ERA readiness and the cost of doing nothing

When we talk about the Employment Rights Act, it’s easy to focus on the legal change itself and lose sight of its wider impact. But for some employers, that impact will soon be very real… and very expensive.

The risk isn’t always a headline-grabbing tribunal claim, either. That may be the end result, but the problem usually starts much sooner, often sitting in the gaps employers are most likely to miss.

And with the Fair Work Agency now part of the picture, those overlooked gaps may come under even greater scrutiny, leaving businesses more exposed than ever.

So, where are you most at risk? Let’s take a closer look at the gaps that could prove most costly under the ERA.

Smaller issues can still carry a real cost

Not every ERA-related risk starts with a major dispute or grievance. In many cases, the first sign of trouble will arise from an everyday operational issue that slowly begins to cost more than expected.

Take absence for example. With day-one SSP and wider eligibility, even a relatively modest rise in paid sickness absence can have a noticeable financial impact. For an employer with 50 employees, that could mean an additional £11,875 every year.

There are also other areas where relatively simple oversights can become expensive very quickly. Fail to tell ten workers about their right to join a union, for example, and penalties could reach £28,000.

Small gaps can come with a big price tag… For 50 employees, day-one SSP alone could add £11,875 a year.

When compensation starts to climb

Some risks become much more serious when employers fail to take the right steps at the right time. In certain circumstances, tribunals can increase compensation by up to 25% where reasonable steps have not been taken. That means a £25,000 award could quickly become £31,250.

At that point, the cost of doing nothing becomes much harder to ignore. Employers are no longer just dealing with the original issue. They are also dealing with the extra exposure that comes from poor preparation, inconsistent decision-making or failing to act early enough.

A £25,000 award can quickly become £31,250 when compensation is uplifted by 25%.

Contract changes are becoming riskier

Few employers can afford to treat contract changes lightly now. As fire and rehire restrictions tighten, the margin for error narrows with them.

Handle a contract change badly and the cost of a single case could fall anywhere between £15,000 and £50,000+.

It’s a useful reminder that knowing the legal position is only part of the picture. Employers also need to think carefully about how changes are communicated, how consultation is managed, and whether their approach would stand up to scrutiny if challenged.

Misjudge a contract change and one case could cost £15,000 to £50,000+.

The biggest risks come when process fails

The highest costs tend to appear when employers get the process wrong in more complex situations.

Collective consultation is a good example of this. Protective awards could reach up to 180 days’ pay per employee. For 20 employees on salaries of £35,000, that creates a potential exposure of £345,200 from one failure alone.

And from January 2027, unfair dismissal compensation could become even more significant. If compensation caps go, senior-level claims could climb well into six figures.

Not every case will reach those levels, but employers don’t need to hit the maximum for the financial and operational fallout to be serious.

One collective consultation failure could expose an employer to £345,200.

Doing nothing is still a decision

And that’s really the point. The risk isn’t limited to the worst-case scenario. Rather, it sits in the everyday decisions employers make and the areas where teams assume they’ll ‘deal with it later’.

Doing nothing now is still a decision. And in most cases, the one that carries most risk.

That’s why readiness matters more than anything:

• Policies need to reflect the new reality.
• Managers need to know what to do when issues arise.
• HR, payroll and operations need to be aligned.

And where compliance depends on judgement, employers need to be able to evidence their approach, not just point to a policy and hope for the best.

If you want help making sense of what these changes mean in practice, our ERA Readiness Series is a good place to start. You can catch up with the on-demand sessions now, and join our final live session for a closer look at what good looks like, where the common gaps are showing up, and what employers should be checking as the reforms go live.