What you need to know, prepare for and act on now
For many small business owners, HR has always been about balancing compliance with common sense. But as we move into 2026, that balance is becoming more complex. Employment law is shifting, employee expectations are rising, and the upcoming Employment Rights Bill signals one of the most significant periods of change UK employers have seen in decades.
For SMEs, this isn’t about keeping up with headlines – it’s about understanding what really matters, where the risks sit and how to prepare without overcomplicating your business.
Here are the key HR areas small business owners should be focusing on in 2026, and why starting early will make all the difference.
A Changing Legal Landscape: Why 2026 Is Different
The Employment Rights Bill is expected to reshape core elements of the employer–employee relationship. While not every change will land at once, the direction of travel is clear: stronger day-one rights, greater protection from unfair treatment, and higher expectations on employers to prevent harm rather than simply respond to it.
For small businesses, this means HR can no longer be treated as a “set and forget” function. Contracts, policies, manager behaviours and payroll practices will all come under greater scrutiny – not just from regulators, but from employees who are increasingly informed about their rights.
The businesses that fare best in 2026 will be those that treat preparation as a strategic exercise, not a last-minute compliance scramble.
Day-One Rights and the Impact on How You Hire
One of the most important themes emerging from planned reforms is the expansion of day-one employment rights. Changes around statutory sick pay, parental leave and protections from unfair treatment will significantly affect how small businesses onboard and manage new starters.
This doesn’t mean recruitment becomes riskier, but it does mean employers need to be clearer, more consistent and more confident in their processes. Informal arrangements, vague expectations or poorly written contracts will be harder to defend.
In 2026, small business owners should be asking:
- Are our contracts clear, current and fit for purpose?
- Do managers understand what rights apply from day one?
- Are probationary periods being used correctly and fairly?
Good onboarding, clear documentation and early performance conversations will become even more critical.
Sick Pay, Absence and Cost Management
The planned changes to Statutory Sick Pay – including removal of waiting days and lower earnings thresholds – will have a practical and financial impact on SMEs.
For some businesses, this will increase short-term costs. For others, it will highlight weaknesses in absence management that have existed for years.
2026 is the year to move away from reactive sickness handling and towards:
- clear absence policies
- consistent return-to-work conversations
- manager confidence in addressing attendance issues early
Handled well, this isn’t just about compliance – it’s about supporting wellbeing while protecting productivity.
Harassment Prevention and Safer Workplace Cultures
Another major shift is the growing emphasis on prevention, particularly around sexual harassment. Employers are expected to take reasonable steps to prevent harassment from occurring – not simply deal with it when it happens.
For small businesses, this can feel daunting, but it doesn’t require complex frameworks or corporate-level programmes. What it does require is clarity.
That includes:
- up-to-date policies that employees actually understand
- managers who know how to challenge inappropriate behaviour early
- training that reflects real-life situations, not just legal theory
Workplace culture will be under greater scrutiny in 2026, and businesses that can demonstrate proactive, people-first approaches will be in a much stronger position if issues arise.
Contracts, Flexibility and Working Arrangements
The Employment Rights Bill is also expected to impact how flexible and zero-hours working arrangements operate, particularly where working patterns are regular in practice but informal on paper.
Small businesses relying on flexible staffing models should take time in 2026 to review:
- whether contracts reflect actual working patterns
- how predictable hours are communicated
- how changes to shifts are handled and recorded
This isn’t about removing flexibility – it’s about ensuring it’s fair, transparent and legally robust for both sides.
Manager Capability: The Hidden Risk for SMEs
One of the biggest HR risks for small businesses has nothing to do with legislation – it’s manager confidence. As rights expand and expectations rise, managers will increasingly sit at the centre of HR risk. They are the ones managing sickness, responding to concerns, handling performance issues and setting the tone for behaviour.
In 2026, investing in manager capability will be just as important as updating policies. Clear guidance, practical training and access to HR advice can prevent minor issues from escalating into costly disputes. Strong managers don’t just protect your business – they protect your culture.
Getting the Basics Right Still Matters
While legal reform dominates the conversation, the fundamentals of good HR remain unchanged.
Small businesses that thrive in 2026 will still be those that:
- recruit well and onboard properly
- communicate clearly and consistently
- manage performance fairly
- support wellbeing realistically
- treat people with respect
Strong HR foundations make legal change easier to absorb. Weak foundations magnify every new requirement.
Final Thoughts: 2026 Is About Preparation, Not Panic
The Employment Rights Bill and wider employment law changes will undoubtedly raise the bar for employers. But for small business owners, this doesn’t have to be overwhelming.
By reviewing your contracts, refreshing policies, supporting your managers and planning ahead, you can approach 2026 with confidence rather than concern.
At Haus of HR, we support small businesses to navigate change in a way that’s practical, proportionate and people-centred. If you’d like help preparing for the year ahead – whether that’s a policy refresh, HR audit or manager support – we’re here when you need us.