As 2025 draws to a close, I’ve reflected on a year marked by economic strain, change, restructuring and legislative anticipation. From recruitment struggles to funding pressures, the sector has faced a complex landscape; one that is set to shift further with the implementation of the Employment Rights Bill in 2026 and beyond.
2025: A year of HR challenges
1. Funding and financial strain
Rising wage costs, employer National Insurance contributions, and high energy prices have placed immense pressure on social sector budgets. For many organisations rising payroll costs may be outpacing funding, raising fears of financial instability.
Social sector organisations have been exploring alternative commercial models, mergers and restructures to remain resilient.
2. Recruitment pressures
The social sector continues to grapple with attracting and retaining talent. Salary competitiveness remains a major hurdle, especially for smaller employers who can’t match private sector pay. While mission-driven work still appeals to many, candidates increasingly expect transparent pay structures, career progression, and flexible working arrangements.
The Kreston Charities Report for 2025 highlighted that almost half (44%) of charities find it hard to recruit and retain employees even with over 50% of respondents having increased salaries and implemented more flexible hours.
The rapid increase in the use of AI has also created challenges for social sector recruiters, with candidates increased use of AI in applications and selection processes.
3. Mental health and wellbeing
The latest CIPD Health and Wellbeing at Work report identifies mental ill health as the leading cause of long-term sickness absence and second leading cause of short-term absence in the UK.
The social sector is responding with wellbeing support, initiatives and flexible work policies, but limited budgets and financial strain can make implementation challenging.
4. Compliance and skills gaps
With rapid changes in employment law and technology, many social sector organisations are struggling to keep policies up to date.
Staff will require reskilling, especially as AI and digital tools become more embedded in organisational processes.
Looking Ahead: The Employment Rights Bill and its implications
The Employment Rights Bill, with phased implementation through to 2027, promises to reshape the employment landscape for charities and not-for-profits.
Key provisions (some of which require further consultation) which will affect employers within our sector:
- 6-month length of service for unfair dismissal rights (reduced from 2 years): Although not the day one right initially presented within the Bill, this change will place greater emphasis on getting it right at the recruitment and selection stage, reviewing probation processes (and durations) and ensuring managers have the capability to effectively manage probation periods. It should also be noted that this change may in fact come into law in 2026, sooner than originally anticipated.
- Zero-hours and low-hours contracts: Workers could gain stronger rights to guaranteed hours, requiring charities to rethink staffing models and shift scheduling.
- Flexible working and “fire-and-rehire” restrictions: The Bill proposes stricter rules around flexible working requests and limits the use of fire-and-rehire tactics to change employment terms.
- Enhanced protections against harassment and discrimination: New regulations will ban non-disclosure agreements and strengthen employer responsibilities around workplace harassment.
- Bereavement and parental leave rights: Including new rights for leave in a bereavement, including pregnancy loss, and a review of statutory parental pay schemes.
What this means
Once Royal Assent is given, the Bill’s phased rollout may give social sector organisations time to prepare for some changes, but with changes likely to be implemented from April 2026, the administrative burden will be significant.
Practical steps that social sector employers should take in early 2026 include:
- Audit employment practices and policies against the likely changes to understand the impact and potential costs of changes
- Refresh and update relevant HR documentation, for example around probations, harassment, flexible working, bereavement etc
- Upskill managers on changes
- Review staffing models, especially where zero-hours contracts are used
- Strengthen recruitment processes to ensure fair and robust hiring from day one
If you want to feel confident going into this new era of employment rights, our COMPLY Plus subscription can give you the support to keep everything aligned and legally sound with ease. Contact us today for more information.
Final thoughts
2025 has underscored the need for HR leadership in the social sector. As we move into 2026, the Employment Rights Bill offers both challenges and opportunities — a chance to build fairer, more inclusive workplaces that reflect the values at the heart of mission-driven work.
By investing in people, embracing compliance, and planning proactively, social sector employers can not only weather the changes ahead but emerge stronger and more aligned with their missions.
