Category: Insights

The Employment Rights Act 2025 (the “Act”) marks the biggest shift in UK workplace rules in over a decade. It received Royal Assent on 18 December 2025 and will be phased in through 2026 and 2027, giving employers and employees time to adjust to the new framework. The Act amends and adds to existing legislation, including the Employment Rights Act 1996, and covers everything from zero-hours contracts and flexible working to sick pay, family leave, dismissal, sexual harassment and enforcement. At its core, the Act is part of the government’s wider “Make Work Pay” agenda, aiming to tackle one-sided flexibility, improve job security, modernise the employment rights framework to suit the economy of today and strengthen protections for vulnerable workers while still preserving flexibility for employers. For all employers, this means both new obligations and new opportunities to rethink how work is organised.

The Government has indicated that most reforms will be implemented during 2026, with further guidance and consultations expected to continue through to 2027 as the implementation timetable progresses. For employers, this phased approach provides a valuable window to review policies, update employment practices and prepare managers for the changes ahead.

Implications for Small and Medium-Sized Enterprises (“SMEs”)

For SMEs that often rely on informal practices, lean HR functions and flexible staffing, the Act is a clear signal that the bar on compliance and documentation is rising. The Act introduces new rights for workers on zero and low-hours contracts, expands family-related leave, strengthens flexible working rules, and tightens expectations around harassment and dismissal.

This is not just a legal update; it’s a cultural nudge. Businesses that continue to rely on last-minute rota changes, vague contracts or ad-hoc decision-making will be more exposed to disputes, tribunal claims and regulatory scrutiny. SMEs that get ahead of the changes can use the opportunity to improve retention, attract talent and build a stronger employer brand.

Addressing One-Sided Flexibility

A major focus of the Act is to tackle “one-sided flexibility” in order to ensure that all jobs provide a baseline of security and predictability. Although these measures have not yet come into force, the government is currently consulting on the detailed operation of the new rights, which will be set out in secondary legislation. Following the consultation, the government will finalise its policy position before the measures are implemented.

The Act will put an end to exploitative zero and low-hours arrangements by introducing new measures that will give employees the right to:

• guaranteed hours, where the number of hours offered reflects the hours worked by a qualifying worker during a reference period (expected to be around 12 weeks);
• reasonable notice of shifts and changes made to guaranteed hours; and
• compensation paid for cancelled, moved or curtailed shifts at short notice.

For SMEs in hospitality, retail, logistics, care and other shift-based sectors, this will mean more structured workforce planning and less reliance on last-minute scheduling. While this may feel restrictive, predictable hours can reduce churn, improve morale and make recruitment easier – especially in tight labour markets.

The Act will also work to prevent employers from using ‘fire and rehire’ or ‘fire and replace’ tactics by automatically classifying dismissals as unfair where employees are terminated for not agreeing to changes to key contractual terms, except where businesses are in severe financial difficulties and genuinely have no alternative. This makes it particularly important for SMEs to think carefully about their employment policies and contractual terms at the outset, ensuring that contracts are robust enough to avoid future variations that may create legal exposure.

Flexible Working: From “Nice to Have” to Structured Duty 

Employees already have a day-one right to request flexible working, but the Act is expected to strengthen the framework by making refusals more transparent and subject to a clearer reasonableness test. The Government consulted on these reforms in 2026, with the changes expected to take effect in 2027.

The Act is expected to require employers who cannot agree to a flexible working request to:

• follow a clearer consultation process before refusing a request;
• consider whether alternative arrangements are possible, rather than moving straight to refusal;
• explain why any refusal is reasonable, by reference to one or more of the existing statutory business reasons; and
• set out the basis for the decision, creating greater transparency for employees.

For SMEs, this means that informal responses such as “that won’t work for the business” will no longer be enough. Employers should be ready to show that requests have been properly considered, alternatives explored and decisions documented. This is likely to require updated template letters, clearer internal procedures and practical training for managers on how to handle flexible working requests consistently.

Handled well, the changes could be a real opportunity for SMEs. A fair and transparent approach to flexible working can support retention, widen access to talent and make smaller businesses more attractive to parents, carers and candidates seeking more adaptable working patterns.

Sick Pay and Family-Friendly Rights

The Act also reshapes sick pay and family-related leave by:

• making Statutory Sick Pay (SSP) a day-one right, with the waiting period removed and the lower earnings limit scrapped, making SSP accessible to more low-paid and irregular workers;
• turning Paternity Leave and Unpaid Parental Leave into day-one rights, with more flexibility in how and when they are taken. Parents are now enabled to take their paternity leave and pay after their shared parental leave and pay;
• offering a new entitlement to Unpaid Bereavement Leave, including for pregnancy loss before 24 weeks, is introduced; and
• creating new protections against dismissal for pregnant employees, mothers on maternity leave and mothers for at least six months after their return to work, except in limited circumstances.

For SMEs, this means revisiting policies, contracts and payroll systems. It also means planning for more varied leave patterns and ensuring managers understand that mishandling a dismissal involving pregnancy or family leave now carries higher risk.

Harassment, NDAs and Culture

The Act strengthens protections around harassment, discrimination and workplace wellbeing. Key changes include:

• requiring employers to take “all reasonable steps” to prevent sexual harassment;
• introducing employer liability for third-party harassment, including harassment by clients, customers and contractors;
• strengthening whistleblowing protections for workers who report sexual harassment; and
• restricting the use of NDAs that seek to prevent workers from speaking out about harassment, discrimination or an employer’s response to such issues.

For SMEs, this means moving beyond “we’ve never had a complaint” as reassurance. SMEs will need:

• clear and accessible anti-harassment policies;
• practical training for managers and employees;
• a credible process for raising and handling concerns;
• a review of NDA and settlement agreement wording; and
• appropriate measures to manage risks arising from third-party interactions.

This is not just about compliance. A safe, transparent and respectful workplace can improve retention, strengthen reputation and help attract talent in an increasingly values-driven labour market.

Dismissal, Redundancy and Enforcement

The Act also reforms dismissal and enforcement rules by:

• making changes to unfair dismissal qualifying periods and compensation caps (in certain circumstances), which will raise the stakes for poorly handled exits;
• extending and clarifying collective redundancy rules, with a wider range of scenarios triggering consultation duties; and
• creating a new Fair Work Agency that will act as the single enforcement body for minimum workplace standards. The Fair Work Agency will promote compliance of employment law and ensure the enforcement of minimum wage, agency rules, and holiday pay. It will also investigate suspected breach of employment law and other alleged labour exploitation, and will have powers to investigate, issue penalties and bring tribunal claims.

For SMEs, this means that the assumption that ‘we’re too small to be on the radar’ is becoming increasingly difficult to justify. Record-keeping, consultation and fair process will matter more, not less.

Risk, Reward and Next Steps for SMEs

The Act brings positive opportunities for SMEs: better retention, stronger recruitment, fewer disputes and a more resilient culture. But there are also clear risks if they do not prepare adequately, including:

• legal risks with increased exposure to tribunal claims and regulatory action;
• operational risks, such as rota and staffing disruption if you don’t adapt to predictable hours and new leave rights; and
• a reputational risk, when being seen as a non-compliant or uncaring employer in a market where values matter.

Practical steps for SMEs include:

• reviewing contracts, handbooks and policies against the Act;
• mapping where you use zero or low-hours arrangements and how you schedule shifts;
• putting a simple, documented process in place for flexible working requests;
• updating sick pay, family leave and bereavement policies; and
• training managers on harassment, dismissal and handling sensitive conversations.

The Motion Paradox team of start-up business and legal consultants can work with you to review contracts, policies and HR practices to ensure they align with the Act and accurately reflect your business’s culture and values. Done thoughtfully, compliance with the new regime can become part of your value proposition – not just a box-ticking exercise.

Sam Altman’s rejection of a $97.4bn bid for Open AI (maker of ChatGPT) from a consortium of investors led by Elon Musk is the latest twist in a longstanding battle between Musk and Open AI’s chief executive. Musk and Altman co-founded the start-up in 2015 as a non-profit company, but the relationship soured since Musk left the firm in 2018. Altman is said to be restructuring the company to become a for-profit entity. However, His rejection of the bid does not necessarily mean the proposed takeover is dead. OpenAI’s board will have a say and may favour a sale, especially if the offer is increased.

Implications for SMEs

This is not only an example of what can go wrong when relationships between SME founders and partners break down (and future insights will look at this issue) but a takeover by Musk may also have significant implications for Artificial intelligence (AI) development. The usefulness of the technology for SMEs in particular may also be impacted by the UK government’s recently announced, ‘AI Opportunities Action Plan,’ which aims to make the UK an AI ‘superpower’. Local and regional authorities across the UK are being encouraged to put their communities forward to become dedicated hotbeds for AI infrastructure development.

AI is Not New

AI is not really that new. The first successful checkers and chess playing AI programs were written in 1951 to run on a Ferranti Mark 1 machine at the University of Manchester. Early iterations of AI were complex systems that could only be used by large organisations investing significant amounts of money, however what is new is the fact that recent technological advances mean that AI is now a powerful tool for small businesses of all sizes.

AI Tools for Small Business

There are several AI solutions available to small and medium businesses which could deliver benefits such as improved productivity, reduced costs, and increased customer satisfaction. The most common AI technology that smaller businesses will come across includes chatbots for responding to customer issues, tools to analyse data, and services to create content. However, adopting AI isn’t without its challenges for smaller businesses. Data can sometimes be of poor quality or out of date. AI systems can be time-consuming to implement, especially if the business lacks individuals with the necessary skills in-house and needs to outsource. There can also be legal concerns over the collection of sensitive data by AI algorithms.

Automating Routine Tasks

Entrepreneurs can spend hours dealing with time-consuming day-to-day tasks, whereas AI tools can handle many routine activities, so business owners can concentrate on more strategic thinking. Tools like Otter and Wingman can transcribe conversations, although at present it’s advisable to have a human review any transcriptions as accuracy and quality cannot be guaranteed.  Diary management applications such as Motion and Akiflow use AI to build optimum daily schedules and are much more reliable for this type of task.

Many AI software solutions can create invoices, analyse financial data and collate employee expenses. The creation of content for marketing communications, researching and writing SEO copy can also be simplified by using AI tools like Grammarly, although the quality of the finished product can vary wildly. Tools such as ChatGPT can generate content or suggest topics by analysing your audiences’ interests.

There are also a number of Microsoft products called Copilot, which come free with a standard business license from Microsoft Office. One of these is an AI platform which is “walled off” from everything else (there is a full version which has access to your Word and Outlook accounts).  This iteration of Copilot could be a good place to have a play with AI in what is a relatively safe environment.

Customer Service Chatbots

One of the most common uses of AI by small businesses is customer service chatbots to handle routine questions. These tools help relieve the pressure on human customer service agents and can act as a triage service.  Many of these AI tools can also predict behaviour so that a more personalised service can be offered. AI tools can also quickly analyse data so businesses can use it to create, adjust, or adapt marketing campaigns and other strategic business activities. AI can also help to make HR processes more efficient by writing job advertisements and descriptions, targeting suitable candidates via social media platforms such as LinkedIn and automating the onboarding process for new employees.

Risks of AI Use

Using AI has obvious benefits for SMEs, but here are also certain risks associated with its adoption. If AI is part of software you purchase or download, those creators are responsible for their product’s use of AI. If you use free AI tools or software in your business, it’s important to review all AI products to make sure they are being used ethically, securely, and legally.

AI sources content from the web, so making sure anything you produce doesn’t infringe on patents, copyrights or trade marks is also essential. Equally, security risks still exist in the form of phishing campaigns that might have been written using AI. Therefore, don’t feed any sensitive data or proprietary information into the system that could be used for content.

Customer trust is also important, and it is becoming an expected best practice to disclose the use of AI. Tools that recognise AI-generated content may mark it as spam, which could negate any future outreach effort and increase customer resistance to your communications. The Motion Paradox team of start-up business and legal consultants, based in London and Los Angeles, can work with you to review and assess messaging, and outreach campaigns to make sure they are legally compliant and accurately reflect your business’s culture and principles.

 

 

On 10 October 2024, the UK Government published its Employment Rights Bill, which includes many of the measures previously set out in the Labour Party’s “Plan to Make Work Pay” which was mentioned in the King’s Speech. It proposes some wide-ranging changes in employment practices and law which will affect virtually all employers including small and medium-sized enterprises (SMEs).

The Bill includes a number of provisions, including the right to request flexible working (employers can still refuse these requests but only on certain specified grounds). There will be an obligation on employers to take all reasonable steps to prevent sexual harassment (previously the law required employers merely to take “reasonable steps”) as well as a broad duty for employers to prevent harassment of employees by third parties. The Government has also confirmed a number of other proposals concerning employment rights will be progressed alongside the Bill, including a right for employees to “switch off” outside their contracted working hours. Some of the other key proposals in the Bill are set out below.

Fire and Rehire

Employers may sometimes need to change contracts of employment, especially if the business needs to restructure to remain viable. If employees do not agree, the employer may dismiss them before offering to re-engage them in substantially the same role.  This is referred to as ‘fire and rehire’. This an acceptable practice when there is genuinely no alternative, but the Bill aims to end unscrupulous ‘fire and rehire’ tactics, insisting on a proper process based on dialogue and common understanding between employers and employees. Employment terms and conditions negotiated in good faith cannot be undercut by the threat of dismissal.

Unfair Dismissal

Protection against unfair dismissal is to be available from day one of employment for all businesses. The Government has said that it is committed to consulting on this proposal and the current unfair dismissal regime will remain in place until at least Autumn 2026. However, scrapping the two-year qualifying period before an employee can claim unfair dismissal will require the employer to have a fair reason to dismiss the employee, no matter what their length of service. This proposal will of course have implications for probationary periods with the Government suggesting a preference for a nine-month statutory probation period.

Zero Hours Contracts

Employers will be required to periodically offer guaranteed hours to workers on zero hours contracts. Such an offer must reflect the working patterns the employee previously worked, and the terms proposed must be as favourable as those the employee previously enjoyed. The employee would be free to accept or decline the guaranteed hours. Employers will need to consider the structure of their workforce and whether the use of flexible labour is appropriate.

Sick Pay and Parental Leave

The Bill will allow employees to claim statutory sick pay from day one of their sickness absence and also removes the qualifying period for parental leave and paternity leave, so these too can be taken by employees from the first day of employment. In addition, the Bill broadens the right of employees to take bereavement leave and extends existing protections from dismissal during pregnancy and for up to six months following the end of maternity leave.

Gender Equality Reporting

The Bill includes a requirement that organisations with two-hundred and fifty (250) or more employees publish an equality action plan every twelve (12) months. The plan should include steps that the employer is taking to advance equality and opportunity between male and female employees, including how they are addressing the gender pay gap and how they support employees going through menopause. Firms with two-hundred and fifty (250) employees should start reviewing their processes in this area before these obligations come into force.

Trades Union Recognition

Currently, a trade union has to demonstrate that it has membership of at least ten per cent (10%) of its proposed bargaining unit before making a formal request for recognition to the Central Arbitration Committee (CAC). The Bill gives power to the Secretary of State to reduce this percentage to as low as two per cent (2%). This change means that trade unions will find it easier to seek formal recognition in future.

Ensuring Compliance

The Employment Rights Bill 2024 represents the most significant change in UK employment law for almost twenty (20) years. Employers large and small must adapt to these coming changes to ensure compliance and support their workforce. The Motion Paradox team of start-up business and legal consultants, based in London and Los Angeles, can help you review and draft bespoke contracts of employment and HR legal guidelines that make sure your company is compliant with all the necessary regulations (whatever they may be) and whenever they may come into force.

The incoming UK Labour Government has announced several plans which should be music to the ears of SMEs. Proposals such as acting on late payments, making it easier for small and medium sized enterprises to access capital, as well as reforming procurement rules to give small business greater access to government contracts, would all be welcomed.

The much-anticipated Employment Rights Bill, published on 10 October 2024, provided a broad framework for an eventual overhaul of the employment landscape, but a significant number of original proposals were omitted from the Bill. The Labour government has pledged to implement further proposals after concluding reviews and consultations expected to begin in 2025.

It’s clear that, although not directly included in the Bill, a new ‘right to switch off’ which would give workers the right not to engage with work correspondence (including emails, telephone calls and instant messaging) outside their contracted working hours still features prominently in the Government’s “Next Steps” paper and remains firmly on the cards.

Maintaining Work-Life Balance is Good for Everyone

While most would agree that a healthy work-life balance is good for the employee and for the business, some SME operations could not function effectively if they were unable to contact key employees urgently. Many SMEs would also argue that the right to disconnect does not need to be legislated and could be achieved by a shift in culture and attitudes. Whatever form it may eventually take, businesses should prepare for its arrival.

‘Right to Switch Off’ in Europe

While the right to disconnect is not legally defined, many countries in Europe have some form of it in their laws. In Germany, the Working Hours Act guarantees workers an eleven (11-) hour break every twenty-four (24) hours, but the digital revolution has made it harder for employees to take this time. There is no statutory right in Sweden for employees to disconnect, however, Swedish employers tend to respect their employees’ private time. There is equally no right to disconnect in Denmark, however, there is a maximum number of hours that an employee can be required to work as well as mandatory rest periods an employee must take during the working day and during the week.

France is seen as the pioneer of the ‘right to switch off”, passing legislation in 2016 that allows employees to switch off their phones outside of working hours. In Ireland, the right to disconnect is embodied in a code of practice which can nonetheless be used as evidence in claims for breaches of employment rights. In Belgium, legislation requires written agreements or rules on disconnection agreed through collective bargaining. Portugal has adopted a much stricter approach with it being unlawful for employers to contact workers out of working hours other than in situations of ‘force majeure’.

‘Right to Switch Off’ Overseas

Further afield, Australia recently introduced a law which still allows employers to contact their employees outside their contractual hours but puts no obligation on the employee to respond. A few states and cities in the USA have considered it, but there are no immediate plans for such federal legislation across the Atlantic. Canada is considering a right to disconnect policy that would allow employees to opt out of work-related communication outside of regular working hours.

Implications for Employers

So, what could the proposals include for the UK? Reports suggest that a combination of the Irish and Belgian schemes is the preference, with the ‘right to switch off’ enacted through a code of practice, with an obligation on employers to enter into workplace agreements detailing allowable contact hours and tailored ‘right to switch off’ policies. It is not clear when these proposals will come into effect. The Government has not formally confirmed whether any scheme would be a simple code of practice, which seems the most likely, or a statutory right. It is also unclear whether company size will impact any legal obligations. The Belgian scheme for example applies to companies with twenty (20) or more staff.

The Risk of Litigation

While there may be no right to bring a tribunal claim based solely on an employer’s failure to follow, say, a code of practice, employees might be able to claim uplifted compensation in connected tribunal claims. Under ACAS guidelines, compensation can be increased by up to twenty-five per cent (25%) if an employer fails to follow established codes of practice in cases related to grievances or disciplinary claims.

Increased Importance of Bespoke Contracts of Employment

Reviewing contracts of employment to include your own right to disconnect policy and tailored flexible working and home/hybrid working policies will be essential to protect your business operationally and legally, whatever form any future legislation may take. Published guidelines around switching off outside of working hours may also be helpful, but there will always be exceptions, which should be clearly stated with examples in any on-boarding documentation.

Supporting Your Employees to Switch Off

Switching off policies could actually benefit some SMEs. Productivity tends to be higher when staff have a chance to wind down and avoid burnout. Persistent sickness and resignations also tend to be reduced. Many valued employees may be keen to retain the flexibility of managing their own working hours, so creating flexible but consistent policies to ensure compliance will be essential.

The Motion Paradox team of start-up business and legal consultants, based in London and Los Angeles, are well aware of issues that face companies with remote workers, often in different time zones and global locations. We can help you draft bespoke contracts of employment and HR legal guidelines that make sure your company is compliant with all the necessary regulations (whatever they may be) so the distinction between home and work benefits you, your staff, and your business.

 

Has business fallen out of love with remote working? Amazon has told its office workers that they may no longer work from home except in extenuating circumstances while PwC now insists that its UK staff work in the office for at least three days per week (a surprising volte face given PwC’s previously liberal attitude to remote/home working).

Many would maintain that the main advantage for business owners of remote working lies in recruitment. Offering flexible working arrangements makes the employer more attractive to candidates. By extension, remote working on a truly global basis also gives access to a vastly increased talent pool of highly skilled individuals in sectors such as IT/Tech or the creative industries that are, by their very nature, highly globalised.

Remote Working Beyond Geographic Boundaries

For potential recruits and existing staff global employment does offer great opportunities for personal and professional growth. But when those workers are located not just in different regions or places within one country, but on an entirely different continent, then the problems of working beyond geographic boundaries begin to emerge.

Managers of some quite large companies as well as more agile SMEs appear to have little option but to say to candidates and employees, who can work from anywhere in the world, that they are happy with the employee upping sticks, leaving their domestic base, and going to work remotely in say, a European country.

Problems with Trans-Atlantic Relocation

This is especially true for workers in the USA and UK, where the perception is, given that the English language and cultural norms are (more or less) common to both, a transition either way should be fairly straightforward. Even in this case, subtle cultural and language barriers do exist between the USA and UK, while misunderstandings and miscommunications that can hinder collaboration and productivity are even more pronounced in countries without the same shared Anglo-Saxon heritage. Some barriers are practical. Since Brexit, gaining permission to work in the UK has become much more complex and does not guarantee access to the rest of Europe.

Barriers to Globalised Employment

There are some legal barriers to globalised employment too. Individuals may need to demonstrate that they have a special talent to allow them entry to their chosen country. Governments globally are showing heightened vigilance against employers failing to comply with increasingly stringent immigration laws, with enforcement powers often including substantial fines. A visa and/or work permit may be required, which could place onerous burdens on the employer. Other questions may arise: How will payroll work? How will you deal with the payment of government taxes on earnings?

When hiring or doing business outside of your typical area of operation, being aware of local employment laws in that particular country is also essential. Failure to maintain local legal compliance could have far reaching financial consequences as could breaches of local data, privacy and protection laws.  Understanding the business ethics of different cultures around the globe will also feed into this issue. By way of example, we can look to Portugal. Portugal has banned bosses from text messaging and emailing staff out of working hours as part of laws dubbed the “right to rest”.

Managing Different Time Zones

Perhaps the greatest practical problem is managing different time zones between global locations. An employer may occasionally need to speak to the employee, sometimes on very short notice. Being based on west coast of the USA for example makes such communication with a remote employee somewhere in Europe tricky, given the up to nine-hour time difference.

Organisations with global operations therefore face complex issues that must be overcome to maintain an effective mobile workforce in an increasingly interconnected world. While embracing global remote employment can offer your staff professional and personal growth opportunities, it should only be attempted in the full knowledge of all the possible business pitfalls such a move entails.

The Motion Paradox team of start-up business and legal consultants, based in London and Los Angeles, are well aware of issues that face companies with workers in different time zones and global locations. We can help you through the process of managing such a distributed global workforce, making sure your company is compliant with all the necessary regulations to operate effectively and safely, whatever jurisdiction your staff may be based in.