1 in 3 UK small businesses plan to raise prices as sweeping changes hit this weekend
From 6 April, a major wave of UK employment law changes kicks in, marking one of the most significant shifts in workers’ rights in decades. The Employment Rights Act 2026 introduces day-one entitlements for key family and sick pay rights, alongside tougher enforcement and higher penalties for non-compliance.
For many small and medium-sized enterprises, which employ nearly 60% of the private sector workforce, the reforms come amid already squeezed margins from rising wages, National Insurance contributions, and energy costs.
According to a survey by Employment Hero, one in three (30%) of small business leaders plan to raise prices to help absorb the additional costs.
What’s changing from 6 April
The most immediate impacts include:
- Statutory Sick Pay (SSP) from day one: The previous three-day waiting period and £123 weekly earnings threshold are removed. SSP will now be available immediately for more workers, with estimates suggesting an extra £400 million in annual costs across the UK economy – hitting SMEs particularly hard where part-time or lower-paid staff are common.
- Day-one parental leave rights: Paternity leave (up to two weeks) and unpaid parental leave (up to 18 weeks per child until the child turns 18) will no longer require qualifying service periods. A new Bereaved Partner’s Paternity Leave offers up to 52 weeks in tragic circumstances. Government figures project an additional 32,000 fathers gaining access to paternity leave each year, with 1.5 million parents benefiting from earlier unpaid leave.
- Doubled redundancy penalties: The maximum protective award for failing to properly consult on collective redundancies (affecting 20 or more employees) doubles from 90 to 180 days’ pay per affected worker. For a typical scenario involving 20 staff on average salaries, this could jump from around £164,000 to £328,000 in potential liability.
- Launch of the Fair Work Agency (FWA): This new body will consolidate enforcement of minimum wage, SSP, and holiday pay, with powers for unannounced inspections, direct tribunal claims on behalf of workers, and fines up to £200,000 for serious breaches.
Further changes are phased in later in 2026 and 2027, including liability for third-party harassment, restrictions on “fire and rehire” practices, reforms to zero-hours contracts, and a reduction in the unfair dismissal qualifying period.
Small businesses feel the pinch
Smaller firms lack dedicated HR teams, making compliance more burdensome.
An Employment Hero survey found that 84% of small business leaders anticipate making operational changes to manage the new rules – from updating contracts and payroll systems to training managers on handling leave requests and maintaining detailed records for potential FWA audits.
Anna Leach of the Institute of Directors has described the cumulative pressure as “freaking businesses out,” especially against a backdrop of recent cost increases and economic uncertainty. Related CIPD research indicates that 37% of employers overall plan to reduce permanent staff recruitment as a result of the reforms.
While 6 April marks a major milestone, further reforms roll out through October 2026 and into 2027. Employers are advised to review contracts, handbooks, and absence management processes now.
For many small business owners, the combination of higher direct costs and indirect risks is prompting pragmatic but unwelcome decisions. Tighter hiring, operational tweaks, or price increases for customers.
