The Employment Rights Bill 2024-25 is positioned as a landmark reform to workers’ rights and entitlements. It constitutes the biggest shake up to employment legislation in over 20 years. Many SMEs have not yet fully grasped the hidden costs and operational impacts the new legislation could bring.

The real-world consequences of the Bill on small and medium-sized businesses are significant and if not a little concerning for some. The need for SME's to prepare for all the changes coming out of the Bill is real, and being able to access clear, practical information giving the advice and guidance needed is vital at this time if they are to take the necessary steps to safeguard their businesses bottom line.

The Government estimates suggest the Bill could add up to £5 billion annually to UK employer costs. While this includes larger corporations, SMEs will feel a disproportionate squeeze. This will be due to having to absorb the costs of implementing the new rights and entitlements for workers, which could result in smaller cashflow buffers to absorb additional staffing and compliance costs. For many SME's, they are already facing higher costs from increases to minimum wage rates and national insurance hikes; and all whilst trying to maintain the need to remain compliant with the law in ever more competitive markets.

With legislative changes such as having to offer guaranteed hours to zero-hours workers, the removal of the lower earnings limit alongside the introduction of day-one statutory sick pay, reforms to dismissal rights by introducing a day-one protection for all new hires, and an almost total ban on ‘fire and rehire’ for changing terms of employment, many businesses are going to be facing significant challenges as well as higher levels of risks. 

Those risks could include more frequent workplace disputes, increased Tribunal claims, higher compensation payouts and a time-draining obligation to divert core business resources away from operational activities into managing employment challenges.

How can SMEs address the tsunami of change that will be coming their way in the coming months? They are going to need to invest in developing their managers to ensure compliance with all the new rules and legislative requirements. They will need to ensure they have conducted a root and branch review of not only their employment documentation such as contracts and policies, but also of their people management practices. They will need a laser-like focus on how they recruit, select, onboard and manage what will become, mandatory probation periods. If they do, they will be going a long way to feeling assured they can avoid making costly mistakes.

The Employment Rights Bill 2024-25 isn’t just about updating contracts — it’s about rethinking how SMEs manage their people, balancing flexibility with the rising tide of legal obligations. By acting early and strategically, SMEs can protect themselves and turn compliance into a competitive advantage.

Kingswood Group, a specialist HR and Recruitment Consultancy, has been working with businesses of all sizes, industries and sectors for many years. We have created a free to access Employment Rights Bill Hub which will enable businesses to stay up-to-date through detailed breakdowns of the key changes and action points coming out of the Bill.