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Employment Rights Bill and the Budget – are SMEs meant to just absorb everything?

ended 07. December 2025

I’m looking for HR leaders, employment lawyers and small business owners to comment on how they feel about the Employment Rights Bill now the dust has (kind of) settled, and what difference the recent Budget makes.

When this was first announced, with “day one rights” and talk of banning zero-hours and fire and rehire, a lot of SMEs went into a tailspin and started wondering if it was still safe to hire or dismiss anyone at all.

Fast forward to now. We have a six-month qualifying period instead of day one, talk of uncapped unfair dismissal awards, and big chunks of the original “New Deal” watered down, delayed or pushed into separate codes and Bills. At the same time, the Budget has cranked up wage costs, frozen tax thresholds and generally squeezed small businesses from every angle.

I’d love views on whether this combo changes how you feel. Are you calmer, more worried, or just exhausted by constant rule changes?

Sources: Government Factsheet on the Employment Rights Bill

Make Pay Work / New Deal for Working People (Labour/Govt Policy Docs)

Questions for HR and People leaders

  • When the Employment Rights Bill was first announced, what was your honest reaction, and did you change or pause anything in your people plans because of it?
  • Now we know it is six months for unfair dismissal rather than day one, does that feel workable, or still a big shift from the current two years?
  • Does the idea of uncapped unfair dismissal compensation worry you more than the original “day one rights” ever did? Why?
  • Has the recent Budget changed your approach, for example, to headcount, pay reviews or hiring plans, when you look at it alongside the ERB?
  • Have you already started changing probation policies, performance management or documentation on the assumption that the new rules will land from 2027?
  • Which bit of the Bill do you think will be the biggest headache for SMEs in real life, zero or low hours reforms, fire and rehire limits, harassment duties, or something else entirely?
  • What is one practical thing you are doing now so you are not scrambling in 2026 or 2027 when the main changes actually hit?

Questions for employment lawyers

  • From a pure risk perspective, which version of the promise worries you more, day one unfair dismissal (now dropped) or six months plus uncapped compensation?
  • Did the original “day one rights” messaging over-inflate the legal reality, or was the initial SME panic understandable?
  • How do you expect tribunal behaviour to change if compensation is uncapped for ordinary unfair dismissal, more claims, bigger Schedule of Loss, or just stronger settlement positions?
  • Do you think SMEs are underestimating any other parts of the Bill, for example harassment duties, predictable hours, fire and rehire restrictions, because they have focused on unfair dismissal headlines?
  • Has the latest Budget shifted the conversations you are having with SME clients about risk, especially when you put higher costs and higher potential awards side by side?
  • If you were advising a small employer with no in-house HR, what are the top three things you would tell them to tighten up now so they are ERB ready?

Questions for small business owners

  • Be honest, when the Employment Rights Bill was first talked about, did it make you think twice about hiring, investing or growing your team?
  • With the changes and delays now in play, do you feel calmer about it, or is it still making you nervous about taking people on permanently?
  • Does a six-month unfair dismissal qualifying period change how you think about probation and “hiring mistakes”, or do you feel you never really had two years in practice anyway?
  • If compensation for unfair dismissal becomes unlimited, do you think that will change your behaviour, for example, more use of probation, fixed-term contracts, or just a lot more documentation?
  • Has the recent Budget, on top of the ERB, changed your appetite to hire or give pay rises, or are you just absorbing it and hoping for the best?
  • Which part of the package feels most positive for you and your staff, and which part feels like yet another stick for small employers?
  • If you could send one message to the Government about the Employment Rights Bill and the Budget from an SME point of view, what would it be?

1 responses from the Newspage community

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Kate UnderwoodVerified
Founder & Chief People Strategist at Kate Underwood HR and Training
Right now, running an SME in the UK feels like being punished for daring to employ people. I wear both hats – HR expert and small business owner – so I see the madness from both sides. When Labour shouted about ‘day one rights’ and banning zero hours, it sent SMEs into a wobble; people were asking if hiring was now a legal booby trap. We’ve quietly shuffled to six-month qualifying periods and talk of uncapped unfair dismissal awards instead, so the slogan has changed but the message is the same: if you get it wrong, you’ll pay. Add a Budget that’s whacked wage costs, frozen thresholds and piled on overheads, and small firms are expected to be welfare state, training provider and shock absorber all at once. Most of us just want rules we can understand and afford. The ERB isn’t the end of the world, but it is the end of blagged HR – sort your contracts, train your managers and document everything.