In our experience, that’s not the case.
1: Small businesses are actually at a higher risk of a tribunal claim because you often manage employee issues informally. That leaves you far more exposed compared to larger companies with stricter processes and policies.
2: The new Employment Rights Act has introduced significantly more red tape and made employing people far riskier, regardless of your size.
In this article, we talk you through the different changes you need to be aware of and how you can protect your business from future claims.
What has actually changed
The Employment Rights Act expands employee protection in several areas that directly affect how you manage people day to day.
Some of the changes include:
- stronger statutory rights from earlier in employment
- lower thresholds for certain types of claim
- broader enforcement powers, including through the new Fair Work Agency
- increased scrutiny on fairness and process in how decisions are made
On their own, each change is manageable. Together, they reduce the margin for informal management and increase the expectation that you can evidence how and why decisions were made.
Why this increases your exposure
More rights for employees means more routes to challenge a decision. That is not a criticism of the law. It is just a practical reality you need to plan for.
Where previously a short-service employee may have had limited options to bring a claim, the thresholds have shifted.
Employees now have earlier access to certain protections and the Fair Work Agency has the power to take enforcement action on their behalf, including taking businesses to tribunal directly.
There are also fewer situations where a dismissal can be treated as low risk. Even in the early stages of employment, how you handle performance, conduct and expectations matters more than it used to.
Add to that a general increase in employee awareness. People are more informed about their rights and more willing to push back on decisions they believe were unfair.
Why small businesses feel this more sharply
This is something we see a lot. Most small businesses rely on informal conversations to manage people. A quiet word here, a verbal warning there, a probation that was never properly reviewed.
That approach worked when the risk was lower. It becomes a problem when:
- employees have stronger protections earlier
- enforcement bodies are actively looking for gaps
- you are expected to show that your process was fair and documented
Without an in-house HR function, there is often no one checking whether the way things are being handled would actually stand up to scrutiny. Managers make decisions based on instinct rather than process and those decisions are harder to defend when they are questioned.
What to do now
The good news is that you do not need to overhaul everything overnight. But there are practical steps you can take to reduce your exposure.
- Tighten your performance processes
If you are managing underperformance through informal chats, start putting things in writing. Set clear expectations, record conversations and follow up. A paper trail does not need to be complicated but it does need to exist. - Review how you handle probation and dismissal
Make sure that your probation process includes structured reviews and documented outcomes. If you need to end someone’s employment, make sure that you are following a fair process, even where you are not legally required to. The cost of getting this wrong has gone up. - Train your managers
Many issues start with a well-intentioned decision made by someone who did not realise that the rules had changed. Make sure that anyone managing people understands the basics of the updated obligations and knows when to ask for help. - Document decisions properly
If you cannot show why a decision was made, you are exposed. Keep records of meetings, conversations, warnings and outcomes. It does not need to be a huge admin task, just somewhere accessible and consistent. - Focus on prevention over defence
Most serious disputes start as unmanaged issues. Someone was not told clearly enough what was expected. A conversation was avoided. A concern was brushed aside.
Small improvements in how you handle things at an early stage dramatically reduce the chance of a formal claim later. That is always going to be easier and cheaper than dealing with one after the fact.
Where an HR consultant can support you
An experienced HR consultant can review your current processes against the expanded rights under the Employment Rights Act and help you to close the gaps before they become problems.
That includes updating manager guidance, sense-checking how you handle dismissals and grievances, strengthening your documentation and stepping in early when issues start to surface.
The tribunal system may look the same, but your exposure has changed. If you are unsure on whether your processes reflect where the law is now, it is worth getting that checked.
Get in touch for a confidential chat and we’ll talk you through how we can help.