The Employment Rights Act Has Landed: What Sussex SMEs Need to Do This Week

Understanding Your Obligations

The Employment Rights Act 2025 received Royal Assent on 18 December 2025 and is, without hyperbole, the most significant overhaul of UK employment law in a generation. The first wave of changes went live on 6th April 2026. The new enforcement body launched the day after.

Most Sussex SME owners have had more pressing things on their plate than reading 300-page legislation docs. That’s understandable. But the April wave isn’t a future concern anymore. Day-one statutory sick pay is live. Day-one paternity leave is live. Doubled redundancy penalties are live. And a brand new agency with real enforcement powers is actively operating. Knowing what’s changed, and what’s coming next, is now a business-critical task.

This guide covers the full picture: what activated in April, what it costs, why the Fair Work Agency deserves particular attention, and the dates in October 2026 and January 2027 that every employer with hiring plans needs to mark now.

One important note before starting: there is no size exemption under the ERA. The obligations apply to every UK employer. The smaller the team, the less likely there’s a dedicated HR function absorbing the change. Which makes the compliance gap more dangerous, not less.

What Just Changed: The April 2026 Wave

Day-One Statutory Sick Pay: Sort Your Payroll This Week

Two things changed simultaneously on 6 April. The three-day SSP waiting period was scrapped. And the Lower Earnings Limit – which previously excluded employees earning below £125 per week from SSP eligibility – was removed. From that date, statutory sick pay is a day-one entitlement for every eligible employee, at a rate of £123.25 per week. For those earning below the former threshold, SSP is paid at 80% of their normal weekly earnings.

The headline cost to UK employers is estimated at around £450 million per year. At national scale, that’s a line in an impact assessment. At small business scale, it is considerably more tangible. According to the final-stage SSP impact assessment, micro businesses – those with zero to nine employees – account for around 47% of all UK businesses but are estimated to absorb approximately 60% of the total new SSP costs. The disproportionate burden on the smallest employers is not incidental. It is baked into the structure of the change.

An estimated 1.3 million of the lowest-paid workers in the UK – many of them part-time or on variable hours contracts – gain SSP entitlement for the first time. If your workforce includes anyone on casual, part-time, or variable arrangements who was previously below the LEL, their eligibility status has changed. Auditing that is the first practical task this week.

Recommendation: Confirm with your payroll provider right now that the three-day waiting period has been removed from your system configuration. Incorrect SSP payments from 6th April onwards represent a compliance failure. The Fair Work Agency – more on this shortly – has the powers to investigate and penalise underpayments.

Day-One Paternity and Parental Leave: The 26-Week Rule No Longer Exists

Previously, employees needed 26 weeks of continuous service before becoming eligible for paternity leave. That qualifying period has gone. From 6th April 2026, paternity leave and unpaid parental leave are day-one rights, bringing them in line with maternity leave entitlement.

The practical implication is simple and easy to miss in the day-to-day of running a business: a new starter joining your team today could, in principle, request paternity leave on their first day. Any employee handbook or contract template that still references a qualifying period for paternity or parental leave is now factually wrong so you need to update both.

There’s also an operational nuance worth flagging. Employees who joined from 18th February 2026 onwards were already entitled to give advance notice of paternity leave ahead of the April commencement date. If you have staff who joined in that window and gave notice, those requests are legally valid and should be treated as such.

Doubled Redundancy Penalties: The Change Most SME Guidance Has Glossed Over

This one has been underreported in coverage aimed at smaller businesses, despite carrying significant financial implications. From 6th April 2026, the maximum collective redundancy protective award has doubled from 90 to 180 days’ pay per affected employee. The rate of a day’s pay is uncapped.

The protective award applies when an employer fails to collectively consult before proposing 20 or more redundancies within a 90-day period. At 180 days per employee, a business making 20 redundancies without the proper consultation process in place could face a substantial six-figure tribunal award where the maximum exposure was previously half that. Add in a further 25% uplift if the tribunal finds the employer also failed to follow the Dismissal and Re-engagement Code of Practice, and the financial stakes of getting this wrong have materially shifted.

If any kind of restructure is on the horizon this year, this change needs to be factored into the planning from the outset. Legal advice sought early rather than after the process has started could save a lot of hassle further down the line.

Holiday Records: The Quiet One With Criminal Teeth

Less headline-grabbing but equally binding: from 6th April 2026, employers are legally required to keep adequate records of annual leave and holiday pay for a minimum of six years. The records need to cover leave taken, any carried-over leave, holiday pay calculations and payments made in lieu. Failure to comply is a criminal offence, punishable by a fine.

The format is flexible – digital, paper, or hybrid – but the legal obligation is absolute. This requirement connects directly to the Fair Work Agency’s enforcement remit, which includes holiday pay compliance and workplace record inspection. If the current leave management system doesn’t produce a clear, retrievable audit trail, that needs to be fixed now rather than after an enforcement notice arrives.

The Enforcement Body You Probably Haven’t Heard Of

The Fair Work Agency launched on 7th April 2026, one day after the first wave of ERA rights activated. It consolidates enforcement of the National Minimum Wage, holiday pay, statutory sick pay, working time records and unpaid tribunal judgments under a single body with real operational teeth. It has powers of workplace entry, can issue notices of underpayment requiring settlement within 28 days and operates a civil penalty regime mirroring the existing NMW enforcement model.

For most SME owners, the likely reality is that this body didn’t feature prominently in their April reading list. It should have.

The FWA is not a toothless advisory function. It can walk into a business premises, request employment records and issue an underpayment notice on the spot. Employers who receive such a notice have 28 days to settle and those who don’t face civil penalties on top. The agency is also empowered to bring tribunal claims on behalf of workers directly, removing the burden of individual employees having to pursue claims themselves. That changes the enforcement dynamic significantly for smaller employers who have historically banked on the practical difficulty of tribunal action as an informal deterrent.

One additional detail that most SME-focused coverage has missed entirely: the FWA’s retrospective enforcement reach on holiday pay extends back to December 2025, the month the Act received Royal Assent, despite the agency itself only launching in April 2026. That means any underpayments of holiday pay made between December 2025 and April 2026 are within scope for enforcement action. Businesses that were still working through the transition, or that miscalculated holiday pay in Q1 2026, have a window of potential liability that predates the FWA’s own existence.

Recommendation: Pull your holiday pay records for the period from December 2025 onwards and check them before the FWA does. If anything looks uncertain, take advice now. The cost of a proactive review is a fraction of the cost of an enforcement notice.

What This Is Actually Costing You

It would be misleading to frame ERA 2025 as purely a compliance box-ticking exercise. The financial picture is real, and it arrives on top of a cost base that has already been rising sharply.

The government’s own central estimate puts the direct cost to UK employers at £1 billion per year once the Act is fully implemented, equivalent to a 0.1% increase in total employment costs. The £5 billion figure that circulated in media coverage was a deliberately cautious stress-test scenario, not a forecast. The actual projected impact is more modest, and the government’s economic analysis suggests a small positive GDP effect of around 0.04% once fully implemented. Obviously this legislation is not designed to destroy small businesses. But the timing is, shall we say, less than ideal.

The FSB has calculated that a small business employing nine staff on the National Living Wage saw its total annual employment bill rise by approximately £25,850 between January 2025 and April 2026, equivalent to the cost of hiring an additional worker. Employer National Insurance bills alone rose by £4,400 over the same period, a 46% increase. ERA adds to that, not instead of it.

Then there’s the background compliance burden. According to the FSB’s Playing by the Rules report, SMEs collectively spend £36 billion a year on regulatory compliance, with the average small business paying around £7,100 annually. For those with ten or more employees, the average rises to £12,600.

ERA 2025 adds new compliance requirements on top of that existing baseline, and the legislation is not finished yet. At least 26 further government consultations are expected in 2026 alone, with secondary legislation still to follow.

The cumulative picture matters here. None of these individual figures are business-ending in isolation. Together, and in a year when energy costs, NLW increases and NI changes are all running simultaneously, they represent a meaningful squeeze on already tight margins for many local and national employers.

Why Getting It Wrong Is Expensive

Employment tribunal claim volumes were already at record levels before ERA added new day-one rights and enforcement routes. Single-claim receipts reached an open caseload of 52,000 in Q2 2025/26, up 33% year-on-year. Unfair dismissal claims specifically rose 25% in Q3 2024/25 compared to the same period the previous year. The system was already under significant pressure before the new rights landed.

When a claim does reach tribunal, the financial exposure is wider than many business owners assume. The average unfair dismissal award in 2023/24 was £13,749, with a median of £6,746. The maximum that year was £179,124. On top of the award itself, businesses spent an average of 4.8 weeks managing tribunal claims between 2022 and 2024. For a small Sussex business owner, nearly five weeks of management time diverted to a tribunal process is often more damaging than the financial award itself.

And the exposure window is about to get longer. From no earlier than October 2026, the time limit for employees to bring most tribunal claims extends from three months to six months. That doubles the period during which dismissed or aggrieved employees can initiate proceedings. The practical response to this change is to document employment decisions thoroughly and consistently, starting now, not after the new window opens.

ACAS provides free early conciliation services and should be the first port of call if a dispute arises before it reaches tribunal stage. Getting to early conciliation quickly, rather than hoping a situation resolves itself, almost always produces a better outcome for both parties.

Your Compliance Checklist for This Week

These are the concrete actions that address the April 2026 changes. Not an exhaustive legal audit, but a practical starting point.

• Payroll and SSP. Confirm with your payroll provider that the three-day SSP waiting period has been removed. Check that employees earning below the former LEL threshold are now correctly set up for SSP eligibility. If anyone on your payroll is on casual, variable, or part-time terms and was previously below the threshold, verify their status has been updated.
• Contracts and handbooks. Remove any reference to a 26-week qualifying period for paternity or parental leave. While contracts are open, check sick pay policy wording reflects day-one entitlement. Any template contracts used for new starters need to reflect the current position, not the pre-April position.
• Holiday records. Implement or audit a system for recording annual leave, carried-over leave, and holiday pay calculations that can produce a clear six-year audit trail. Digital is simplest. Check that records from December 2025 onwards are complete and retrievable.
• Redundancy planning. If any restructure involving 20 or more redundancies is on the horizon, take legal advice before the process begins. The doubled protective award means the cost of procedural errors in collective consultation has materially increased.
• Manager briefings. Day-one rights only work in practice if line managers know about them. A new starter on their first day has the right to request paternity leave and receive SSP from their first day of sickness. Managers who are unaware of this create compliance gaps regardless of what the updated handbook says.

Mark These Dates: What’s Coming in October 2026 and January 2027

The April 2026 wave is the most operationally urgent, but it is not the end of the process. The ERA 2025 grew from 158 pages at introduction to over 300 pages at Royal Assent, with more than 600 amendments made during its passage. Compliance is an ongoing programme, not a single update.

October 2026. The tribunal claim window extends from three months to six months for most claim types. Separately, employers will be placed under a strengthened duty to take all reasonable steps to prevent sexual harassment, with the definition extended to cover harassment by third parties such as clients or customers. Practical workplace policies need to reflect this, and it requires more than updating a handbook section.

January 2027. This is the date that most directly changes the risk profile of every hiring decision made between now and then. The qualifying period for unfair dismissal protection drops from two years to six months. Anyone hired from 1st July 2026 onwards will benefit from the shorter qualifying period from January 2027. The compensation cap for unfair dismissal will also be removed at the same point, meaning there is no ceiling on what a tribunal can award.

The July 2026 hiring date is the trigger most SME advisers have not yet highlighted clearly. If someone joins the business in August 2026, they could bring an unfair dismissal claim against an uncapped award within six months of starting. Robust probation processes, consistent documentation and clear performance management from day one are no longer optional hygiene. They are financial risk management.

A Complex Law, Still in Motion

The ERA 2025 is not a completed piece of work. At least 26 further consultations are expected in 2026, with significant secondary legislation still to follow on zero-hours contracts, flexible working, fire and rehire and more. Over 18 million employees, more than half of the UK workforce, are directly affected. The direction of travel is clear and unlikely to reverse.

For Sussex SMEs, the practical response is not to wait for the full picture to emerge before acting. The changes that are already live require action now. The changes coming in October and January require preparation that starts in Q2. And the further consultations and secondary legislation that follow in 2026 and beyond make staying informed an ongoing business responsibility rather than a one-time task.

ACAS and the government’s dedicated ERA guidance site are the most reliable free resources for tracking changes as they develop. An employment solicitor or HR consultant with ERA specialism is worth engaging if there is any uncertainty about specific obligations. Remember, the cost of that conversation is almost always lower than the cost of finding out there was a problem through a tribunal claim or an FWA enforcement notice.

The Employment Rights Act 2025 sounds like a lot to take in, and it is. But with proper planning and preparation businesses can insulate themselves from its most damaging potential effects. Ignorance is not an excuse if your business falls foul of the new guidelines so take active steps now to get on top of your obligations.

If you’re worried about the costs of compliance why not consider some small business cost saving ideas to give your business some headroom.