As we approach the start of the 2026/27 tax year on 6 April 2026, UK employers face a series of significant updates to employment laws, tax thresholds, and payroll obligations. The Government claim that these changes, driven by the Employment Rights Act 2025 and Autumn Budget 2025 announcements, aim to enhance worker protections, simplify compliance, and address economic pressures.
In this article, we’ll break down the key areas of change, including Statutory Sick Pay (SSP), parental leave, minimum wage adjustments, National Insurance contributions, and other relevant matters.
Statutory Sick Pay (SSP) Reforms
One of the most impactful changes for employers is the overhaul of SSP rules under the Employment Rights Act 2025. These reforms expand eligibility and could increase administrative and financial burdens, particularly for businesses with high absence rates.
- Day-One Entitlement: SSP will now be payable from the first day of sickness absence, eliminating the current three-day waiting period. This means employees can claim from day one, potentially leading to more short-term claims.
- Removal of Lower Earnings Limit (LEL): Previously, employees earning below £123 per week were ineligible. From April 2026, all employees qualify.
- Rate Adjustment: The weekly SSP rate rises from £118.75 to £123.25, or 80% of the employee’s normal weekly earnings, whichever is lower.
Employers should review absence policies, update payroll systems, and train managers on supporting returns to work. Enhanced occupational sick pay schemes may help mitigate the impact.
Parental Leave and Family Rights Enhancements
The Employment Rights Act 2025 introduces greater flexibility for working parents, aligning paternity and parental leave more closely with maternity rights. These changes support work-life balance and could affect workforce planning.
- Day-One Rights: Paternity leave (up to two weeks) and unpaid parental leave (up to 18 weeks per child) become available from the first day of employment, removing the 26-week qualifying period.
- Bereaved Partners’ Paternity Leave: Partners who lose a spouse or civil partner before their child’s first birthday gain up to 52 weeks of leave.
- Flexibility After Shared Parental Leave: The restriction preventing paternity leave after shared parental leave is lifted.
Additionally, statutory maternity, adoption, paternity, shared parental, and bereavement pay rates will increase to £194.32 per week after the initial six weeks. Businesses should update family leave policies and consider how these changes might influence recruitment and retention.
National Minimum Wage and Living Wage Increases
Wage floors are rising again, reflecting recommendations from the Low Pay Commission to keep pace with median earnings. Employers in low-wage sectors like retail and hospitality should budget accordingly.
| Age Group | Rate from April 2026 | Increase from 2025 |
|---|---|---|
| 21 and over (National Living Wage) | £12.71 | +£0.50 (4.1%) |
| 18-20 | £10.85 | +£0.85 (8.5%) |
| 16-17 | £8.00 | +£0.45 (6.0%) |
| Apprentices | £8.00 | +£0.45 (6.0%) |
The accommodation offset rises to £11.10 per day. Note that the voluntary Real Living Wage (not statutory) will increase to £13.45 UK-wide and £14.80 in London by May 2026.
National Insurance Contributions (NICs) Updates
- Voluntary NICs for Abroad Periods: From April 2026, only Class 3 contributions (£18.40/week) allowed, ending cheaper Class 2 options.
- Future Pension NICs (April 2029): NICs applied to salary-sacrificed pension contributions over £2,000 annually.
Preparing Your Business for the changes
These changes represent a shift toward greater employee protections and introduce compliance challenges. We recommend reviewing your policies, consulting on payroll updates, and training staff early. Proactive planning can turn these obligations into opportunities for better employee engagement and retention.
If you’d like tailored advice on how these updates affect your organisation, please do contact us.
