As new workplace protections raise costs for SMEs, Catherine Greslow, Founder and Fractional Operations Director at Formative Consulting Ltd, looks at how founders are turning to part time executives and specialists to stay compliant, agile, and competitive.
Introduction
The UK’s new Employment Rights Bill is being described as the biggest shake up in workplace law for a generation. From my perspective working with founders and leadership teams, it’s also the source of creeping anxiety, higher costs, tighter obligations, and less room to manoeuvre.
The principle behind the reforms is simple and right, fairer protections for workers from day one. But in practice, smaller businesses will shoulder a heavier burden. Planned reforms such as day one unfair dismissal rights, extended sick pay, and restrictions on exploitative zero hours contracts create new layers of cost and complexity.
What I’ve seen is that SMEs don’t just have to absorb these changes and carry on, they can adapt differently. One of the smartest responses I’m noticing in the market is the rise of fractional work, bringing in senior expertise part time, for a project, or across multiple clients.
The Changing Employment Landscape
Here’s what’s on the table over the next two years:
- Day one rights: unfair dismissal protection is planned but not yet in force. Statutory Sick Pay is planned to become a day one entitlement from April 2026.
- Parental protections: maternity leave is already a day one right. The Bill introduces a day one right to paternity leave from April 2026, though statutory paternity pay will still require service. Unpaid parental leave is currently a one year service right, moving to a day one right from April 2026.
- Zero hours contracts: exploitative use will be curtailed, with workers gaining a right to request predictable hours if they work regular patterns.
- Redundancy rules: extended protections for pregnant workers and new parents, plus stricter consultation requirements.
- Workplace duties: a new legal duty on employers to take reasonable steps to prevent sexual harassment (in force since October 2024).
For SMEs, this translates into:
- More cost from day one of employment.
- Less flexibility to test a role or take a chance on a hire.
- Greater admin and legal exposure, even without in house HR.
Surveys suggest over 60% of SMEs expect a negative impact, and nearly 40% see day one rights as a major risk. The estimated annual cost of the reforms could reach £5 billion.
The Rise of Fractional Working
Fractional work isn’t new, but it’s gained real momentum in the past 18 months. SMEs are increasingly choosing senior talent for a few days a week or on a project basis, rather than full time hires.
Around 1.6 million people in the UK are classed as temporary employees, alongside a growing pool of portfolio professionals.
A 2025 survey by Marks Sattin found that fractional hiring can save 40–60% compared to a full time role and The Federation of Small Businesses has reported rising demand for flexible staffing models since the Bill was announced.
From my client work, I’ve found this isn’t about cutting corners. It’s about accessing skills such as finance, operations and HR that would otherwise be out of reach, while keeping headcount lean.
Fractional Work as a Strategic Response
From where I sit, fractional roles are becoming a survival tactic for SMEs adapting to the Bill.
- Lower payroll risk: without the full overheads of holiday pay, sick pay, and pensions.
- Flexibility: hours can be scaled with business needs.
- Speed: specialists arrive ready to build systems and plug compliance gaps quickly.
I’ve seen founders gain months of breathing space and clarity by using a fractional FD or COO earlier than they thought they could afford.
The Opportunity for SMEs
While the Bill feels like a burden, I see it pushing SMEs to rethink how they build teams. Fractional roles offer:
- Access to senior expertise at a fraction of the cost.
- Systems that outlast the person, embedding resilience.
- Levelling the playing field, giving SMEs access to the same calibre of professionals as corporates.
- Meeting workforce expectations, as more senior professionals seek portfolio careers.
- This shift helps founders step away from firefighting and build businesses designed to scale.
How SMEs Can Embrace Fractional Talent
When clients ask how to make this model work, my advice is:
- Know when you’re ready, growth bottlenecks or compliance gaps are clear signals.
- Scope the role clearly, define deliverables to avoid “employee in disguise” risks.
- Get the contract right, use a services agreement, not a handshake.
- Blend carefully, introduce them well, but don’t treat them like permanent staff.
- Build for handover, insist on systems and processes that outlast their time with you.
Conclusion
The Employment Rights Bill raises obligations for every SME, but it also creates the push to rethink team structures.
In my experience, fractional working is one of the most practical ways to adapt. It protects compliance, controls cost, and gives founders access to the expertise they need to grow.
The choice is clear, treat the Bill as another burden, or use it as the catalyst to build a leaner, more agile business. The SMEs who choose the latter will be the ones ready to scale on their own terms.