Employment Rights Act 2025: What Small Businesses in Hull Need to Do Before January 2027

The Employment Rights Act 2025 is the biggest change to UK employment law in a generation, and it's arriving in stages. Some changes are already in force, more land this month, and the one that will affect small businesses most starts on 1 January 2027: staff will be able to claim unfair dismissal after just six months' service.

If you run a small business in Hull or East Yorkshire and don't have an HR team, here is what's changing, when, and what to do about it, in plain English.

The key dates at a glance

• Already in force (April 2026). Statutory Sick Pay is now payable from the first day of sickness, and lower earners now qualify for it. Paternity leave and unpaid parental leave are day-one rights. Employers must keep records of holiday and holiday pay. A new government body, the Fair Work Agency, now enforces employment rights.
• 1 October 2026. Employees now have six months instead of three to bring many employment tribunal claims.
• 30 October 2026. Employers must take “all reasonable steps” to prevent sexual harassment at work, and can be liable when staff are harassed by third parties such as customers, clients or contractors.
• 1 January 2027. The qualifying period for unfair dismissal falls from two years to six months, and the cap on unfair dismissal compensation is removed. New restrictions on “fire and rehire” also start.
• Later in 2027. Further changes are planned, including guaranteed hours for zero-hours and low-hours workers, a new flexible working framework, bereavement leave, and stronger protection for parents returning to work. The details are still being confirmed.

The big one: unfair dismissal after six months

At the moment, most employees need two years' service before they can claim unfair dismissal. From 1 January 2027, that drops to six months. It applies to dismissals on or after that date, so anyone who has already worked for you for six months by then will be protected straight away. That includes anyone who joined on or before 1 July 2026.

The cap on compensation is also being removed. Until now, unfair dismissal awards were capped at a year's pay or the statutory limit, whichever was lower. From January there is no upper limit, so getting a dismissal wrong could cost a small business considerably more.

This doesn't mean you can't let someone go. It means that after six months you need a fair reason and a fair process, and you need to be able to show it. In practice, the first six months of employment are now your window to decide whether someone is right for the role.

What to do now:

• Check your probation periods. Make sure they end comfortably within six months, and that your contracts say how probation can be extended.
• Make probation real. Set clear expectations on day one, hold regular review meetings, and write down what was discussed.
• Deal with problems early. Performance or conduct issues that are left to drift become much harder to resolve once someone passes six months.
• Have proper procedures. Make sure you have disciplinary, capability and grievance procedures, and that your managers know how to use them.

Preventing harassment: from 30 October 2026

Since October 2024, employers have had a legal duty to take reasonable steps to prevent sexual harassment. From 30 October 2026, that becomes “all reasonable steps”, which is a higher bar. Employers can also be held responsible when employees are harassed by third parties, such as customers, clients, suppliers or members of the public. If an employer hasn't met the duty, a tribunal can increase compensation in sexual harassment cases by up to 25%.

What to do now:

• Have an up-to-date anti-harassment policy that covers third parties.
• Carry out a simple risk assessment. Where could harassment happen in your business: client sites, evening events, customer-facing roles?
• Give staff a clear and safe way to raise concerns, and act on every complaint.
• Train managers and staff, and keep a record that you did.

Longer to bring claims

Because the time limit for many tribunal claims has doubled to six months, a problem can come back to you later than it used to. Keep good records of decisions, meetings and the reasons behind them, and keep them for longer.

Changes already in force: have you caught up?

If you haven't yet reviewed the April 2026 changes, do it now. Check that your sickness absence policy and payroll reflect Statutory Sick Pay from day one. Make sure your family leave policies show day-one paternity and parental leave. And check that you're keeping proper holiday records.

Your checklist before 1 January 2027

• Review employment contracts and make sure probation clauses work with the six-month rule
• Update your employee handbook and policies: sickness, family leave, harassment, disciplinary and grievance
• List everyone who will have six months' service on 1 January 2027
• Resolve any ongoing performance or conduct concerns fairly and promptly
• Carry out a harassment risk assessment and update your policy to cover third parties
• Train managers on probation reviews, fair process and handling complaints
• Check your record-keeping for holidays, absence and management decisions
• Review any plans to change staff terms and conditions in the light of the new fire-and-rehire rules

How Floreo HR can help

If this feels like a lot, you don't have to work through it alone. Our free HR Health Check is a good place to start. We'll look at your contracts, policies and processes, highlight any risks or gaps, and give you clear recommendations on what to update before January. There's no pressure and no sales pitch.

We support businesses across Hull, East Yorkshire, York, Leeds, Harrogate and Sheffield with both ad-hoc and retained HR support. Call 07860 507 848 or get in touch.

This article is general guidance based on the government's published timetable as at October 2026. It isn't legal advice. Some dates and details are still being confirmed through government consultation, so check the latest position on GOV.UK and Acas, or speak to us about your circumstances.