The Autumn Budget could bring further clarity on employment costs and the implementation of several significant employment law reforms. For small and medium-sized businesses, developments relating to minimum wage rates, statutory payments, unfair dismissal rights, flexible working and employment rights enforcement could have important financial and operational implications. With employers already managing rising costs, recruitment pressures and changing regulatory requirements, understanding what lies ahead is essential for effective workforce planning and compliance.
Here are five employment law areas SMEs should monitor closely ahead of the Autumn Budget:
1. National Minimum Wage and National Living Wage
The rates for the National Minimum Wage and National Living Wage are reviewed annually, with new rates taking effect from April. Any increase will have a direct impact on employers’ payroll costs, particularly businesses with larger numbers of lower-paid employees. For employers, it will be important to consider not only the direct increase in wages but also the wider impact on salary structures, recruitment, overtime and overall workforce expenditure.
2. Statutory payments
Changes to statutory payments, including Statutory Sick Pay (SSP) and family-related statutory payments such as Statutory Maternity Pay and Statutory Paternity Pay, will also be important for employers to monitor. Recent and proposed reforms to Statutory Sick Pay have increased employers’ focus on absence management and payroll costs. Any further increases to statutory payment rates could add to the cost considerations that businesses need to factor into their workforce planning and budgets.
3. Unfair dismissal
The Employment Rights Act 2025 will reduce the qualifying period for ordinary unfair dismissal claims from two years to six months from 1 January 2027. As a result, employees who commenced employment on or after 1 July 2026 will be eligible to bring an ordinary unfair dismissal claim from 1 January 2027. The legislation will also remove the cap on compensatory awards for successful claims increasing the potential financial exposure for employers in unfair dismissal cases.
While the broad direction of these reforms is already clear, practical questions remain around implementation. The Government has consulted with employers and other stakeholders on how the changes will operate in practice, including the interaction with probationary periods and the proposed lighter-touch approach to dismissals during the early stages of employment. Employers should therefore review their recruitment, probation and performance management processes now to ensure they remain fit for purpose and are capable of supporting fair and well-documented decision-making.
4. Flexible working
Flexible working is another key area to watch. The Government is continuing to develop the detail of reforms expected to come into effect in 2027, following consultation on how flexible working requests will be managed in practice. Further announcements on implementation timelines and practical requirements may require employers to review their existing policies and procedures, particularly where flexible working arrangements affect recruitment, retention and workforce planning.
5. Fair Work Agency and enforcement
The Fair Work Agency was established in April 2026 and is responsible for bringing together enforcement of a range of employment rights, including National Minimum Wage and National Living Wage compliance. Its remit is expected to develop further including responsibility for areas such as statutory holiday pay and Statutory Sick Pay. The Budget could therefore provide greater clarity on the Government’s approach to employment rights enforcement and the resources, penalties and compliance expectations that businesses may need to prepare for.
What should employers do now?
While further Budget announcements may clarify the direction and implementation of employment law reforms, employers do not need to wait for every detail before reviewing their current practices. Reviewing employment contracts and handbooks, assessing workforce costs and ensuring recruitment, probation and performance management processes are properly documented can help businesses identify potential issues early and prepare for changes as they take effect. For SMEs, keeping these areas under review can help manage legal and financial risks while supporting effective workforce planning and people management.
About Susan Lockhart
Susan Lockhart is Legal Director at Sumer Law with over 15 years’ experience in employment law. She advises both employers and employees across a wide range of workplace issues, including redundancies, TUPE, contracts, settlement agreements and employee relations. With experience across a range of sectors, Susan provides clear, practical and commercially focused advice, helping clients navigate changing employment legislation, manage risk and find solutions that work in practice.
Contact email: Susan.Lockhart@sumer.co.uk
