With the introduction of the Employment Rights Act 2025 last December, law specialists have shared what these changes will mean for contractors
The changes to construction employment law affect holiday pay, statutory rights, and protections against workplace harassment.
Specialists from Anglo Scottish Asset Finance and Beecham Peacock Solicitors have shared their analysis and views on the matter and how contractors and firms can stay on the right side of the law.
Some changes are more important for construction
From October 2026, employers will become liable for harassment from third parties, including clients or site visitors, and must have taken “all reasonable steps” to prevent harassment of any kind. As construction worksites are multi-employer workplaces, the vast majority of people on site will be a third party to someone else’s employer.
This means that a subcontractor with a small number of employees can quite easily be held liable for harassment coming from people it does not employ, and therefore can’t supervise or discipline.
Lisa Branker, head of employment law at Beecham Peacock solicitors, said: “Construction employers need a clear anti-harassment policy, tailored to their workplace, as well as regular training and simple methods for reporting harassment that are visible across every site.”
Carl Johnson, UK sales director at Anglo Scottish, added: “Now, more than ever, it’s worth allocating budget, taking the time to invest in induction training and taking visible action when standards are breached.”
Payroll calculations will need closer auditing
The changes also increase liabilities and penalties for incorrect holiday pay or Statutory Sick Pay (SSP) calculations, and can also often lead to reputational damage. Due to variable hours, overtime, travel time, day rates, and night or weekend rates, construction firms are again at particular risk to falling afoul of these changes.
Employment status also throws a wrench in the works, as an employee through the Construction Industry Scheme (CIS), an agency, or an umbrella company, for example, is considered to be a worker, and not self-employed, meaning they are entitled to holiday pay and SSP.
The Fair Work Agency, established in April, helps enforce these employment rights.
Branker: “Before the next round of employment rights laws come into play, we recommend proactively auditing your payroll calculations, especially if you have a large number of site-based workers. Opting to audit payroll before an inspector does is likely to save your company money in the long run.”
Johnson: “Small errors over statutory payments or holiday pay can easily accumulate into substantial back-pay bills, impacting construction cash flow and spiralling into a six-figure liability for larger contractors. If your business works to a financial year-end of 31 December, push to include payroll auditing in the following year’s budget.”
Upgraded or updated Human Resources policies may also need to be considered, as while the time limits for tribunals have been doubled, construction employees rarely stay in one area, making claims harder to examine, dispute, or confirm. For example, claims can still be brought forward by an employee who spent a few weeks on a site years ago, meaning importance should be placed on short-tenure records, even once a project is completed and the team demobilised.
Branker: “From October, employees will have twice as long to bring tribunal claims against their employers. Practically, this means contractors will have to keep HR records for longer and improve their data handling and documentation processes.”
Johnson: “Financially, this means construction businesses must plan for a longer period of exposure. Employment disputes can last for twice as long, which in theory, means more expenditure on legal costs, management time and settlement discussions.
“There’s also the worry that key witnesses might be tied up on live sites, disrupting ongoing operations. So, investing early in robust HR documentation is the best course of action for contractors that wish to protect themselves against budget-busting litigation in the long term.”
Financial penalties can be more severe
Penalties for collective redundancies with mishandled consultations are being increased under the new law. The maximum ‘protective award’ for failing to consult has doubled from 90 days to 180 days, and the price of a mishandled consultation has risen with it.
Collective consultation duties are also triggered by the number of redundancies proposed in a single establishment, meaning a business that is running several projects at once may see difficulties with determining whether a site counts as a separate establishment.
Johnson: “For contractors, this is particularly prudent, given that a huge chunk of sector businesses are investing in offsite manufacture and modern methods of construction to increase output and reduce on-site labour costs.”
Branker: “External employment law advice might be required if substantial restructuring is taking place and employees need to be redeployed or retrained. The cost of your investment in legal advice to ensure you meet consultation obligations is likely to be substantially less than protective awards under the new legislation.”
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