Blog

By Helen Lawrence, Managing Director, MorgenHR

“Change is inevitable. Preparation is a choice.”

2026 is set to be a transformative year for UK employment law, with a raft of new regulations and reforms that will reshape the HR landscape for small and medium-sized enterprises (SMEs). As someone who has spent decades guiding businesses through regulatory shifts, I know that being proactive, not reactive, is the key to compliance and commercial advantage. This blog synthesises insights from leading sources including CIPD, Clyde & Co, Pinsent Masons, and more, to help SMEs understand what’s coming and how to prepare.

1. Day-One Employment Rights

One of the headline reforms for 2026 is the introduction of several “day-one” employment rights. Under the new Employment Rights Act (ERA), employees will be entitled to: - Protection from unfair dismissal from their first day - Statutory sick pay and flexible working rights from day one

Source: Clyde & Co, CIPD

Implication for SMEs: - Review and update onboarding processes, contracts, and probationary periods - Train line managers on fair dismissal procedures from the outset

2. Statutory Sick Pay Reform

Statutory Sick Pay (SSP) is set for significant changes: - Removal of the lower earnings limit, making all staff eligible - Potential increases in SSP rates and simplification of claims - Day One Payment: No more “three unpaid waiting days"; SSP is paid from the first day of absence. New Calculation: SSP will be 80% of normal weekly earnings or the current flat rate (£118.75/week), whichever is lower, as explained in this GOV.UK PDF and PAYadvice.UK.

Source: Personio, Cezanne HR

Implication for SMEs: - Budget for higher absence costs - Audit absence management and payroll systems for compliance

Why the Change?

• To prevent people from working when sick (presenteeism) and spreading illness, improving productivity.
• To offer better financial support to workers with short-term illnesses, reducing debt and hardship, according to Citizens Advice.

Impact on Employers:

• Increased costs, especially for small businesses and those with many part-time workers.
• Need to review existing enhanced sick pay schemes to align with the new rules

3. Flexible Working as Default

Flexible working will become a default right, not a privilege. All employees can request flexible arrangements from day one, and employers must follow a new, faster response process.

Source: Brightmine, CharlieHR

Implication for SMEs: - Update policies to reflect the new default - Prepare for a rise in flexible work requests and potential operational impacts

4. Carer’s Leave and Family-Friendly Measures

The new rules introduce: - A statutory right to one week’s unpaid carer’s leave - Expanded parental leave and pay entitlements - Enhanced protection for pregnant employees and new parents

Source: CIPD, Training Express

Implication for SMEs: - Adjust leave policies and communicate changes clearly - Train managers to handle sensitive family-related requests

5. Anti-Harassment Duties

Employers will face a new, proactive duty to prevent sexual harassment at work, with possible fines for non-compliance. There will be increased emphasis on training, reporting, and prevention.

Source: Cezanne HR, People Management

Implication for SMEs: - Implement or refresh anti-harassment training - Review reporting procedures and workplace culture

6. “Fire and Rehire” Restrictions

New laws will restrict the use of “fire and rehire” practices, requiring employers to consult more thoroughly and evidence attempts to reach agreement before changing terms.

Source: Stephens Scown

Implication for SMEs: - Document negotiation efforts when changing contracts - Seek legal advice before major contractual changes

7. Enhanced Data Protection and HR Tech Compliance

With more digital HR systems in use, there is a renewed focus on: - Cybersecurity and data privacy for employee records - Compliance with updated UK GDPR guidance

Source: Pinsent Masons, Brightmine

Implication for SMEs: - Review data handling processes - Ensure HR platforms meet new compliance standards

Conclusion: Preparing for 2026 and Beyond

“A pre-mortem is the ultimate risk-reversal.”

For SMEs, these changes may seem daunting, while they also present opportunities to modernise processes, enhance culture, and attract talent.

Proactive steps:

• Audit and update contracts, handbooks, and policies
• Train managers on new rights and responsibilities
• Invest in compliant HR technology
• Foster a culture of transparency and flexibility

For further details, consult: MorgenHR - Clyde & Co - CIPD - Brightmine - Personio - Cezanne HR - People Management - Pinsent Masons - Stephens Scown - CharlieHR - Training Express

Staying ahead of the curve will not only keep you compliant but make your business more attractive to both talent and clients in a rapidly changing world.