Employment rights reform 2026: What small and medium businesses must do now

On February 11th, we hosted our latest SafeHR webinar, where our in-house employment solicitors, Helen Hancock and Nick Soret, guided attendees through some of the most significant changes to employment law in decades. The message was clear: 2026 and 2027 will fundamentally reshape the employer-employee relationship. Preparation is no longer optional, it is essential.

Many of these changes will take effect within the next 12–24 months, leaving businesses with limited time to review employment contracts, policies, and processes.

These reforms are wide-ranging and highly technical. They will directly affect how small and medium-sized businesses recruit, manage, and retain their people.

Here are the key takeaways every business leader needs to understand.

Statutory sick pay: a shift in cost and responsibility

From April 2026, statutory sick pay (SSP) will become more accessible for employees. The removal of the three-day waiting period and the lower earnings threshold means more employees will qualify, and they will be paid from day one. SSP will also move to 80% of normal weekly earnings (subject to the statutory cap).

For employers, this represents a direct cost increase and will require robust absence management processes. Without the right systems and policies in place, absence costs could quickly escalate.

Family leave and workplace protections are expanding

Family-friendly rights are being strengthened significantly. Qualifying service requirements for paternity and parental leave will be removed, and additional protections are being introduced for bereaved partners.

Employers will also have a new mandatory duty to take all reasonable steps to prevent sexual harassment in the workplace. They will bear increased responsibility for third-party harassment, including harassment in virtual spaces.

This is a critical shift. Prevention, HR documentation, and training will no longer simply be best practice, they will be a legal expectation.

The fair work agency: A new enforcement power

A new Fair Work Agency will be established with the authority to inspect workplaces, enforce compliance, and even bring tribunal claims on behalf of employees.

This marks a move toward active enforcement rather than relying solely on employee-led claims. Businesses must maintain compliant contracts, policies, and practices at all times, not just when a problem arises.

Unfair dismissal: The biggest change employers must prepare for

Perhaps the most profound change arrives in January 2027.

The qualifying period for unfair dismissal will be reduced from two years to just six months, and compensation caps will be removed.

This dramatically reduces the margin for error.

Probation periods, performance management, documentation, and dismissal processes will all need to be handled with far greater precision. Informal or poorly documented processes that many small businesses have relied upon could expose employers to serious legal and financial risk.

In short, good intentions will no longer be enough. Employers must be able to demonstrate fair, compliant decision-making.

The end of “fire and rehire”

Changes to employment terms without employee agreement will become virtually impossible unless a business can demonstrate genuine financial necessity.

This removes a tool many organisations have relied upon during periods of change, placing even greater emphasis on getting contracts and workforce planning right from the start.

The reality for small and medium businesses

These reforms are complex, and they are arriving quickly.

Most business owners didn’t start their companies to become employment law experts. Yet the reality is that people management is now one of the highest-risk areas of running a business.

This is exactly why Helen and Nick’s role at SafeHR is so important. Having direct access to experienced employment solicitors, supported by compliant documentation, robust systems, and proactive guidance, gives our clients clarity and confidence. We help businesses avoid problems before they arise, navigate change smoothly, and protect what they have worked so hard to build.

Our advice: Prepare early, not react late

The businesses that will succeed through these changes will be those that act now.

They will review their contracts.
They will strengthen their processes.
They will recruit the right candidates.
They will seek expert guidance.

Most importantly, they will recognise that compliance is not just about avoiding risk, it is about building a stronger, more resilient organisation.

At SafeHR, we are proud to support our clients through this transition, combining legal expertise, practical HR support for small businesses, and technology to make compliance manageable and efficient.

If you are concerned about the impact of these changes, unsure how to prepare, or simply want confidence that your business is set up to manage and support your people effectively, please get in touch with me directly or speak to a member of our team:

0330 057 2721
safehr@safe-hr.com

Ultimately, the cost of getting this right far outweighs the cost of getting it wrong.