We recently brought together employee-owned business leaders and HR professionals for a roundtable discussion on the Employment Rights Act 2025 and what it means in practice for EO organisations.
The session combined a short legal update on the key reforms, covering areas such as unfair dismissal, consultation, harassment and flexible working, with a wider conversation about how EO businesses are preparing, where uncertainty remains, and whether employee ownership itself is shaping their response.
What quickly became clear is that while the legal framework applies equally to all employers, the way it lands in employee-owned organisations is often different. Discussions moved beyond compliance into questions of accountability, employee voice, transparency and values, highlighting both opportunities and tensions as the reforms take shape.
This article draws together those insights, alongside our legal perspective, to explore what the ERA 2025 really means for employee-owned businesses and how leadership teams and HR can prepare with confidence.
ERA 2025: What the Changes Mean for EO Businesses
The Employment Rights Act 2025 significantly increases both employee rights and employer obligations. These include day one rights in areas such as sickness absence, creating increased cost and more active management from the outset of employment, alongside the reduction in the unfair dismissal qualifying period, bringing legal risk into play much earlier.
The EO organisations we spoke to often saw these changes as more positive than other employers might and viewed the new obligations as fitting in well with their already employee-focussed practices.
“We’re seeing the move to day one SSP as an opportunity to strengthen how we manage return-to-work conversations, framing them more as wellbeing check-ins.” – shared an attendee.
At the same time, extended Employment Tribunal time limits from three to six months, new and expanded responsibilities for third party harassment, and strengthened duties around sexual harassment all increase both scrutiny and the need for clear, consistent approaches. These are some of the more significant changes and are part of a wider shift towards greater accountability for how employers manage and evidence their people practices.
For employee-owned businesses, these changes build on an existing commitment to fairness, transparency and employee voice. The key shift is that these principles now need to be applied more proactively and at an earlier stage in the employment relationship, with clear evidence to support decisions. Framed positively, this is not simply about managing increased exposure. It is an opportunity to strengthen decision-making through clearer expectations, earlier intervention and more effective support for employees.
Hiring and Probation Changes: Reducing Risk in Early Employment
The reduction in the unfair dismissal qualifying period from two years to six months, which is due to happen on 1 January 2027, fundamentally shifts where risk sits in the employment lifecycle. Decisions taken during recruitment and probationary periods now carry significantly greater legal weight, placing more emphasis on getting appointments right and managing performance early and effectively.
“We tend to think of probation more as a ‘settling-in process’ rather than just a pass-or-fail stage.” – shared one attendee.
At the roundtable, concern was expressed that these changes may make employers more cautious about hiring, with a potential risk that businesses become more reluctant to recruit. However, the stronger theme that the EO organisations expressed was not about caution, but about better decision-making at the outset.
A number of businesses described more structured recruitment processes, including early-stage screening based on values, followed by competency-based interviews and assessment activity. There was a clear focus on identifying the right individual for the organisation. As Nathan Jarvis, Head of Operations, at ICE Trikes noted, the emphasis is often on recruiting for values and fit first, recognising that capability can be developed through training rather than needing to be in place from the outset. For employee-owned businesses, cultural alignment and understanding what it means to be an employee-owner were seen as key.
Probationary periods were highlighted as an area requiring greater focus. It was noted that probation needs to be actively managed, with expectations communicated clearly from the outset and concerns addressed promptly rather than allowed to drift. The importance of documentation was a consistent theme, particularly where employment does not continue, to ensure there is a genuine and evidenced rationale for dismissal decisions taken.
Some practical challenges were also identified, including pressure from recruitment agencies to move quickly, which can conflict with the need to take time to reach the right decision. At the same time, there was recognition that onboarding presents a valuable opportunity to embed employee ownership from the outset, helping individuals understand expectations, values and their role within the business.
Sexual Harassment Duties and Organisational Prevention
The Employment Rights Act 2025 strengthens the legal obligation on employers to take proactive steps to prevent sexual harassment. From October 2026, the standard will increase from taking “reasonable steps” to “all reasonable steps”, raising the threshold for both the action employers must take and how those steps are evidenced. At the same time, employers will become liable for third party harassment, bringing customers, clients, end users of services, suppliers and contractors within scope. Taken together, these changes significantly increase the potential exposure to claims where preventative measures cannot be demonstrated.
For employee-owned businesses, there is often a clear commitment to doing the right thing and protecting employees, supported by strong cultural expectations around behaviour and values. This typically includes a zero-tolerance approach, where employees understand expected standards and know they could raise a concern. However, culture alone is no longer sufficient. It needs to be underpinned by clear training, preventative actions and reporting routes that can be demonstrated in practice. Starting with a risk assessment to identify areas of exposure is an important step in shaping a proportionate response and reflects the broader shift towards more structured and evidenced practice.
A number of businesses described a layered approach to training, with more intensive sessions for senior leadership teams and online or portal-based training for the wider workforce, supported by visible messaging such as posters and mandatory training completion requirements. Training plays an important role in reinforcing culture, helping employees understand expected behaviours and how to report concerns with confidence, and supporting consistency across the business.
The extension to third party harassment was a consistent theme. Questions were raised about how to communicate expectations to contractors, suppliers and those accessing sites, and how to manage environments where non-employees are present. As one participant noted, contractors remain a particular sticking point in practice.
There was also recognition that risk looks different across organisations. While smaller or remote businesses may experience fewer incidents, the relative impact of a complaint can still be significant, both in cost and in culture.
Although technical guidance on this continues to evolve, it is advisable for employers to act now ahead of the curve of the legislative changes. Taking proportionate, risk-based steps and being able to evidence them will be key to demonstrating compliance in this developing area.
Employee Voice: Strength, Challenge and Opportunity
Employee voice sits at the heart of employee ownership, and in many respects EO businesses are already ahead of the curve. However, the Employment Rights Act 2025 raises expectations around how that voice is structured, evidenced and used in decision-making. Reforms taking effect during 2026 and 2027 will expand trade union rights, including making recognition easier to achieve, increasing union access to workplaces (including digital access), and introducing a new obligation on employers to inform employees of their right to join a trade union. These changes point towards a more formalised and demonstrable approach to employee engagement.
Many already have established employee forums, representative structures and open communication channels, underpinned by a culture of transparency and trust. As Sam Moles, Stephens Scown’s Employee Ownership Engagement Advisor, highlighted, discussion and engagement with employees is already embedded in how employee-owned businesses operate and make decisions.
However, it was also recognised that employee voice in practice is not always straightforward. Not all employees engage consistently, and not all fully understand how EO governance operates or how their voice influences decisions. As a result, some organisations are helpfully placing greater emphasis on how they explain decisions, guide employees through change, and ensure that consultation is both meaningful and understood by staff.
There was also recognition that voice mechanisms need to work in practice, not just exist on paper. Uneven participation, unconscious bias in discussions and the risk of dominant voices shaping outcomes were all identified as practical challenges. In that context, greater structure can support EO culture rather than detract from it, helping ensure broader engagement and more consistent decision-making.
The Government’s use of the ERA 2025 legislation to promote the role of trade unions in the workplace adds a further dimension. Employee ownership does not remove the potential for independent representation, and for some organisations, the question is how union engagement sits alongside existing EO structures. This is not necessarily a conflict, but it does require clarity around channels for voice and how different forms of representation interact.
Other areas of the reforms present more uncertainty. Changes relating to zero and low hours arrangements, where definitions and practical application are still developing, were identified as difficult to prepare for in detail. This is compounded by the timing of some reforms. The requirement to take “all reasonable steps” to prevent sexual harassment takes effect in October 2026, but further legislative detail and guidance on what this will require in practice is not expected until later.
Employers are therefore expected to meet a higher standard before the full detail of that requirement of employers is available.
There was also discussion around the growing focus on equality-related obligations, including equal pay and menopause action plans. For many EO organisations, these align closely with existing values and ways of working, but will require a more structured and evidenced approach going forward.
“We’ve already started running menopause workshops for managers, recognising the impact this has across a significant proportion of our workforce.” – shared an attendee.
For EO businesses, the foundations are already in place. Many already have established structures for employee voice, including forums, representative mechanisms and open communication channels. The focus now is on ensuring that those structures operate effectively, support genuine engagement and can be clearly demonstrated where required.
A Practical Readiness Roadmap for EO Leadership Teams
The scale of change under the Employment Rights Act 2025 means that early, structured preparation is key. However, for employee-owned businesses, this is less about starting from scratch and more about building on existing governance and people practices in a more deliberate and evidenced way.
At the roundtable, the discussion confirmed for employers the most effective approach is phased and practical. The starting point for most organisations is to understand the implementation roadmap and identify which reforms are most likely to have an operational impact, particularly in areas such as day one statutory sick pay, earlier unfair dismissal rights and strengthened obligations around harassment and consultation.
From there, attention naturally turns to reviewing existing frameworks. For EO businesses, this often involves sense-checking recruitment and probation processes, performance management approaches and routes for employee voice. In many cases, these structures are already in place, but will need to be applied more consistently and supported by clearer documentation and evidence.
Manager capability was also identified as a key area. As expectations increase around early-stage decision-making, consultation and conduct, managers will need to be confident in applying policies in practice and recording decisions clearly. This does not require complex systems, but it does require clarity, consistency and training.
Communication is another important strand. Bringing employees on the journey as changes are introduced is particularly important in an EO context, where transparency and engagement are central. Clear explanations of what is changing, why it matters and how decisions are made can help ensure that consultation is meaningful and understood.
Finally, there was recognition that preparation is not a one-off exercise. With further consultations ongoing and detailed legislation and guidance still emerging, organisations need to remain adaptable. In practice, this means focusing now on strengthening core processes and governance, so that they can respond flexibly as the detail of the reforms develops.
The reforms represent a significant shift in employment law, but for many EO businesses they also reinforce principles that already sit at the heart of employee ownership: fairness, transparency, accountability and employee voice. The challenge is not introducing something new, but ensuring that those principles are applied consistently, supported by evidence and capable of standing up to scrutiny.
How we Can Help
We are supporting employee-owned businesses in preparing for the Employment Rights Act 2025 in a practical, proportionate and commercially focused way, including:
- In-depth reviews of contracts, policies and working practices.
- HRExpress, our annual employment law and HR support service, including ERA-focused contract and handbook reviews.
- Updated policy and procedure packages tailored to your organisation.
- Training for managers and employees, particularly around harassment, sexual harassment and the evolving requirements under the ERA.
- Employment Rights Act readiness reviews to help identify priority risks and areas for action.
Our aim is to help EO businesses feel prepared, confident and in control, rather than overwhelmed by the scale of change.
For more information, please get in contact with our Employment team. You can also read our latest detailed article with an update on the changes under the Employment Rights Act 2025 here.