What the Employment Rights Act means for your business

As an owner of a small business, you might assume that tribunal claims are something that happens to bigger companies.

That assumption could cost you.

The Employment Rights Act has shifted the rules, and smaller businesses are now more exposed than ever.

I see it regularly with the businesses I work with. Owners doing their best, managing people informally, and not realising the ground has moved beneath them.

Here's what you need to know and what you can do about it.

Steps you can take right now

You don't need to rip everything up and start again. But there are some straightforward things you can do to reduce your risk.

 

Get performance conversations on paper

If you've been handling underperformance through casual chats, it's time to start writing things down. That doesn't mean creating mountains of paperwork. It means noting what was discussed, what was agreed, and following up. A simple email after a conversation can be enough. The point is that you can show a record exists if you ever need to.

Look at how you manage probation periods

Probation reviews often get forgotten or treated as a formality. Under the updated rules, how you handle the early stages of employment carries more weight. Build in structured check-ins and document the outcomes. If you do need to end someone's employment during probation, having that trail makes a real difference.

Make sure your managers know what's changed

A lot of problems I see start with a manager making a well-meaning decision without realising the obligations have shifted. If someone in your team is responsible for managing people, they need to understand the basics of the new rules. And they need to know when to pause and ask for help.

Keep records of decisions

If you can't explain why a decision was made, you're vulnerable. Keep notes from meetings, conversations, and any formal or informal warnings. It doesn't need to be a complex system. It just needs to be consistent and accessible.

Deal with issues early

Most serious disputes grow from small problems that were left unaddressed. Someone wasn't clear on what was expected of them. A difficult conversation was put off. A concern was brushed aside. Catching things early is always cheaper and less stressful than defending a claim later.

Myth vs reality: do small businesses really face tribunal risk?

"We're too small to be taken to tribunal."

Size has nothing to do with it. In fact, smaller businesses often carry more risk because there's less structure around how decisions are made. Larger organisations tend to have formal processes baked in. Without those, you're relying on memory and good intentions, and neither holds up well under scrutiny.

"We treat people fairly, so we'll be fine."

Fairness matters, but being fair and being able to prove you were fair are two different things. The Employment Rights Act places greater emphasis on documented process. If you handled something well but didn't record it, you may struggle to demonstrate that.

"The new rules won't affect us much."

The changes are broad. Employees now have access to certain protections earlier in their employment. The Fair Work Agency can take enforcement action on behalf of employees, including referring cases to tribunal directly. The bar for what's considered acceptable has moved, and it applies to businesses of every size.

 

What's actually changed under the Employment Rights Act

The Act expands employee protections across several areas. Two of the most significant for small businesses are the earlier access to statutory rights and the creation of the Fair Work Agency.

Previously, a newer employee might have had limited options if they wanted to challenge a decision. Those thresholds are now shifted. Protections kick in sooner from 1st July 2026 - 1st January 2027, which means how you manage someone in their first weeks and months matters far more than it used to.

The Fair Work Agency is a new enforcement body with the power to act on behalf of employees. It can take businesses to tribunal directly. That's a meaningful change, because it means an employee doesn't necessarily need to bring a claim themselves.

Alongside those, there's increased scrutiny on fairness in decision-making, and lower thresholds for certain types of claim. Taken individually, each change is manageable. But together, they reduce the space for informal management considerably.

Why this hits smaller businesses harder

Most small businesses don't have an HR team. Decisions about people are made by the owner or a manager, often on the spot, based on what feels right.

That approach was workable when the legal risk was lower. Now, with employees gaining protections earlier and enforcement bodies actively looking for gaps, it's a different picture.

There's also a shift in employee awareness. People are more informed about their rights than they were even a couple of years ago. They're more willing to challenge decisions they feel were unfair. That's not a bad thing, but it does mean you need to be more deliberate about how you handle things.

Without someone checking whether your processes would stand up if questioned, it's easy to make mistakes without realising. And those mistakes are harder to fix once a claim is underway.

Questions worth asking yourself

It can help to step back and think honestly about where your gaps might be.

• If an employee challenged a recent decision, could you show the steps you followed?
• Do your managers understand what the updated Employment Rights Act requires of them?
• When was the last time you reviewed your probation process or updated your documentation?
• Are you confident that your approach to dismissal would hold up under external scrutiny?
• Is there someone your managers can turn to when they're unsure how to handle a situation?

If any of those gave you pause, it's worth looking at where you could tighten things up. Our HR consultancy services in Thanet can help you work through those gaps practically and affordably.

How I can help

As an experienced HR consultant, I can review your current processes against the expanded rights under the Employment Rights Act. That means looking at how you handle probation, performance, dismissals, and grievances, and identifying where the gaps are before they turn into problems.

I can also help with updating guidance for your managers, strengthening your documentation, and stepping in when an issue starts to develop so it doesn't escalate.

The tribunal system hasn't changed in how it looks. But the routes into it have expanded, and the expectations on you as an employer have gone up. If you're not sure whether your current approach reflects where the law is now, it's worth having a conversation.

As an outsourced HR consultant in Thanet, I work with small businesses across the area to provide exactly this kind of practical, commercially focused support. Get in touch for a confidential chat and I'll talk you through how I can help.