Employment Rights Act: A Practical Guide for Small Businesses (2026–2027)
The Employment Rights Act is now law and will be introduced in phases. For small businesses, the priority is understanding what needs to change by April 2026, steps to take in February, what’s coming later, and what’s still under consultation.
This guide focuses on practical compliance, not legal theory.
What changes in April 2026
Statutory Sick Pay (SSP)
From April 2026:
The lower earnings limit for SSP is removed
The three-day waiting period is removed
More employees qualify for SSP from day one of sickness
Action for employers:
Review SSP wording in contracts (for those starting after 6 April 2026) and sickness policies and ensure payroll processes are aligned.
Family-friendly rights
Certain family-friendly rights will apply from day one of employment, including:
Paternity leave
Unpaid parental leave
Also being introduced is a new type of leave, Bereaved Parent’s Paternity Leave.
Action for employers:
Update family-friendly policies and ensure contracts and handbooks reflect day-one eligibility. Note that transitional arrangements apply, allowing employees who gain the right on 6 April to request leave from 18 February (shortening the notice period for babies due to be born after 5 April). So publicise these changes first. Introduce a Bereaved Parent’s Paternity leave policy.
Holiday Records
The Fair Work Agency (FWA) is a new UK state enforcement body launching 6 April 2026. It will serve as a single, central regulator for enforcing employment rights, bringing together several existing enforcement functions into one coordinated agency. From 6 April 2026, UK employers will be subject to a new statutory duty to keep detailed records of workers’ holiday entitlement, leave taken, and holiday pay – the FWA will enforce this requirement.
Action for employers:
Retain holiday records for 6 years Employers must keep “adequate records” for at least six years from the date the records are created.
Redundancy processes
Changes to maximum awards for failure to collectively consult increase the importance of:
Clear consultation processes
Proper documentation
Understanding potential exposure
Action for employers:
Review redundancy policies, even if redundancies are not currently planned.
What changes in 2027
Unfair dismissal
From 2027:
The qualifying period for unfair dismissal will reduce to six months (from two years)
What to do now:
No contract changes yet — but review probation and performance management processes so issues are addressed early and consistently.
What’s still under consultation
Some proposed changes are not yet final, including:
Zero-hours and low-hours contract reform
Rights to more predictable working patterns
Notice of shifts and compensation for cancelled work
These will be introduced through further regulations once consultations close.
For now:
Businesses using variable hours should monitor developments but do not need to update contracts yet.
The takeaway for small businesses
Before April 2026, focus on:
Updating SSP and family-friendly policies
Making sure contracts reflect reality & ensuring adequate record keeping for holidays and holiday pay calculations