Employment Rights Bill explained: What small business owners should know
The UK Government’s proposed Employment Rights Bill has sparked major concern among small businesses. With big changes coming to sick pay, dismissal rules, and flexible working, small employers are feeling the pressure. Many worry about extra costs, paperwork, and risks if the Bill becomes law as it is.
At Affinity, we know our clients don’t just want accountants, they want trusted advisors who can help them handle these changes and stay financially strong. In this blog, we break down what the Employment Rights Bill means for small businesses and how accountants can play a vital role in managing the challenges ahead.
What is the Employment Rights Bill?
The Employment Rights Bill forms a key part of the Government’s “Make Work Pay” initiative. It aims to overhaul employee entitlements and workplace rights, with several key measures proposed:
- Statutory Sick Pay (SSP) from day one, with no waiting period
- Staff will be protected against unfair dismissal immediately upon starting work
- Flexible working as the default
- Extended paternity leave
- Stricter rules on zero-hours contracts
- A ban on fire-and-rehire practices
The Government says this is the biggest improvement to workers’ rights in a generation. But many small businesses worry it could mean extra costs, more paperwork, and legal risks—especially for those without their own HR or legal teams.
Why are small businesses concerned?
The FSB has highlighted major concerns shared by small business owners. According to their findings:
- Over 90% of small employers feel the changes are overwhelming.
- Two-thirds say the bill could make them less likely to take on new staff.
- A third may be forced to cut staff to cope with the additional costs.
Small businesses mostly have tight budgets and limited resources. Unlike bigger companies, they can’t easily cover unexpected costs or have teams for HR compliance. This is where accountants can help—by showing businesses the financial impact and helping them follow the rules while keeping costs low.
How will this impact your business finances?
Here’s a closer look at some of the major changes, and how accountants can support small firms in managing each one.
1. Statutory Sick Pay from day one
Previously, SSP began on the fourth day of absence. Under the new bill, employees would be entitled to it from their first day of illness, increasing the employer’s cost burden.
How your accountant can help:
- Adjust cash flow forecasts to account for more frequent or longer SSP payouts.
- Create financial cushions or recommend contingency funds.
- Track employee absence trends to predict likely future SSP expenses.
2. Unfair dismissal protection from day one
Currently, employees must have two years’ service before they can claim unfair dismissal. The Bill would remove this qualifying period, meaning new hires could make claims from day one.
How your accountant can help:
- Model the potential legal and settlement costs linked to dismissal disputes.
- Help you budget for employment liability insurance if needed.
- Assist in reviewing employment processes and documentation costs.
3. Flexible working by default
Employees would be able to seek flexible working arrangements immediately upon starting work. While flexibility can improve morale, it also requires operational adjustments.
How your accountant can help:
- Review workforce costs and recommend more efficient scheduling systems.
- Support in costing various flexible working models (e.g., part-time, remote).
- Help plan around potential productivity dips during implementation.
4. Stricter zero-hours and fire-and-rehire rules
The Bill seeks to tighten restrictions on zero-hours contracts and prevent ‘fire and rehire’ strategies. This limits employers’ ability to adjust their staffing levels quickly during periods of low demand.
How your accountant can help:
- Analyse your business’s seasonal trends to determine if more stable contracts are financially sustainable.
- Suggest alternatives such as part-time or fixed-term contracts, along with cost breakdowns.
- Provide data to support fair and lawful employment decisions.
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5 Ways accountants can support small businesses?
1. Review payroll & HR policies
We will help ensure your employment contracts, payroll systems, and sick/holiday policies are up to date and compliant with upcoming changes.
2. Budget for legal risks
We assist in allocating funds for potential tribunal claims, estimating costs for sick leave or flexible working, and running financial “what-if” scenarios.
3. Strengthen cash flow & reserves
We can help you set up an emergency fund, adjust forecasts, and monitor cash flow to stay resilient against unexpected staffing costs.
4. Connect you with HR & legal experts
Unsure how to implement new rights? We can link you with trusted HR and legal partners—and make sure it’s budgeted in.
5. Stay ahead of compliance changes
We’ll keep you informed of legal updates, adjust your financial plans accordingly, and offer training or webinars on employment cost planning.
When will these changes happen?
Many of the changes are expected to come into effect from April 2026, although some (like flexible working reforms) may be phased in earlier. The exact timetable is still under consultation.
This means small businesses still have time to prepare, and working closely with your accountant now can make that transition far smoother.
What to do next?
If you are not sure how the Employment Rights Bill might affect your business firm, now is the right time to act.
- Check your company policies now to stay in line with future regulatory changes.
- Rebuild budgets to account for new obligations like sick pay and flexible working.
- Be confident and plan everything ahead, using clear financial forecasts and practical advice.
Doing this now can help you avoid problems, lower risks, and keep control of your finances as the new rules come into effect.
Conclusion
The Employment Rights Bill isn’t just a matter for HR departments—it has real consequences for how your business manages recruitment, employee benefits, cash flow, and legal risk. As your accountants, we go far beyond compliance and tax returns. Our role is to help you interpret legislation, manage the numbers, and keep your business stable and future-ready. With the proper preparation and expert support, your business can remain resilient and well-positioned for whatever comes next. Contact us today for tailored advice on navigating the Employment Rights Bill.
Author
Mukund is a founding member of the Affinity Associates Group and has been with the practice for nearly 40 years. After completing his degree in Accounting and Finance, he went on to qualify with both ACCA and ICAEW in 1991. Over the years, he’s built deep expertise in consultancy, tax, business development, and corporate group structures. Mukund is known for helping clients make sense of complex financial challenges and turning them into opportunities for sustainable growth.
