As we move through 2026, the construction industry is facing one of the most significant shifts in regulation for years.
The Employment Rights Act 2025 introduces a wide range of changes — but for construction businesses, the real impact sits around how you manage subcontractors, site behaviour, and compliance risk across your supply chain.
What is the Employment Rights Act 2025?
Introduced in December 2025, the Act sets out a series of reforms aimed at improving worker protections and strengthening accountability across industries.
While many changes focus on employed staff, there are important implications for construction companies working with self-employed subcontractors (“subbies”).
What Does This Mean for Self-Employed Subcontractors?
Subbies typically operate with a high level of flexibility and are not entitled to the same rights as employees.
However, they are protected when it comes to:
• Health and safety on site
• Protection from discrimination and harassment
And this is where the biggest shift is coming.
Third-Party Harassment – A Major Change for Construction
From October 2026, construction companies can be held liable if a worker is harassed by:
• A subcontractor
• A client or developer
• An agency worker
• A site visitor
…unless the business can show it took “all reasonable steps” to prevent it.
This is a higher threshold than current expectations.
On busy sites with multiple contractors and informal working environments, this creates real risk.
What Will HMRC and Tribunals Look At?
Recent case law has already given us a clear indication.
In Campbell v Sheffield Teaching Hospitals NHS Foundation Trust, the tribunal asked:
1. What steps did the employer take?
2. Were there further steps that could reasonably have been taken?
For construction businesses, this means:
• Having a policy is not enough
• You need to evidence action
• You need to show you did everything reasonably possible
CIS and Supply Chain Risk – A Growing Focus
Alongside employment law changes, CIS legislation is tightening.
A key shift is the introduction of “Should have known”.
This means HMRC can now pursue businesses not just for deliberate errors but where they:
• Failed to carry out proper checks
• Didn’t question unusual arrangements
• Made assumptions within the supply chain
This significantly increases risk across subcontractor engagement.
What Should Construction Companies Be Doing Now?
With increased scrutiny from HMRC and upcoming regulatory changes, a proactive approach is essential.
Key actions include:
✔ Reviewing subcontractor processes – Ensure proper due diligence, verification and documentation.
✔ Strengthening site conduct expectations – Make it clear what behaviour is acceptable across all parties on site.
✔ Training site managers and supervisors – They are your first line of defence and need to understand their responsibilities.
✔ Creating clear reporting routes – Workers must feel able to raise concerns and know how to do so.
✔ Keeping clear records – If challenged, documentation will be critical.
Preparing for What’s Next
The direction of travel is clear with:
• Increased HMRC enforcement
• Stronger CIS legislation
• The introduction of the Fair Work Agency
This means more accountability, more scrutiny and less room for error.
Final Thoughts
Construction businesses operate in complex environments with multiple layers of responsibility.
These changes aren’t just legal, they’re operational.
Those who act now will reduce risk, protect their business, and strengthen their reputation across the supply chain.
If you’d like our support regarding subcontractor processes or CIS compliance, the team at Sovereign Plus is here to help.
This blog is for informational purposes and should not be considered financial or legal advice. If you have any specific questions, please speak to a professional adviser.
