What the Employment Rights Act changes on 1 January 2027 mean for your practice

General information for practice owners, current at the time of writing (August 2026). Dates and figures are those published by the government and its advisers as at 10 August 2026. The implementation timetable has already moved once — most recently in the roadmap update of 16 July 2026 — and can move again. This is not legal advice; take your own on your firm's facts.

The Employment Rights Act 2025 applies to your own firm as well as to the clients you advise on it. An accountancy practice is an employer with a payroll, a partnership culture, a Christmas party and, in many cases, a performance problem that has been left alone for a year or two.

The Act takes effect in instalments. The instalment that matters most to a fifteen-person practice takes effect on 1 January 2027, and there are practical steps to take in the months before it.

What changed in April 2026

Three changes took effect on 6 April 2026 and already apply to your payroll.

Statutory sick pay was rebuilt. The three waiting days are gone, so SSP is payable from the first full day of sickness. The lower earnings limit is gone, so employees who previously earned too little to qualify now do. And the rate became 80% of average weekly earnings or the flat weekly rate of £123.25, whichever is lower. For a practice with part-time bookkeepers and admin staff, these changes brought a group of people into the scheme who were never in it before.

Paternity and parental leave became day-one rights. The old service qualification has gone. A new joiner in week two now has the same entitlement as a ten-year veteran.

Annual leave records became a statutory duty. Employers must keep and retain records of holiday taken. If your firm still runs leave on a shared spreadsheet that gets overwritten each January, that is now a compliance gap. Leave records are also one of the items on a buyer's due diligence questionnaire.

The timetable of changes

The 1 October change doubles the window in which a claim can be brought. A leaver can bring a claim up to six months after they walked out, by which point the manager who handled it may have left too, and the notes made at the time either exist or they do not. From that date, good record-keeping is what decides many of these cases.

The 30 October harassment duty applies directly to partnerships. Moving from “reasonable steps” to “all reasonable steps” sets a standard you meet with documents. A firm where everyone behaves well but nothing is written down is in a worse legal position than a firm with a dated risk assessment, a signed-for policy and a recorded training session.

The unfair dismissal change on 1 January 2027

From that date, the qualifying period for ordinary unfair dismissal falls from two years to six months. The rule turns on the date of dismissal, so staff hired before the change are covered as soon as they have six months' service.

If someone needs six months' service, and the rule applies to dismissals from 1 January 2027, then anyone employed on or before roughly 1 July 2026 is protected from 1 January 2027 itself. There is no run-in and no grandfathering for people you hired under the old two-year rule.

The same date removes the cap on the compensatory award and restricts “fire and rehire” — imposing changes to pay, pensions, hours, shifts or holiday by dismissing and re-engaging on new terms.

What a claim could cost a practice

Press coverage has concentrated on the uncapped award. For a typical practice, the larger effect comes from the number of people who can bring a claim.

The second calculation is the number of staff who can bring a claim.

Why small firms are more exposed

A 200-partner firm usually has an HR director, a template library and an employment solicitor on retainer. In a twelve-person practice, the owner often does the appraisals personally, when time allows.

The law itself asks for a fair reason and a fair process, both documented. The difficulty for a small firm is doing that consistently when the managing partner is also the tax manager, the complaints route, the appraiser and, in a bad month, the person being complained about. Firms in that position have historically relied on the two-year qualifying period as an informal safety net for hiring mistakes: if a new senior did not work out at month eighteen, the conversation was awkward but the legal exposure was small.

That safety net closes on 1 January 2027. Recruitment decisions get more expensive to reverse, which means probation periods and the first six months need a real assessment of each new hire. That adds to the demands on owner time covered in our piece on the 2026 capacity crunch.

The effect on the value of your firm

We buy practices directly, so we see this from the buyer's side. Buyers price uncertainty, and employment records are one of the cheapest places to remove it.

A live or threatened tribunal claim is usually handled through a retention, an indemnity or a specific warranty, and it slows completion, which adds cost to the deal. A more common problem is missing paperwork: staff without signed contracts, no written policies, no leave records, three people whose job titles have changed without any paperwork, and a performance issue that everyone knows about and nobody has documented. Each of these widens the diligence exercise, lengthens the timetable and hands a buyer material to negotiate with.

The remedy is cheap relative to the price of a practice: a complete, dated employment file for every member of staff. It helps whether you sell in two years or twenty. Our guides on due diligence when selling your practice and what reduces the value of your practice cover it in more detail.

What to do in the next ninety days

1. List everyone with under two years' service and note their start dates. Anyone at or before about 1 July 2026 is protected from 1 January 2027. This takes twenty minutes and tells you the size of the change for your firm.
2. Deal with the performance problem you have been tolerating. If someone in that group is not working out, start the fair-process work now and document each step, well before December.
3. Set up proper probation reviews. Hold a defined review at month three and month five, write each one up, and record a decision at the end.
4. Do the harassment risk assessment before 30 October. Date it. Cover client sites and social events. Record who was trained and when. Give people a reporting route that does not run solely through the senior partner.
5. Check your leave records are kept from year to year. This has been a statutory duty since April.
6. Confirm payroll is applying the new SSP rules — day one, no lower earnings limit, 80% of average weekly earnings or £123.25 a week, whichever is lower.
7. Get contracts and policies to a single current version. One template, issued to everyone, signed for and filed.

These steps also make a firm easier to run, easier to hand over and easier to sell. Our KPI guide covers the same habits from the management side.