If you have been running a hospitality business for any length of time, you will know that the legislation rarely leaves you alone for long. The Allocation of Tips Act in October 2024. The employer NIC hike in the April 2025 Budget. National Minimum Wage rises every April. And now, just as you might have hoped for a quieter run, the Employment Rights Act 2025 has arrived – with the first wave already in effect and more to come over the next eighteen months.
For a sector that runs on zero-hours contracts, seasonal peaks and last-minute shift changes, parts of this are going to bite. There is, however, a flip side. Operators who get organised now will be in a much stronger position than those who leave it until enforcement starts knocking on the door.
In this blog, we walk through what has already changed, what is coming, and the practical steps hospitality employers should be taking right now.
What the Act actually changes
The Employment Rights Act received Royal Assent in 2025 and is being implemented in stages through to 2027. Some provisions are already live. Others are still in secondary legislation, but the direction of travel is settled. And for hospitality businesses, it is important to understand which of the changes will have the biggest impact.
Zero-hours contracts are being reined in
Workers on zero-hours or low-guaranteed-hours contracts will gain the right to be offered a contract that reflects the hours they actually work, based on a 12-week reference period. If a team member consistently works 25 hours a week, you will need to offer them a contract that reflects that pattern rather than leaving them on zero hours indefinitely. This provision is expected to come into force in 2027, with consultation on the details still ongoing.
Statutory Sick Pay is now a day-one right
This one is already in force. From 6 April 2026, the three waiting days were abolished and the Lower Earnings Limit was removed as an eligibility test. Every eligible employee – including those on zero-hours and variable contracts who previously fell outside the safety net – is now entitled to SSP from their first qualifying day of absence. For hospitality, where short-term absences are common and zero-hours arrangements are widespread, this is one of the most significant changes to payroll costs in recent memory.
Unfair dismissal protection is being brought forward
The current two-year qualifying period is being replaced with day-one protection against unfair dismissal, with a statutory probationary period (expected to be nine months) during which a lighter-touch dismissal process will apply. The details are still being finalised, but the direction is clear. The casual “we will see how it goes” approach to new starters will no longer be safe ground.
Reasonable notice of shifts and cancellation pay
Employers will need to give workers reasonable notice of shifts, and pay compensation when shifts are cancelled or changed at short notice without adequate warning. The exact notice period and compensation levels are still being set in secondary legislation, but a week is the figure being discussed. For pubs, restaurants and hotels that flex their rotas around bookings and footfall, this is a structural change.
Flexible working from day one
The right to request flexible working from the first day of employment is already in place. Employers can still refuse a request, but the grounds for refusal must be reasonable, and you must explain your reasoning. The Act tightens this further – employers will need to demonstrate that any refusal is justified on one of the statutory grounds.
Stronger protections for new parents
It will become significantly harder to dismiss someone who is pregnant or who has recently returned from parental leave. Day-one rights to paternity leave and unpaid parental leave are also being introduced, with further details to follow.
The Fair Work Agency is now active
The Fair Work Agency launched on 7 April 2026, consolidating enforcement powers from HMRC’s National Minimum Wage team, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate. It has the budget, the inspectors and the remit to pursue non-compliance directly. Tips, compliance, NMW, holiday pay and now SSP all sit under its umbrella – which means a hospitality employer who falls foul of any of them is dealing with a single, well-resourced regulator.
There are some upsides
It can feel like every piece of new legislation is stacked against the employer, but in fairness, some of these changes could genuinely work in your favour.
- Better retention. Hospitality loses staff at a rate well above almost every other sector. Workers who feel secure – with contracts that reflect reality, predictable shifts and proper rights from day one – are less likely to walk. Replacing a single member of staff can cost upwards of £6,000 once recruitment, training and lost productivity are factored in. Even a modest improvement in retention shifts the maths considerably.
- A level playing field. Operators who have built their model on cutting corners – cancelling shifts without notice, keeping staff in deliberate uncertainty, avoiding formal contracts – will find the new rules genuinely difficult. For operators who already treat their teams well, the impact is far smaller.
- A stronger employer brand. Recruitment in hospitality is brutal. Businesses with a solid reputation as employers – where contracts are fair and rights are respected – find it easier to attract and keep good people.
- Reduced tribunal exposure. More clarity in the law actually helps employers. If your contracts, processes and records are in order, you are in a far stronger position if anything is ever challenged.
The risks
For a sector that has been absorbing one cost hit after another, this is another layer of pressure. The risks are worth naming clearly.
Sick pay from day one adds up fast
With no waiting days, every qualifying day of absence triggers a payment. For a business with a large hourly-paid workforce and the usual hospitality churn, the cumulative cost and the admin burden of accurate tracking add up quickly.
Zero-hours flexibility is changing
Seasonal businesses, event venues, and hotels that surge in summer – the model has relied on flexing capacity at short notice. The Act does not ban zero-hours contracts, but where workers consistently work regular hours, those arrangements will need to be formalised. That changes your cost base.
Shift cancellations will cost money
A quiet Monday, a no-show wedding party, a kitchen flood – sending staff home will need a proper policy behind it, and may carry a compensation cost.
Probation now matters more
Hiring someone and seeing how they get on is entirely normal. But the process will need to be documented properly from week one. Verbal warnings and informal arrangements will not stand up if something goes wrong.
Your floor and kitchen managers need to know the rules
A great deal of day-to-day employment activity – rotas, performance conversations, flexible working requests, shift cancellations – happens at site level. If your managers are not briefed and trained, the exposure is real.
What to do now
The staged rollout gives you time to prepare, but only if you use it. These are the practical starting points.
Contracts and policies
- Review every zero-hours and variable-hours contract. If workers consistently work regular hours, start planning how you will formalise those arrangements.
- Update sickness absence policies and staff handbooks to remove any reference to three waiting days or the Lower Earnings Limit – those rules no longer apply.
- Add or review qualifying-day clauses for all zero-hours and variable-hours workers. Without an agreed pattern, the statutory default can produce some uncomfortable outcomes.
- Refresh your probation framework so that performance is documented properly from day one.
Operations and people
- Brief your managers – particularly on the new probation process, flexible working requests, shift change procedures and absence reporting.
- Get your absence tracking right. SSP from day one means payroll needs accurate first and last days of absence for every employee, every time.
- Communicate the changes to your team in plain language. Many newly eligible workers will not know they now qualify for SSP.
Payroll and systems
- Confirm with your payroll provider that your software is configured for day-one SSP and the new 80% Average Weekly Earnings calculation.
- Make sure your rota and timesheet records will stand up as evidence if a dispute ever arises about qualifying days, shift notice, or hours actually worked.
- Model the likely SSP cost increase across your workforce so the cash flow impact does not come as a surprise.
- Hospitality has always absorbed enormous complexity – seasonal demand, weekly payroll runs, multi-site operations, tips, NMW monitoring and high staff churn. The Employment Rights Act adds another layer, and the arrival of the Fair Work Agency means the enforcement environment is more active than it has been for
years.
For operators who get their contracts, systems and managers in order now, this does not have to be the disaster the headlines suggested. The businesses that will struggle are those whose contracts do not match reality, whose absence tracking is patchy, and whose managers are not equipped for the new rules. That does not have to be you.
If you would like to talk through how the changes affect your payroll specifically, we are here to help.
