Many business owners believe sexual harassment is something that only happens in large organisations. Unfortunately, that assumption can leave smaller businesses exposed to significant legal and financial risk.

The Employment Rights Act (ERA) 2025 strengthens employer responsibilities and requires organisations to take proactive steps to prevent sexual harassment in the workplace. This includes harassment carried out by employees, managers, customers, clients, contractors and other third parties.

In simple terms, it is no longer enough to deal with complaints after they happen. Employers are expected to take reasonable steps to prevent harassment from occurring in the first place.

What Has Changed?

Previously, many employers relied on having a policy tucked away in the staff handbook and dealing with issues if they arose.

The new ERA requirements go much further.

Employers must be able to demonstrate that they have actively assessed risks, implemented preventative measures and taken steps to create a workplace culture where inappropriate behaviour is not tolerated.

Tribunals will increasingly look at what an employer did before an incident occurred, not just how they responded afterwards.

What Counts as Sexual Harassment?

Sexual harassment is unwanted conduct of a sexual nature that violates a person’s dignity or creates an intimidating, hostile, degrading, humiliating or offensive environment.

Examples can include:

• Inappropriate jokes or comments.
• Unwanted touching.
• Suggestive messages or emails.
• Sexual remarks about appearance.
• Displaying offensive images.
• Repeated requests for dates after refusal.
• Inappropriate behaviour by customers or clients.

Importantly, the individual affected does not have to make a complaint at the time for the behaviour to be unacceptable.

Why SMEs Are Particularly Vulnerable

Many smaller businesses operate with informal cultures and limited HR support.

Managers may be promoted because they are technically good at their job but have never received training on workplace conduct or managing complaints.

In customer-facing sectors such as hospitality, retail, healthcare and professional services, employees can also be exposed to inappropriate behaviour from customers and clients.

A tribunal is unlikely to accept “we didn’t know” as a defence if no preventative measures were in place.

Five Steps Employers Should Take Now

1. Review Your Policies

Ensure your anti-harassment, dignity at work and disciplinary policies are up to date and reflect the new preventative duty.

Policies should clearly explain:

• What constitutes harassment.
• How concerns can be raised.
• How complaints will be investigated.
• The consequences of inappropriate behaviour.

2. Conduct a Risk Assessment

Consider where harassment risks might arise within your business.

Examples include:

• Employees working alone with customers.
• Client entertainment and social events.
• Remote working and online communications.
• Staff travelling together.
• Customer-facing roles.

Document the findings and actions taken.

3. Train Managers

Managers are your first line of defence.

They should understand:

• What harassment looks like.
• How to recognise warning signs.
• How to respond to concerns.
• When to escalate issues.

Regular training demonstrates that the business is taking reasonable preventative steps.

4. Train Employees

Employees should understand expected standards of behaviour and how to report concerns.

Training should not be a one-off exercise. Regular refreshers help reinforce expectations and demonstrate ongoing commitment.

5. Create a Speak-Up Culture

Employees must feel confident raising concerns without fear of retaliation.

Make reporting channels clear and ensure complaints are taken seriously and investigated promptly.

Many issues can be resolved early if staff feel comfortable speaking up.

What Happens If You Do Nothing?

Failure to take reasonable preventative steps could significantly increase the cost of defending a tribunal claim.

In addition to legal costs and management time, businesses may face:

• Tribunal compensation awards.
• Reputational damage.
• Reduced employee morale.
• Recruitment and retention difficulties.

For many SMEs, the cost of prevention is far lower than the cost of dealing with a claim.

Final Thoughts

The message from the Employment Rights Act 2025 is clear.

Employers are expected to prevent sexual harassment, not simply react to it.

Now is the time to review your policies, assess workplace risks and ensure managers understand their responsibilities.

Taking action today could save your business significant time, cost and disruption in the future.

Need Help?

NewmanHR can help you review your policies, assess workplace risks and provide practical manager training designed specifically for SMEs.

To arrange a free initial discussion, visit:

www.ukemploymentlawadvice.co.uk/contact

Commonsense HR Solutions