The UK is on the brink of one of the most significant payroll and employment rights overhauls in over 15 years, with major changes taking effect from 6 April 2026.
These reforms, driven by the Employment Rights Act 2025 and related government initiatives under the “Make Work Pay” agenda, will reshape how employers handle sick pay, benefits, compliance, and worker entitlements, says accountancy and advisory firm S&W.
The firm outlined some o the key changes coming below.
Statutory Sick Pay
Central to the changes is a fundamental reform to Statutory Sick Pay (SSP). From 6 April 2026, SSP becomes payable from day one of sickness absence, eliminating the longstanding three waiting days. The Lower Earnings Limit (LEL), previously around £125 per week, is also removed, meaning all eligible employees qualify regardless of earnings level.
The new calculation shifts to the lower of:
- 80% of the employee’s average weekly earnings (AWE), or
- The flat weekly rate of £123.25 (up from £118.75 in 2025/26).
For lower earners (e.g., AWE of £100), this means around £80 per week. This aims to provide immediate and fairer support, particularly for part-time and low-paid workers, but it will increase costs for many employers – especially smaller businesses without enhanced sick pay schemes.
Launch of the Fair Work Agency
Enforcement gets a major boost with the launch of the Fair Work Agency (FWA) in April 2026. This new executive agency under the Department for Business and Trade will consolidate oversight of key rights, including SSP, holiday pay, and the National Minimum Wage (NMW), leading to heightened scrutiny and potential penalties for non-compliance.
The Employment Rights Act
The Employment Rights Act 2025, which received Royal Assent in December 2025, introduces phased changes starting around April 2026. These include:
- Day-one rights for paternity leave and unpaid parental leave.
- Enhanced protections for pregnant workers and whistleblowers (including sexual harassment disclosures).
- Reforms to zero-hours contracts, such as options for guaranteed hours and compensation for cancelled shifts.
- New unpaid bereavement leave provisions, including for pregnancy loss.
- Other family-related and trade union enhancements.
Tax changes
On the tax and benefits front, the 2026/27 tax year is the final voluntary period for payrolling of benefits in kind before mandatory implementation in April 2027.
Employers offering taxable benefits (e.g., company cars, private medical insurance) should register voluntarily by 5 April 2026 if not already doing so, to ease the shift to real-time payroll reporting and away from year-end P11D forms.
Income tax personal allowances and National Insurance thresholds remain frozen (e.g., personal allowance at £12,570), continuing “fiscal drag” as wage growth, including NMW and National Living Wage rises, pushes more workers into higher bands. Class 1A NICs on benefits hold at 15%.
Employers are urged to update payroll systems, review sickness and benefits policies, and seek specialist advice promptly to ensure compliance and avoid disruptions.
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