The Employment Rights Act became law in December, and if you run a small business the parts that actually affect you are only now starting to land. Statutory sick pay changed in April. The bigger change, a much shorter qualifying period for unfair dismissal, arrives in January 2027. Between now and then there is a real window to get your hiring and probation process right before the rules tighten.
I have hired people into small businesses a few times now, first at Crocodile HR and then again as CampSuite grew. Hiring badly is expensive even without new legislation. This Act makes it considerably more expensive, and I do not think enough small business owners have clocked how much it changes the calculation around who they take a chance on.
What The Employment Rights Act Actually Changes
The Act itself is a big piece of legislation covering a lot of ground, but three changes matter most if you are the person signing contracts and deciding who joins your team.
Statutory sick pay became a day one right in April this year, with the lower earnings limit removed so that even your lowest paid staff qualify from their very first day off sick. The unfair dismissal qualifying period drops from two years to six months from January 2027. And zero hours workers get a right to guaranteed hours based on what they have actually been working, due to land later in 2027.
Ministers originally promised day one unfair dismissal rights for everyone. That got watered down to six months during the Bill's passage through Parliament, which is a relief, but six months is still a quarter of what employers have been used to for years.
The Unfair Dismissal Change Should Worry You Most
Two years gave a small business a genuinely long runway to work out whether someone was right for the role. Six months does not. If a hire is not working out, you now have to know that, document it properly and act on it inside half a year rather than quietly hoping things improve for eighteen months before finally admitting the problem.
For a business with an HR department this is an inconvenience. For a business where the founder is also doing the hiring, the onboarding and the eventual difficult conversation, it is a genuine shift in risk. Get a hire wrong under the old rules and you had time to fix it internally. Get it wrong under the new rules and you are much closer to a claim if you have not built a paper trail.
The obvious response is to write off probation periods as pointless. I think that is exactly the wrong lesson. A well run probation period, with clear objectives set from day one and honest check ins at the one month and three month marks, is now more valuable than it has ever been. It gives you the evidence that you managed the situation properly, and it forces the conversations that founders naturally want to put off.
Statutory Sick Pay From Day One Is Already Live
This one slipped past a lot of small business owners because it landed quietly in April. Staff no longer need to earn above the lower earnings limit to qualify for statutory sick pay, and there is no more three day waiting period. Someone who joined you last week and calls in sick tomorrow is entitled to pay from that first day.
For most small teams the cash cost is not enormous. What it changes is your absence management. You can no longer let a pattern of odd days off drift for months before addressing it, because the cost starts accruing from the very first absence rather than after a qualifying wait. If you do not already have a simple, written process for recording and reviewing sickness absence, this is the point at which you actually need one.
Guaranteed Hours Are Coming For Zero Hours Workers
If your business uses zero hours or genuinely variable hours contracts, whether that is retail, hospitality or casual technical support, a right to guaranteed hours based on typical worked patterns is coming in 2027. The detail on the reference period is still being finalised, but the direction is clear. Flexibility that only benefits the employer is going away.
This does not mean zero hours contracts disappear. It means you need to be honest with yourself about whether you are using flexibility to genuinely respond to variable demand, or whether you are using it to avoid the commitment of a proper contract for someone who is, in practice, working regular hours every week. If it is the latter, the law is about to catch up with what has actually been happening.
What This Means If You Are About To Hire Your First Employee
I wrote a while back about what non technical founders get wrong when hiring their first developer, and most of those mistakes come from treating the hire as a one off event rather than a process. This legislation makes that mistake more expensive. A rushed job description, a gut feel interview and no real probation plan used to be recoverable within two years. Under the new rules you have six months to work out whether the hire is right and, if it is not, to have handled it properly.
The fix is not more paperwork for its own sake. It is being deliberate about the first six months. Set specific, written objectives before day one. Review them properly at four and twelve weeks rather than hoping it works itself out. If someone is not going to work out, have that conversation early rather than late, because you genuinely do not have the runway you used to.
How I Would Handle Probation Periods Now
If I were setting up a probation process today, I would keep it simple but I would make sure it actually happened rather than existing only on paper. A short written brief of what good looks like in the role, agreed with the person on day one. A check in at four weeks that is honest rather than a box ticking exercise. A proper review at three months with a clear decision, extend, confirm or end, rather than letting it drift to the edge of six months by default.
None of this requires an HR department or expensive software. It requires the discipline to actually do it, which is the same discipline I write about in The 28 Day Startup when it comes to getting the basics of a business right before you scale up. Hiring is one of those basics that founders love to wing, and this Act is a fairly blunt incentive to stop.
My Honest Take
I do not think the Employment Rights Act is the catastrophe some business lobby groups have suggested, and I have written before about how UK small business policy tends to talk a good game while quietly making founders' lives harder. This one is more defensible than most. Reasonable job security and sick pay for the people doing the work are not unreasonable asks.
What I do think is that a lot of small businesses are going to get caught out simply because nobody told them the qualifying period was shrinking, or that sick pay rules had already changed back in April. The businesses that come out of this fine will be the ones who treat the first six months of a hire as seriously as the interview itself. That was always good practice. Now it is close to compulsory, and if you need a hand thinking through how your business handles the practical side of that, it is exactly the kind of thing I help clients work through.
