Marvin OnumonuSupplier risks are rising for public services as small and medium-sized businesses (SMEs) are behind on getting ready for new employment rights, research from Commercial Services Group found.
Only 64% of SME workers said they knew about the new Employment Rights Act.
One in three (36%) said they had experience with zero-hours contracts, showing the amount of change needed for small employers to meet the law.
Contracting authorities are now told through the National Procurement Policy Statement to spend more with SMEs and voluntary, community and social enterprises (VCSEs), while making sure suppliers stick to high employment standards.
Large contracting authorities spending over £100m a year will have to set targets for direct spend with SMEs and VCSEs.
They will also need to show their supply chains are following the tougher employment rights, putting more focus on workforce practices.
Rob Boyles (pictured), group CFO at Commercial Services Group, said: “Employment reforms are no longer siloed HR issues, they are overlapping with public-sector procurement.
“If gaps in SME compliance are not addressed, it could carry costly implications through delayed contracts and failed audits.
“Realistically, those risks are passed straight into public-sector contracts, making it harder for contracting authorities to meet the expectations set out in the NPPS.”
Early 2026 will see the start of new rules on pay transparency and redundancy protections.
By mid-2026, regulators will have full enforcement powers to fine those who don’t comply.
Nearly two-fifths (38%) of small businesses said they would need clearer government guidance to get ready.
Boyles added: “With SMEs playing such a vital role in delivering public services, supporting them to understand and implement these changes is essential to the resilience and reliability of public-sector supply chains.
“Now is the time to start reaching out for support revising policies and modernising contracts.
“If employers act early, compliance could turn into a strategic advantage, positioning their businesses as a fair and transparent employer.”
