As many businesses will be aware, the Employment Rights Act 2025 (ERA 2025) has provided the broadest and largest change to employment law in decades. It is, therefore, being implemented in stages.

While several changes have already taken effect during 2026, the next significant milestones for employers are expected in October 2026 and January 2027 onwards.

Even small to medium sized business, and those without recognised trade unions in their workplaces, will need to be aware of the widespread changes. The steps below will help SMEs prepare and identify what changes could create new or heightened risks for their businesses, depending on their sector and workforce.

If you want help with any of these changes in the law, please do reach out to us and we will respond promptly.

Changes expected from October 2026

1. Enhanced Duty to Prevent Sexual Harassment

Employers will be required to take “all reasonable steps” to prevent sexual harassment in the workplace, strengthening the existing preventative duty.

Employers may also become liable for certain incidents of harassment by third parties, such as customers, clients or suppliers. The government has stated that the expectations on employers in respect of preventing third party harassment will be lower than the expectation in respect of an employer’s own employees.

We note that, at the time of writing, the government’s Reasonable steps factsheet  states the regulations setting what will be regarded as ‘reasonable’ are expected to come into force in 2027/8 after consultation. This means employer’s may be in the unenviable position of the new rules coming to force, but without firm guidance on what is expected.

A failure to take all reasonable steps can lead to a 25% uplift on the employee’s discrimination compensation, and the Equality and Human Rights Commission (EHRC) has the power to investigate and take enforcement action.

Practical steps for SMEs

• Carry out a workplace risk assessment identifying situations where harassment risks may arise and review these annually alongside H&S risk assessments
• Review and update anti-harassment and dignity-at-work policies
• Deliver mandatory training for all staff and managers
• Establish clear reporting channels and investigation procedures
• Keep records of training and complaints handled
• Consider how to manage risk and prevent harassment where employees regularly deal with customers or members of the public

2. Increased Trade Union access rights it (now pushed back to January 2027)

Trade unions will gain broader rights to access workplaces for recruitment, organisation and representation activities (but expressly not to organise industrial action).

In brief, the union will present an “access request” to the employer, who may issue a “response notice” to the union before the end of the “response period”. The union and employer then have a “negotiation period” to agree written terms on which the officials will have access. There is a draft Code of Practice that has been consulted on.

It has been recognised that smaller employers may find it more difficult to facilitate access in practice, so employers with fewer than 21 workers will be exempt.

Practical steps for SMEs

• Review procedures for dealing with union representatives
• Train managers on lawful engagement with trade unions
• Ensure any access arrangements are applied consistently
• Avoid decisions that could be interpreted as obstructing lawful union activity

3. Duty to inform workers of their right to join a Trade Union

Employers will be required to provide information to workers regarding their right to join a trade union.

When must it be given?

The statement must be given:

• At the same time as providing the worker’s section 1 statement
• At other prescribed times (which will be set out in regulations)

What must it include? The regulations will also state:

• The information that must be included in the statement
• The form which the statement must take
• The manner in which the statement must be given

Practical steps for SMEs

• Keep a look out forthcoming regulations to see what is needed and when
• Update offer letters, contracts and onboarding materials
• Include information in employee handbooks
• Review induction programmes to ensure compliance

4. Facilities and time off for union officials and protection against detriment for industrial action

The planned changes to trade union officials’ rights are summarised as follows and are more relevant where the employer has a recognised trade union:

• Where given time off for trade union duties (an existing right), the employer must provide “such accommodation and other facilities for carrying out the duties or undergoing the training for which the employee takes time off as is reasonable in all the circumstances, having regard to any relevant provisions of a Code of Practice issued by Acas”.
• Similar wording applies for ‘union learning representatives’
• ‘Union equality representatives’ will also be allowed paid time off for carrying out their activities, again with the provision of reasonable accommodation and other facilities.
• Draft regulations (yet to be approved) will prohibit all forms of detriment against a worker on the grounds of them taking industrial action. These are expected to come into force on 30 October 2026.

Practical steps for SMEs

• Where there is a recognised trade union, check processes already in place and update any policies
• Be mindful where no recognised trade union of the above rights of access
• Review training of managers to ensure business is aware of the rights and protection afforded to trade union officials

5. Extension of Employment Tribunal time limits

The limitation period for most employment tribunals will be extended from three months to six months.

It is proposed that the six-month time limit will only apply where the ‘relevant date’ (the cause of action) falls on or after 1 October 2026.

Practical steps for SMEs

• Retain employment records for longer periods
• Ensure investigation records are comprehensive and well documented
• Review document retention policies
• Use the longer time limit to try and resolve any issues to avoid any claims

Changes Expected from 1 January 2027 Onwards

1. Reduction of the Unfair Dismissal qualifying period

The qualifying period for ordinary unfair dismissal claims will reduce from two years’ service to six months’ service.

Many employees who currently have no ordinary unfair dismissal protection during their first two years of employment will gain protection after six months.

Practical steps for SMEs

• Strengthen probation management processes
• Conduct formal probation reviews and document performance concerns
• Train managers on fair dismissal procedures
• Avoid informal dismissals based solely on “short service”
• Ensure performance and conduct concerns are evidenced and recorded

2. Removal of the cap on Unfair Dismissal compensation

The current statutory cap (currently at £123,534 since April 2026) on the compensation award for unfair dismissal is expected to be removed.

This means employers have a higher financial exposure from dismissal claims. This could be particularly significant where employers have a large number of high earners.

The reduction of the qualifying period above and the removal of the cap on compensatory awards will apply to any case where the ‘effective date of termination’ (EDT) falls on or after 1 January 2027. Note that statutory notice periods can affect what the EDT is.

Practical steps for SMEs

• Review employment practices and insurance policies
• Ensure robust performance management and disciplinary processes
• Conduct risk assessments before terminating employment
• Obtain legal advice for higher-risk dismissals

3. Fire-and-Rehire Restriction

New protections are expected in January 2027 to significantly limit an employers’ ability to dismiss and re-engage employees to impose contractual changes.

It is proposed that employees will be automatically unfairly dismissed, other than in circumstances of severe financial difficulty, where their dismissal is:

• Because the employee refused to agree to a “restricted variation” in their contract of employment
• To enable the employer to employ another person (or to re-engage the employee under a varied contract of employment) to carry out the same or substantially the same duties, where one or more of the differences in contractual terms is a “restricted variation”
• To enable the employer to replace the employee with another individual who is not an employee of the employer

Practical steps for SMEs

• Plan organisational change projects earlier
• Prioritise consultation and voluntary agreement
• Keep detailed records of business reasons for any proposed contractual changes
• Seek legal advice before considering dismissal and re-engagement strategies

Summary

The changes highlighted above are not exhaustive. For most SMEs, the two changes likely to have the greatest practical impact are:

• the strengthened duty to prevent workplace harassment from October 2026, and
• the reduction of the unfair dismissal qualifying period to six months from January 2027, together with the removal of compensation cap

These reforms will require employers to adopt more structured HR processes and investment, particularly around recruitment, probation management, workplace culture and employee relations. Employers should watch this space as the ERA 2025 is implemented and look out for information on government websites or Acas.

We can help. We can provide your business with legal advice or training tailored to your needs.

For further information, please contact Linda Wilson at lsw@macdonaldoates.co.uk or on 01730 268211.This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.