses, and no meaningful distinction between hiring one person and hiring fifty. From day one, you carry the same core legal obligations as any other employer: written contracts, statutory pay entitlements, discrimination duties, and lawful dismissal procedures.

The Employment Rights Act 2025 has added considerably to that picture. Several of its provisions are already in force, and more are coming in 2027. ShrewdHR is a UK-based HR consultancy that works with small business owners. What follows is a plain-English walkthrough of the key pillars, with the specific figures and deadlines you need to act on now.

Key takeaways

• Written contracts: Must be issued on or before an employee’s first day, not within two months as many employers assume.
• Statutory sick pay: Payable from the first full day of sickness from 6 April 2026, with no lower earnings threshold, broadening liability for small employers.
• Discrimination law: Applies in full to businesses of all sizes across nine protected characteristics, with no small-business exemption.
• Fair dismissal: A potentially fair reason is not sufficient on its own; procedure matters, and the compensatory award is capped at £123,543 (GOV.UK, employment tribunal award guidance, effective 6 April 2026).
• Tribunal deadlines: Employees now have six months to bring most claims for events from 1 October 2026, up from three months (GOV.UK / Acas).
• 2027 reforms: The unfair dismissal qualifying period is expected to drop to six months; reviewing your procedures now is the most practical way to manage that risk.

Employment law in the UK: what small businesses must have in place before anyone starts work

The written statement of employment particulars

Most small business owners believe they have two months to issue a contract. They do not. The law requires you to provide a principal written statement on or before an employee’s first day. That statement must cover the identity of the parties, job title, pay, working hours, holiday entitlement, probation period, place of work, and the notice required by either side.

A missing or defective statement does not just create an administrative inconvenience; it can be cited in a tribunal claim and attract a compensation uplift. Getting this right before someone walks through the door takes little additional time compared with addressing it once a dispute has begun.

Pension auto-enrolment duties

You are legally required to pay employer contributions, notify the worker of their enrolment and their right to opt out, and register compliance with The Pensions Regulator.

The re-enrolment obligation repeats approximately every three years (The Pensions Regulator). It is a commonly missed duty, and failing to meet it attracts fixed and escalating penalty notices. Tracking your re-enrolment dates at each payroll run is a straightforward way to stay compliant.

Health and safety basics every employer is responsible for

Every employer must carry out suitable risk assessments and provide safe systems of work, with appropriate training and supervision in place. RIDDOR requires you to report certain serious injuries, diseases, and dangerous occurrences to the relevant authority. If you employ field workers, remote workers, or operatives on client sites, those assessment duties extend well beyond your own premises, particularly in maintenance, trades, and construction, where site-specific risks are common and documented assessments are not optional.

What statutory rights are your staff entitled to?

Pay, holiday and sick pay: the 2026 figures

Most workers are entitled to 5.6 weeks’ paid annual leave per year, and holiday pay must reflect normal remuneration, including regular overtime. From 6 April 2026, Statutory Sick Pay is payable from the first full day of sickness: the three-day waiting period has been removed, and so has the lower earnings threshold. According to GOV.UK guidance, SSP stands at £123.25 per week, subject to an 80% cap on average weekly earnings for lower earners, and is payable for up to 28 weeks.

Family leave entitlements: broader than most employers realise

Maternity leave can run to 52 weeks, with statutory pay available for up to 39 of those weeks. Paternity leave and unpaid parental leave are now day-one rights, effective from 6 April 2026, removing the previous minimum service requirements. Workers also have day-one rights to carer’s leave (up to one week unpaid per year), neonatal care leave (up to 12 weeks), and parental bereavement leave.

The working week is regulated separately. The Working Time Regulations cap average weekly hours at 48, with entitlements to daily and weekly rest periods and a 20-minute break when the working day exceeds six hours. Workers can sign a written opt-out from the 48-hour average, but that opt-out does not remove any other entitlement.

What does discrimination law require of employers?

The nine protected characteristics and what they mean in practice

The Equality Act 2010 lists nine protected characteristics: age, disability, race, sex, pregnancy and maternity, religion or belief, sexual orientation, gender reassignment, and marriage and civil partnership. There is no exemption for small businesses. You are liable for direct and indirect discrimination, harassment, and victimisation committed by your employees in the course of their employment.

The “all reasonable steps” defence now requires active, documented prevention measures rather than a generic equality policy filed away somewhere. From 30 October 2026, employers also face potential liability for harassment of workers by third parties, including clients and customers. A complaint from a member of staff about customer behaviour that you fail to address is now a compliance risk in its own right.

Reasonable adjustments for disabled workers

Where a workplace rule, physical feature, or the absence of an auxiliary aid puts a disabled worker at a substantial disadvantage compared with non-disabled colleagues, you have a positive legal duty to make reasonable adjustments. Cost alone does not justify failing to adjust; proportionality is assessed in context, taking into account the size and resources of the business. Failure to make reasonable adjustments is one of the most frequently cited grounds in tribunal claims and often appears alongside an unfair dismissal complaint.

How to dismiss someone fairly and avoid a costly mistake

The five potentially fair reasons for dismissal

There are five potentially fair reasons for dismissing an employee: conduct, capability or qualifications, redundancy, statutory restriction, and some other substantial reason. Having a potentially fair reason is a necessary starting point, but it is not sufficient on its own. The tribunal also examines whether the decision to dismiss fell within the range of reasonable responses open to a reasonable employer in the same circumstances.

From January 2027, the unfair dismissal qualifying period is expected to drop from two years to six months (GOV.UK / Employment Rights Act tracker). That change fundamentally alters the risk profile of every dismissal from the early months of employment, and businesses should start treating all dismissals as decisions that may face scrutiny.

What a fair procedure actually looks like

A fair disciplinary process under the ACAS Code of Practice requires a proper investigation, written notification of the allegations, a hearing at which the employee has the right to be accompanied by a colleague or trade union representative, a genuine opportunity for the employee to respond, a proportionate sanction, and a right of appeal. Departing from the ACAS Code without good reason can increase a tribunal award by up to 25%.

Constructive dismissal carries its own significant risk. Where an employer commits a serious breach of contract, for example, an unauthorised pay cut, sustained bullying, or a fundamental change to duties, and the employee resigns as a result, that resignation is treated legally as a dismissal. The employee does not need to be formally let go for a claim to succeed.

What a tribunal award could cost you

For dismissals from 6 April 2026, the maximum basic award for unfair dismissal is £22,530, and the compensatory award is capped at £123,543 or 52 weeks’ gross pay, whichever is lower (GOV.UK, employment tribunal award guidance). According to the Ministry of Justice’s Employment Tribunal Statistics 2023–24, the median unfair dismissal award was £6,746; discrimination claims, however, carry no statutory cap on compensation at all. Statutory redundancy pay uses an age-and-service formula, with weekly pay capped at £751 and service capped at 20 years, giving a maximum statutory payment of £22,530 (GOV.UK / Acas). These figures make clear that getting dismissal and redundancy procedures right is considerably less costly than defending a tribunal claim that goes wrong.

What do the 2026 employment law changes mean for your business?

Changes already in effect this year

Several provisions of the Employment Rights Act 2025 are already live and affecting small employers now. SSP is payable from the first full day of sickness with no lower earnings threshold, broadening liability for businesses that previously had minimal sick-pay exposure. Paternity leave and unpaid parental leave are day-one rights. Tribunal time limits have extended: employees can bring most claims for events on or after 1 October 2026 within six months minus one day, up from three months, giving them a significantly longer window in which to act (GOV.UK / Acas).

The protective award for failing to collectively consult on redundancy has doubled to 180 days’ pay per affected employee (GOV.UK / Employment Rights Act 2025 implementing guidance), a change with real financial weight for smaller businesses considering restructuring. The sexual harassment prevention duty now requires employers to take “all reasonable steps,” and third-party harassment liability is live from 30 October 2026.

What’s coming in 2027 that you should prepare for now

The unfair dismissal qualifying period is expected to fall to six months in January 2027 (GOV.UK / Employment Rights Act tracker). This is arguably the single most significant change for small businesses: from that point, employees will be able to challenge dismissal decisions made in the first half of their employment, which removes much of the buffer that probationary periods currently provide. Fire and rehire will be effectively prohibited except in narrowly defined circumstances involving genuine financial difficulty, making it substantially harder to impose changes to core contractual terms.

Workers on zero-hours or variable-hours arrangements will gain rights to guaranteed-hours offers and compensation for short-notice shift cancellations. Flexible working requests will require genuine substantive justification for refusal. The time to review your contracts, procedures, and manager behaviours is now, not when the first claim lands on your desk.

Managing employment law in the UK without an in-house HR team

What outsourced HR support actually covers and why it matters now

As employment rights in the UK become more extensive and the financial consequences of non-compliance rise, small businesses without dedicated HR expertise carry real exposure. Shorter tribunal deadlines, broader statutory rights, stronger harassment prevention duties, and higher redundancy liabilities all add to that risk. ShrewdHR provides small and growing businesses with access to named, experienced HR consultants, without the overhead of a full-time in-house hire.

We cover employment contract reviews, policy documentation, disciplinary and grievance handling, redundancy support, and ongoing employment law updates to keep you current as legislation evolves. Our ‘Managing with Confidence’ programme provides management training delivered by experienced HR trainers.

A simple compliance checklist to start with

Use this as a baseline review against your current position. If any item is not yet in place, it is worth addressing before your next hire or your next difficult conversation with a member of staff.

• Written statement of employment particulars issued on or before day one
• Pension auto-enrolment assessed at each payroll run, with re-enrolment dates tracked
• Employment contracts reviewed against 2026 statutory minimums, including SSP and family leave day-one rights
• Disciplinary and grievance procedure documented, up to date, and communicated to all staff
• Equality policy in place and sexual harassment prevention measures reviewed and evidenced
• Tribunal risk reviewed in light of the six-month time limits applying to events from 1 October 2026

Employment law is manageable, if you know what to look for

What creates risk is the gap between what employers assume their obligations are and what employment law in the UK actually requires, and that gap has widened considerably with the Employment Rights Act 2025. The obligations are real and they apply from day one: contracts, statutory pay, discrimination duties, fair dismissal procedures, and the wave of legislative changes already in force.

If you are unsure whether your current contracts, procedures, or management practices meet the 2026 standards, the practical next step is a review now, before a problem arises, rather than a reactive scramble once one does. The businesses that navigate employment rights in the UK well are not those with the largest legal budgets; they are the ones with consistent, documented processes and expert advice available when they need it.

That is precisely what we are here for at Shrewd HR. Whether you need a contract review, support handling a disciplinary, guidance through a redundancy process, or ongoing retained HR support, get in touch with our team and we will make sure your business is on the right side of the law.