The Employment Rights Bill, which received Royal Assent in late 2025 and takes effect from April 2026, represents the most sweeping overhaul of employment law in a generation. It introduces day-one unfair dismissal protection, statutory sick pay from day one, enhanced family leave, the right to request predictable working patterns, and stronger protections against fire-and-rehire practices. While these measures aim to improve worker security, they impose a significant and largely unquantified burden on small and medium-sized enterprises.
The British Chambers of Commerce Quarterly Economic Survey for Q4 2025 finds that 79 % of SMEs believe the government has not adequately assessed the impact of these reforms on smaller businesses. 77 % express dissatisfaction with the pace and scope of the changes, and 41 % say they are already reducing hiring or shifting to zero-hours contracts to manage risk. The Federation of Small Businesses estimates that the combined effect could add £2,000–£5,000 per employee annually in direct and indirect costs (legal advice, HR time, potential tribunal claims) for the average small firm.
Large employers have dedicated HR departments, insurance policies, and the ability to absorb or pass on costs. Small businesses – which create the majority of net new jobs – do not. When they hesitate to hire, the economy loses momentum.
The solution is to give SMEs a meaningful safeguard:
- Establish a statutory SME Impact Assessment Veto for any employment rights measure that would impose more than £500 per employee per year in compliance costs on businesses with fewer than 50 staff.
- The veto would require the government to either redesign the policy to reduce the burden below £500 or seek parliamentary approval with a full impact statement.
- The assessment would be conducted by an independent panel of SME owners and economists.
- Estimated cost to government: zero – the veto simply prevents poorly assessed legislation from proceeding without scrutiny.
This is not about blocking workers’ rights; it is about ensuring they are introduced in a way that does not destroy the small businesses that employ 60 % of the private-sector workforce. Similar veto mechanisms exist in Germany and the Netherlands for SME-sensitive labour law changes.
Do not let good intentions become job-killing burdens. Give small employers a real voice before the next wave of reforms hits.
The 1832 Club is fighting for these changes. The more members we have, the louder our voice in Westminster.
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