Where are small hospitality businesses (restaurants, pubs, cafés, hotels) are most likely to feel compliance costs from the Employment Rights Act.
The Employment Rights Bill 2025 is expected to introduce major changes for UK employers — and the hospitality sector is likely to feel the impact more than most. Restaurants, pubs, cafés and hotels rely heavily on flexible staffing, variable hours and seasonal demand. As a result, new rules around guaranteed hours, day-one unfair dismissal rights, and stronger worker protections could increase hospitality HR compliance costs, reduce staffing flexibility, and increase exposure to employment tribunal claims.
Highest-risk cost drivers
- Loss of staffing flexibility (especially for zero-hours and variable shift patterns)
- Higher employment tribunal risk from grievances, dismissals and workplace disputes
- Updating hospitality employment contracts, staff handbooks and HR policies
- Formalisation of HR processes
Moderate but persistent costs
- Ongoing HR/legal support
- Training line managers
- Updating contracts and policies
- HR compliance administration including rotas, holiday pay and sick pay records
Practical Example (Small Restaurant / Pub)
A 15-employee restaurant might face:
- £1,000–£3,000 upfront in HR/legal updates
- Ongoing monthly HR advisory costs
- Increased wage liability due to guaranteed hours
- Higher risk costs from one poorly handled dismissal
Key Takeaway for Hospitality
Hospitality businesses are disproportionately affected because the sector depends on:
- Flexible labour
- Informal management
- High staff turnover
- Thin margins
Compliance costs are less about one-off fees and more about ongoing operational and risk costs.
Scenario Assumed
- Small hospitality venue (restaurant / pub / café)
- 15 employees (mix of full-time, part-time, variable hours)
- No in-house HR
- Owner-managed or single general manager
1. Estimated Cost Impact – 15‑Employee Venue
A. Upfront / First‑Year Compliance Costs
| Cost area | What drives the cost | Estimated range (Year 1) |
| HR & legal review | Contracts, policies, dismissal processes | £1,000 – £2,500 |
| Updated contracts & handbooks | Day‑one rights, predictability clauses | £500 – £1,500 |
| Manager training | Handling disciplinaries & dismissals lawfully | £500 – £1,200 |
| HR systems / record‑keeping | Basic HR or rota software upgrades | £300 – £800 |
| External HR advice (setup) | Interpreting new rules, templates | £500 – £1,000 |
| Estimated upfront total | £2,800 – £7,000 |
Ongoing Annual Costs
| Cost area | Description | Estimated annual cost |
| HR advisory support | Retainer or ad‑hoc advice | £1,200 – £3,000 |
| Increased admin time | Owner/manager compliance time | £1,000 – £2,000 (opportunity cost) |
| Higher wage exposure | Guaranteed hours, SSP, holiday | £1,500 – £4,000 |
| Tribunal risk provision | One dispute every few years averaged | £1,000 – £2,500 |
| Estimated ongoing total | £4,700 – £11,500 per year |
Worst‑Case Risk Scenario (Illustrative)
- One early‑service dismissal mishandled
- Employment tribunal claim issued
Potential cost exposure:
- Legal advice & preparation: £3,000 – £6,000
- Settlement or award: £2,000 – £10,000+
- Management time & stress: significant but uncosted
Briefing Note for Owners or Investors
Purpose
To outline how the Employment Rights Bill may affect cost base, risk profile, and operational flexibility for small hospitality businesses.
Key Impacts
- Higher fixed employment costs due to guaranteed rights and reduced flexibility
- Increased legal and compliance risk, particularly around dismissals
- Greater administrative burden for owner‑managers
- Disproportionate impact on hospitality, where variable hours and high turnover are standard
Financial Implications
For a 15‑employee venue, realistic additional costs are:
- £3k–£7k upfront
- £5k–£11k annually thereafter
Margins in hospitality are typically thin, meaning these costs may:
- Reduce profitability
- Constrain hiring
- Encourage more cautious staffing decisions
Investor Considerations
- Strong HR processes become a value‑protecting asset
- Poor compliance increases risk of cash‑draining disputes
- Well‑run people management reduces volatility and exit risk
Strategic View
Businesses that professionalise HR early will be more resilient, while informal operators face rising regulatory exposure.
Mitigation Checklist – Reducing Tribunal & Compliance Risk
A. Contracts & Documentation
- Issue updated contracts to all staff
- Clearly define hours, flexibility, and variation clauses
- Maintain written probation and review processes
B. Dismissals & Discipline
- Never dismiss without documented reason
- Use a simple but consistent disciplinary process
- Seek advice before dismissing staff with short service
- Keep notes of meetings and decisions
C. Manager Capability
- Train supervisors on basic employment law
- Limit who can discipline or dismiss staff
- Use scripts or templates for meetings
D. Record‑Keeping
- Keep rotas, attendance, and pay records
- Retain emails and advice linked to decisions
- Store documents securely and consistently
E. External Support
- Maintain access to HR or legal advice
- Use advice early, not after decisions are made
- Review provider status (controller vs processor) for SARs
F. Culture & Communication
- Explain expectations clearly to staff
- Address issues early rather than letting them escalate
- Treat consistency as a risk‑reduction tool
Key Takeaway
For a 15‑employee hospitality venue, the Employment Rights Bill is less about one‑off fees and more about ongoing risk management.
Investing modestly in HR structure can prevent disproportionately large tribunal and disruption costs later.
👉 Book a free, no‑obligation demo to explore features, pricing, and set‑up in under 30 minutes.
The Employment Rights Bill 2025 is expected to introduce wide-ranging reforms for UK employers — and the hospitality sector in the UK is likely to feel the impact more than most. Restaurants, pubs, cafés and hotels rely heavily on flexible staffing, variable hours, and seasonal demand. Because of this, changes affecting contracts, scheduling, dismissals, and employment tribunal exposure could increase operating costs and reduce the flexibility many businesses depend on to remain profitable.
In this article, we break down where small hospitality businesses are most likely to face new compliance costs, what the biggest risk drivers are, and what owners and investors can do now to reduce risk.
Why Small Hospitality Businesses Will Feel the Biggest Impact
Small hospitality venues often operate with:
- thin profit margins
- high staff turnover
- variable shift patterns
- limited admin capacity
- no in-house HR team
This combination means even small regulatory changes can create disproportionate cost and risk. Unlike larger groups with HR departments, independent venues often rely on informal management and flexible working patterns — especially for peak periods, events, weekends, or seasonal trading.
Where Compliance Costs Will Increase in Hospitality
Highest-risk cost drivers (biggest financial exposure)
The biggest cost risks for hospitality employers are typically linked to operational flexibility and legal exposure.
1) Loss of staffing flexibility
Hospitality often uses variable hours and shift-based rota planning, including part-time work and (in many cases) zero-hours style arrangements. If changes push employers toward guaranteed hours contracts and stronger predictability requirements, businesses may face higher wage commitments even during quiet trading periods.
Impact for hospitality employers:
- less ability to flex staffing to demand
- higher fixed labour costs
- higher wage exposure during low-footfall periods
2) Day-one unfair dismissal rights
One of the biggest risks for small employers is the possibility of day-one unfair dismissal rights, which can increase the likelihood of claims even where staff have short service.
Why this matters in hospitality:
- high turnover means dismissals occur more frequently
- poor documentation increases risk
- a single mishandled dismissal can lead to a costly dispute
3) Increased tribunal and dispute risk
The hospitality sector already experiences a high volume of workplace disputes due to:
- stress and fast-paced operations
- behavioural issues
- performance concerns
- customer-facing conflicts
With stronger employee rights, the risk of employment tribunal claims, grievances, and settlement costs rises — especially where processes are informal.
4) Formalisation of HR processes
Many independent venues manage staff informally. Under stricter rules, there is likely to be greater pressure to formalise:
- probation processes
- disciplinary and dismissal procedures
- written documentation
- HR record keeping
For owner-managed venues, this can mean more admin and higher time costs.
Moderate but Persistent Compliance Costs for Hospitality Employers
Some costs may not feel dramatic at first, but build up over time.
Ongoing HR and legal support
Many businesses will need retained support or ad-hoc advice to stay compliant, especially during disputes, dismissals, or contract changes.
Training line managers
Hospitality supervisors are often promoted internally and may lack formal HR training. Employers may need to invest in manager training so disciplinary meetings and dismissals are handled correctly.
Updating contracts and policies
Businesses may need to update:
- employment contracts
- staff handbooks
- disciplinary and grievance policies
- terms around working hours and shift changes
Compliance administration and record keeping
Employers may face increased admin around:
- rotas and shift scheduling evidence
- holiday pay records
- sick pay and SSP obligations
- documentation for performance issues
Practical Example: Cost Impact for a 15-Employee Restaurant or Pub
Scenario Assumed
- Small hospitality venue (restaurant / pub / café)
- 15 employees (mix of full-time, part-time, variable hours)
- No in-house HR
- Owner-managed or one general manager
Estimated Cost Impact – Year 1
A) Upfront / First-Year Compliance Costs
| Cost Area | What Drives the Cost | Estimated Range (Year 1) |
| HR & legal review | Contracts, policies, dismissal processes | £1,000 – £2,500 |
| Updated contracts & staff handbook | Day-one rights, predictability clauses | £500 – £1,500 |
| Manager training | Disciplinary and dismissal handling | £500 – £1,200 |
| HR systems / record keeping | Basic HR or rota software upgrades | £300 – £800 |
| External HR advice (setup) | Interpreting rules and templates | £500 – £1,000 |
| Estimated upfront total | £2,800 – £7,000 |
Ongoing Annual Costs for Hospitality Employers
| Cost Area | Description | Estimated Annual Cost |
| HR advisory support | Retainer or ad-hoc advice | £1,200 – £3,000 |
| Increased admin time | Owner/manager compliance time | £1,000 – £2,000 |
| Higher wage exposure | Guaranteed hours, SSP, holiday | £1,500 – £4,000 |
| Tribunal risk provision | Average dispute costs over time | £1,000 – £2,500 |
| Estimated ongoing total | £4,700 – £11,500 per year |
Worst-Case Risk Scenario (Illustrative)
A common risk scenario is a dismissal that happens quickly and informally — especially under pressure, poor performance, or behavioural issues.
Example:
- early-service dismissal mishandled
- employee raises grievance
- tribunal claim issued
Potential cost exposure:
- legal advice & preparation: £3,000 – £6,000
- settlement or tribunal award: £2,000 – £10,000+
- management time and disruption: significant (often underestimated)
Key Takeaway: Why Hospitality Is Disproportionately Affected
The hospitality sector faces a unique combination of cost pressure and operational risk because it relies on:
- flexible labour and variable shift scheduling
- informal management in small teams
- high staff turnover
- tight margins and wage sensitivity
For many employers, the cost impact is less about one-off fees, and more about ongoing operational costs and risk management.
Briefing Note for Owners and Investors
Purpose
To outline how the Employment Rights Bill 2025 may affect the cost base, risk profile, and operational flexibility of small hospitality businesses.
Key Impacts
- higher fixed employment costs due to guaranteed rights and reduced flexibility
- increased compliance and legal risk, especially around dismissals
- greater administrative burden for owner managers
- disproportionate impact on hospitality where variable hours are standard
Financial Implications
For a 15 employee venue, realistic additional costs are:
- £3,000 – £7,000 upfront
- £5,000 – £11,000 annually thereafter
Given hospitality margins are thin, these costs may:
- reduce profitability
- constrain hiring plans
- increase caution in staffing decisions
Investor Considerations
- strong HR processes reduce cash-draining disputes
- poor compliance increases legal volatility and exit risk
- well-managed people practices protect valuation
Strategic View
Hospitality businesses that professionalise HR early will be more resilient, while informal operators face rising regulatory exposure.
Mitigation Checklist: Reducing Tribunal and Compliance Risk
A) Contracts & Documentation
✅ Issue updated contracts to all staff
✅ Clearly define hours, flexibility and variation clauses
✅ Maintain written probation and review processes
B) Dismissals & Discipline
✅ Never dismiss without a documented reason
✅ Use a simple but consistent disciplinary process
✅ Seek advice before dismissing short-service employees
✅ Keep written notes of meetings and decisions
C) Manager Capability
✅ Train supervisors on basic employment law
✅ Limit who can discipline or dismiss staff
✅ Use meeting scripts or templates to stay consistent
D) Record Keeping
✅ Keep rotas, attendance and pay records
✅ Retain emails and advice linked to decisions
✅ Store staff documents securely and consistently
E) External Support
✅ Maintain access to HR or legal advice
✅ Use advice early — not after decisions
✅ Review provider status (controller vs processor) for SARs
F) Culture & Communication
✅ Set clear expectations with staff
✅ Address issues early to prevent escalation
✅ Treat consistency as a legal risk reduction tool
Final Thought
For a 15-employee hospitality venue, the Employment Rights Bill 2025 is less about one-off fees and more about ongoing risk management and reduced flexibility. Investing modestly in HR structure and documentation can prevent disproportionately large tribunal costs later — and support long-term business resilience.
Book a Free Demo / Speak With a Hospitality HR Specialist
👉 Book a free, no-obligation demo to explore features, pricing, and set up in under 30 minutes.
👉 Contact LBJ Consultants on 07984 568523 to speak with a UK HR specialist about your hospitality business and get a tailored solution.
FAQ Questions (visible on the page)
1. What is the Employment Rights Bill 2025 and when will it apply?
The Employment Rights Bill 2025 is expected to introduce reforms to worker protections and employer obligations in the UK. Hospitality employers should start preparing early by reviewing contracts, scheduling practices and dismissal procedures.
2. How will the Employment Rights Bill 2025 affect hospitality businesses?
Hospitality businesses may face higher compliance costs due to reduced staffing flexibility, increased wage obligations from guaranteed hours, and higher risk of disputes and employment tribunal claims.
3. Will the Employment Rights Bill affect zero-hours contracts in hospitality?
It may increase pressure to offer clearer and more predictable working patterns, which could reduce reliance on zero-hours style arrangements and increase wage commitments.
4. Why is hospitality more exposed than other sectors?
Hospitality relies heavily on variable shifts, seasonal demand, high turnover and informal management structures. These factors increase the cost and risk of compliance compared to sectors with stable hours and larger HR support.
5. What could the Employment Rights Bill cost a small restaurant or pub?
For a 15-employee venue, estimated additional costs may be £3,000–£7,000 upfront and £5,000–£11,500 annually thereafter, depending on contracts, HR support, systems and dispute risk.
6. How can hospitality employers reduce tribunal risk?
By keeping accurate records, documenting probation and performance issues, using consistent disciplinary procedures, and seeking advice before dismissals — especially for short-service staff.
7. What should hospitality employers do now to prepare?
Update employment contracts and handbooks, introduce a basic disciplinary and grievance process, train supervisors, and implement simple HR record keeping for rotas, attendance and pay.👉 Or call LBJ Consultants on 07984 568523 to speak with a UK HR specialist and get a tailored compliance plan for your hospitality business.
