The Employment Rights Act 2025 introduces reforms that will affect how employers manage legislation, payroll and employee benefits. While many of the changes will be phased in gradually through to 2027, some will take effect from April 2026, meaning businesses need to be aware of these changes and be preparing now.
One area seeing notable change is Statutory Sick Pay (SSP). This will have practical and financial implications for employers.
Statutory Sick Pay
The government estimates that around 1.3 million additional employees will become entitled to the benefit once the new regulations take effect.
Two key changes will drive this expansion:
- Removal of the 3 day waiting period
- SSP will be payable from the first day of sickness, rather than commencing on day four.
- Removal of the Lower Earnings Limit (LEL)
- Employees of all earnings levels will qualify; and
- The SSP rate paid will be the lower of 80% of average weekly earnings or the statutory weekly rate (£123.25).
SSP becomes payable from the first qualifying day on or after 6 April 2026. In some cases, employers may need to review entitlement at that point – for example where an employee was previously serving waiting days or was not eligible due to the LEL.
Employees already on sick leave
HM Revenue & Customs (HMRC) has provided clarity on how the updated SSP rules apply to employees who were already off sick before 6 April 2026.
In certain circumstances, employees who were previously ineligible for SSP, because their earnings fell below the LEL, may now qualify.
This will apply where the employee’s sickness absence began:
- On or after 22 September 2025; or
- Before 21 September 2025, provided they returned to work at some point between 22 September 2025 and 5 April 2026.
Eligible employees can then receive SSP at the applicable weekly rate for up to 28 weeks.
Why the changes?
The proposed changes reflect the government’s view that the current waiting day system may discourage employees from taking time off when unwell. This can result in employees attending work whilst ill, leading to a delay in their recovery, contributing to the spread of illness and potentially affecting productivity.
While the impact will differ across individual businesses, these changes are set to raise SSP costs for employers. The effects are likely to be most pronounced in sectors such as social care, hospitality, and retail, as part-time and lower-paid employees will now be eligible for sick pay from the first day of absence.
Tips and gratuities
From October 2026, employers will also need to involve employees in developing and reviewing tipping policies on a regular basis.
Priority actions for employers
Ahead of these changes taking effect, employers need to consider:
- Reviewing and updating sickness absence policies to reflect the new SSP rules
- Checking with payroll providers to understand any system updates that may be required
- Ensuring employees are aware of these changes
- Seeking support from payroll specialists where needed. Learn more about the expertise of the M+A Partners payroll team here.
It is important that in conjunction with these changes, employers understand what this means for them in terms of compliance and their resulting obligations. For more detailed guidance on employment law aspects, businesses may wish to consult appropriate professional advisers or access resources available through organisations such as the Federation of Small Businesses (FSB) or relevant sector bodies.
