In SMEs, employment decisions are often made by owners or senior managers rather than HR specialists. While teams are smaller and relationships closer, the legal risks remain the same, and in some cases, more concentrated, a single poor decision can have a disproportionate financial and operational impact.
The Employment Rights Act 2025 requires us to change our approach to managing certain aspects of the employment relationship with our teams.
- Probation must be taken seriously, even in close-knit teams
With unfair dismissal rights due to apply after six months’ service, informal “let’s see how it goes” approaches are no longer safe. Regular check-ins, clear expectations, and timely decisions are essential. - Performance issues need early, simple conversations
Problems should be addressed quickly through clear, honest discussions. Notes do not need to be complex, but there must be a written record showing that concerns were raised and support was offered. - Dismissals carry higher personal and financial risk
The removal of the compensation cap will mean that even small businesses could face significant awards. Early HR advice can prevent costly mistakes. - Redundancies require planning, even when numbers are small
If multiple redundancies are planned over time, owners must consider the total impact across the business, not just on individual roles. - Changing terms and conditions is high risk
Fire and rehire will rarely be justified. For very small employers, agreement and employee buy-in are critical. Changes should only be made after consultation and genuine attempts to reach an agreement. - Owners and managers are the first line of defence
In very small businesses, managers’ behaviour is often seen as the organisation itself. Basic training, consistent decision-making, and knowing when to ask for help are key.
The goal is not bureaucracy. It is about having a small number of clear, repeatable steps that reduce risk: set expectations early, address issues promptly, document key decisions, and seek advice before problems escalate. If you need help, please get in touch to learn about our “Audit.” If you mention this article/Sterling, it’s free of charge; the normal price is £295.
