As a small business owner, navigating the shifting landscape of industrial relations can feel daunting. The Employment Rights Act 2025 introduces the first phase of significant reforms on 18 February 2026. These changes are designed to modernise trade union laws but also represent a shift in the balance of power that SMEs need to understand.
In this article, we explore the key changes coming into force this month and what they mean for your business.
A guide for SMEs
While many small businesses may not have a formal trade union presence today, the reforms coming into effect on 18 February 2026 make collective action easier and faster to initiate. Understanding these shifts is essential for maintaining stable industrial relations and planning for potential disruptions.
Union political funds
There are two areas being reformed from 18 February regarding political funds – changes to the 10-year ballot requirement and contributions.
Removal of the 10-year ballot requirement
Previously, unions were required to hold a ballot of their membership every 10 years to maintain their political fund.
The change: This requirement has been abolished. Once a political fund is established, it no longer needs periodic re-authorisation through a membership vote.
The impact: Unions save considerable administrative costs and avoid the strategic risk of losing their political mandate every decade. For employers and political parties, this means union political spending will become more consistent and less susceptible to 10-year cyclical interruptions.
Shift to “opt-out” contributions
The 2016 requirement for new members to actively “opt in” to political fund contributions is being reversed.
The change: All new union members will be automatically opted in to political fund contributions unless they specifically choose to provide an opt-out notice. Additionally, unions are no longer required to send annual “reminder notices” to members about their right to opt out.
The impact: This will likely lead to a substantial increase in union political capital. Unions can expect higher participation rates in political funds, providing them with greater financial leverage for campaigning, lobbying, and political donations.
Shorter notice periods for industrial action
The timeframe between a union deciding to strike and the action starting is being reduced.
The change: The notice period unions must give employers before starting industrial action is reduced from 14 days to 10 days.
The impact: You will have four fewer days to manage contingency plans, redeploy staff, or communicate with customers about service changes.
Doubling the “strike mandate”
Once workers vote for industrial action, that vote will now carry much more weight over time.
The change: A successful ballot for industrial action will now provide a 12-month mandate, up from the previous six months.
The impact: A single dispute could result in sporadic industrial action over an entire year without the union needing to re-ballot its members.
Removal of voting thresholds
Previously, “important public services” had to meet a high bar to strike, requiring 40% of all eligible members to vote in favour.
The change: The 40% support threshold has been abolished. Industrial action will now generally require only a simple majority of those who cast a vote.
The impact: Action can now be authorised by a smaller, more active group within the workforce, making it easier for unions to secure a legal mandate.
Simplified paperwork and reduced oversight
The administrative hurdles for unions are being lowered, reducing the “technical” ways an employer might challenge a strike.
The change: When issuing ballot notices, unions no longer need to provide detailed information on the specific categories or numbers of employees expected to take part in the action.
The change: The requirement to appoint a picket supervisor has been removed, making it harder for employers to monitor and manage picket lines effectively.
The impact: Overall, these changes represent a rebalancing of leverage towards unions. By reducing the “red tape” associated with industrial action, the legislative environment now favours unions while simultaneously complicating the employer’s ability to predict, manage, and legally contest labour disputes.
Enhanced protection from dismissal
Protections for employees participating in industrial action have been significantly bolstered.
The change: The previous 12-week limit on protection from unfair dismissal during a strike has been removed.
The impact: It is now automatically unfair to dismiss an employee for taking part in official and protected industrial action, regardless of how long the strike lasts.
What should SME owners do now?
SME owners face a choice: proactive engagement to shape workplace culture or reactive compliance with new legal mandates.
Option 1: Proactive engagement – building an “Employee Voice”
Strengthen direct relationships before external parties intervene by establishing a formal Employee Communication Forum. This internal channel addresses concerns regarding pay and safety, often satisfying the need for representation and reducing union appetite.
If approached by a union, this strategy allows you to pivot to a Voluntary Recognition Agreement. These are more flexible than statutory mandates, allowing you to define the “bargaining unit” and scope of discussions to suit your specific business needs.
Option 2: The “wait and see” strategy – statutory resistance
This defensive position maintains the status quo, acting only if a formal recognition request is made. If you decline a voluntary approach, the union must apply to the Central Arbitration Committee (CAC) to prove sufficient workforce support.
The primary risk is that the Employment Rights Act 2025 significantly lowers the bar for unions. By reducing membership thresholds and removing the “40% support” rule, the CAC is now more likely to accept applications from smaller groups. If successful, the CAC can impose a “one-size-fits-all” legal framework on your business that remains legally binding for at least three years, offering far less operational flexibility than a voluntary deal.
Next steps
Choosing the right path for your SME requires balancing operational needs against the new legal landscape. Because the Employment Rights Act 2025 streamlines the CAC recognition process, a “wait and see” strategy now carries significantly higher risks than in previous years.
Here are our thoughts on the key steps to help you decide your strategy:
Conduct a “temperature check”
Audit internal sentiment: Use anonymous pulse surveys to identify friction points such as pay, safety, or management style.
Assess union presence: Given the forthcoming new workplace access rights (expected in October), high levels of internal dissatisfaction may indicate that a formal union approach is imminent.
Evaluate your negotiating power
Compare the level of control you retain under each strategy:
Voluntary control: Choosing a voluntary agreement allows you to define the “bargaining unit” and set the ground rules for meetings.
Statutory rigidity: A CAC-imposed agreement is inflexible, using a “one-size-fits-all” method for pay and hours that rarely suits agile SMEs.
Review the “threshold” risk
Lowered threshold for recognition: The 2025 reforms make forced recognition easier. If just 10% of a specific group are union members and a majority are “likely” to favour recognition, the CAC can intervene.
Risk assessment:
If your workplace has high union density (approaching or exceeding 10%), a “resistance” strategy is significantly more likely to result in a legally imposed CAC agreement.
Cost-benefit analysis of an internal forum
If you choose to “embrace change” by creating an internal forum, consider the resources required:
Pros: Keeps the conversation “in-house”, builds trust, and can act as a preventative measure against external unionisation.
Cons: Requires management time to facilitate meetings and a genuine commitment to acting on feedback. A forum that staff perceive as not being conducted in good faith can accelerate union membership.
