Employment Rights Act 2025: SME HR and Automation Plan

Unemployment hit 5.1% in figures released on 16 December 2025 (up from 4.3% a year earlier). For UK SMEs, that backdrop matters because hiring is already fragile—then the Employment Rights Bill received Royal Assent on 18 December 2025, becoming the Employment Rights Act 2025.

Most companies will treat this as “an HR problem” and park it with whoever does contracts and payroll. That’s a mistake. The Act will reshape how you recruit, schedule, manage absence, and change terms—so it will also reshape your operating capacity. And when operational capacity shifts, marketing automation gets affected fast: slower lead follow-up, inconsistent campaign execution, and more manual work when you can least afford it.

This piece sits in our Immigration, Skills & Workforce series for a reason. When labour is tight (skills shortages, mobility, wage pressure), you can’t waste time on admin—or on fixing avoidable compliance gaps. The smart move is to build processes that are compliant by default, then keep revenue-generating activity steady.

Practical stance: treat the Employment Rights Act 2025 as a workflow redesign project, not a legal memo.

What changed in the Employment Rights Act 2025 (and when)

The immediate headline: the Act is law, but many measures will be introduced through secondary legislation, with government guidance expected throughout 2026.

Here are the parts SMEs should have on their radar now, because they affect day-to-day management.

Unfair dismissal: not day one, but a shorter runway

Answer first: Unfair dismissal rights won’t be day one; instead there’s a six-month period (still a major reduction from 24 months previously).

Operational impact for SMEs:

• Hiring decisions may feel riskier, especially for roles where performance is hard to judge quickly.
• You’ll need cleaner probation processes: documented objectives, regular check-ins, and consistent feedback.

Automation tie-in: if your onboarding, probation reviews, and manager reminders live in people’s heads, you’ll miss steps. Miss steps → messy terminations → claims risk.

Pay and protections from day one: sick pay and parental pay

Answer first: Workers will get sick pay and parental pay from day one.

This is where cashflow planning meets process design:

• Absence reporting needs to be consistent from day one of employment.
• Managers need a simple route to record absence and trigger payroll/HR actions.

Automation tie-in: day-one entitlements increase the value of structured data capture. A single absence form (Teams/Slack form, HR system, or even a simple workflow tool) that logs dates and reason codes can prevent payroll surprises.

Pregnancy and new mother protections: higher risk if you’re sloppy

Answer first: The Act strengthens protections for pregnant workers and new mothers.

SMEs don’t usually fail here because they’re malicious; they fail because communication is fragmented (WhatsApp messages, informal rota changes, inconsistent notes). Your defence is an audit trail that shows fair process.

Automation tie-in: create standard manager prompts and checklists for risk assessment updates, scheduling adjustments, and return-to-work planning.

Fire-and-rehire and zero-hours: softened, but not “business as usual”

The Act didn’t implement outright bans that some expected. But it does tighten the rules in ways that will punish casual processes.

Fire-and-rehire: unfair when core terms are changed

Answer first: Fire-and-rehire will be deemed unfair if certain core terms are changed, including:

• required number of working hours
• pay
• pension
• rights regarding time off
• shift times and length

There’s also a tougher stance on “fire and replace”—replacing employees with contractors/agency workers or others doing largely the same work.

An exception applies if the company is under severe financial distress. Measures are expected around October 2026.

Automation tie-in: contract variation workflows matter. If your “change of terms” process is basically an email thread, you’re exposed. A controlled workflow with approvals, versioned documents, and acknowledgement tracking is cheap insurance.

Zero-hours: pressure to offer guaranteed hours

Answer first: Employers will be expected to offer guaranteed hours to qualifying workers when regular worked hours exceed contracted hours (details of “qualifying” to follow).

This matters for sectors relying on flexible staffing (hospitality, care, logistics, events). It also intersects with the wider workforce and skills conversation: if you can’t reliably staff delivery, your growth plans and marketing targets are fantasy.

Automation tie-in: you need reporting that answers a simple question fast:

“Who is regularly working above contract, and by how much?”

If you don’t already track this cleanly, build it now (even if the “qualifying” definition changes later).

Notice of shifts and cancellations: rota chaos will get expensive

Answer first: Many workers will have the right to reasonable notice of shifts and changes/cancellations, extended to agency workers.

This pushes SMEs toward better scheduling discipline. And here’s the uncomfortable truth: inconsistent scheduling doesn’t just upset staff—it creates knock-on disruption everywhere else.

• Customer response times slip
• Deliveries miss windows
• Sales follow-ups stall
• Marketing campaigns lose momentum

Marketing automation tie-in: if your sales team is suddenly covering shifts, your CRM pipeline goes stale. If your service team is understaffed, reviews drop. Workforce stability shows up in your revenue metrics.

The hidden SME risk: compliance admin drains marketing capacity

Answer first: The Act increases administrative load, and admin load steals time from revenue.

FSB and other business groups have flagged a common SME worry: too many changes, too quickly. Even if you agree with the intent of improving job security, the operational reality is that small employers often lack dedicated HR capacity.

Here’s the pattern I see in SMEs: when compliance pressure rises, marketing execution becomes inconsistent.

• Campaigns go out late or not at all
• Lead nurture sequences aren’t updated
• Follow-up SLAs drift (hours become days)
• Customer segments aren’t refreshed

And then leadership says “marketing automation isn’t working”. It usually is working—it’s just not being maintained.

So the real question becomes: how do you absorb new workforce obligations without letting marketing fall apart?

3 ways to prepare in 2026 without losing marketing momentum

Answer first: Standardise HR workflows, connect them to your scheduling data, and protect your lead handling process with automation.

1) Build a “compliance calendar” and automate reminders

Don’t wait for guidance drops to catch you off guard. Set up a simple 2026 compliance calendar that includes:

• policy reviews (probation, sickness, parental leave)
• contract template review points
• manager training refreshers
• secondary legislation/guidance review checkpoints (monthly or bi-monthly)

Then automate nudges:

• task reminders to owners/managers
• document request workflows (collect acknowledgements)
• escalation rules when tasks are overdue

Why it helps marketing: it prevents last-minute fire drills that steal the same people who run campaigns and sales follow-up.

2) Treat staffing and scheduling data as a revenue input

If shift notice and guaranteed hours requirements tighten, your rota can’t be “best effort”. Start tracking:

• planned hours vs worked hours
• last-minute cancellations and who initiated them
• agency usage patterns

Even a basic dashboard is useful. The aim is to reduce surprises.

Why it helps marketing: stable staffing supports stable customer delivery, and stable delivery supports conversion and retention.

3) Put lead follow-up on rails (so it survives busy weeks)

When HR workload spikes, leads often get neglected. Fix that by setting up:

• automated lead routing (by service line, location, or urgency)
• SLA reminders (e.g., notify if no response in 2 hours)
• lightweight qualification forms to reduce back-and-forth
• automated nurture for “not ready yet” prospects

This is where marketing automation for SMEs earns its keep: it maintains speed-to-lead and keeps prospects warm even when humans are stretched.

Non-negotiable metric: track response time weekly. If it deteriorates, something upstream (often staffing) is breaking.

People Also Ask: quick answers SMEs want in January 2026

When does the Employment Rights Act 2025 take effect?

The Act has received Royal Assent (18 Dec 2025), but many measures depend on secondary legislation and guidance planned through 2026. Plan for phased changes.

Is unfair dismissal now a day-one right?

No. The notable update is that day-one unfair dismissal rights were abandoned in favour of a six-month period, still down from 24 months previously.

Are zero-hours contracts banned?

No. The approach is softened: employers will be expected to offer guaranteed hours in certain cases where worked hours regularly exceed contracted hours, with details to follow.

Is fire-and-rehire banned?

No, but it’s constrained. It may be unfair when core terms (hours, pay, pension, time off rights, shift times/length) are changed, and “fire and replace” is targeted.

What to do this quarter: a simple SME checklist

Answer first: Update your processes now, then refine when 2026 guidance lands.

1. Probation process: define what “good” looks like at 30/60/90/180 days and schedule check-ins.
2. Absence reporting: create one route for reporting sickness and one owner for payroll inputs.
3. Contract change control: require written approval and tracked employee acknowledgement for term changes.
4. Hours tracking: start measuring contracted vs worked hours for anyone on variable schedules.
5. Shift communications: move rota updates into a system that timestamps notices and changes.
6. Marketing protection: automate lead routing and follow-up reminders so enquiries don’t die during busy weeks.

If you do nothing else, do this: make your workflows visible. What’s written down can be improved and automated. What’s tribal knowledge becomes legal and operational risk.

Where this fits in Immigration, Skills & Workforce

The Employment Rights Act 2025 lands at the same time SMEs are juggling labour shortages, changing worker expectations, and ongoing skills gaps. Whether you hire locally, rely on agency staff, or compete for scarce digital talent, the direction of travel is clear: better worker protections, more structure, and less tolerance for informal processes.

That pressure can either slow your business down—or force you to build cleaner systems that support growth. I’m firmly in the second camp.

The next 12 months will reward SMEs that standardise HR and scheduling, then use marketing automation to keep revenue predictable while they adapt. What are you going to automate first: onboarding and probation, shift notices, or lead follow-up?