The Employment Rights Act 2025 represents the most significant overhaul of UK employment law in a generation. Following its Royal Assent in December 2025, the government has laid out a clear roadmap for implementation. For our clients, these changes mean immediate adjustments to payroll processing and a longer-term shift in HR strategy and recruitment.
At Hewitts Payroll, we are committed to ensuring your business remains compliant. Below is a breakdown of what you need to know and when you need to act.
The April 2026 Milestone: Payroll & Immediate Rights
The first major wave of changes takes effect on 6 April 2026. These primarily impact how you pay your staff and manage initial leave.
Statutory Sick Pay (SSP) Reform
The “waiting days” system is being abolished.
- Day 1 Payment: Employees are now entitled to SSP from the first full day of sickness.
- Removal of the Lower Earnings Limit (LEL): Previously, staff had to earn at least £123/week to qualify. This threshold has been removed, making SSP available to all workers regardless of their earnings level.
- The 80% Rule: For lower-paid workers, the weekly SSP rate is now calculated as:
$$\text{SSP Weekly Rate} = \min(\text{Statutory Flat Rate}, 0.8 \times \text{Average Weekly Earnings})$$
(Note: As of April 2026, the statutory flat rate is set at £123.25.)
Day-One Family Leave
Rights that previously required months of service are now “Day 1” entitlements:
- Paternity Leave & Unpaid Parental Leave: Employees no longer need 26 weeks or a year of service. They qualify from their first day on the job.
- Bereavement Leave: A new statutory right to unpaid bereavement leave (including for pregnancy loss) will be introduced.
The Late 2026 & 2027 Shifts: HR & Dismissal
The second phase of the Act focuses on job security and contract flexibility, with most measures landing in January 2027.
Unfair Dismissal & The “Six-Month” Rule
Perhaps the most significant change is the reduction of the qualifying period for unfair dismissal from two years to six months.
- Effective Date: 1 January 2027.
- Removal of the Cap: The statutory cap on unfair dismissal compensation (previously approximately one year’s pay) has been scrapped. This means a tribunal can award full loss of earnings, making high-earner dismissals significantly higher risk for employers.
Ending “Exploitative” Zero-Hours Contracts
The Act does not ban zero-hours contracts but “strips away one-sided flexibility”:
- Right to Guaranteed Hours: If a worker consistently works a regular pattern over a reference period (expected to be 12 weeks), the employer must offer them a contract reflecting those actual hours.
- Shift Cancellation Pay: Employers must provide reasonable notice for shifts and pay compensation if a shift is cancelled or changed at short notice.
Compliance & The “Fair Work Agency”
A new enforcement body, the Fair Work Agency, will launch in April 2026.
This agency has “super-enforcer” powers to inspect business records and issue fines for non-compliance in areas like:
- National Minimum Wage (NMW) errors.
- Holiday pay miscalculations.
- Statutory Sick Pay (SSP) arrears.
How Hewitts Payroll is Preparing
We have already begun updating our software to automate the new 80% SSP calculations and track Day 1 leave entitlements. We are also reviewing our reporting tools to help you identify when zero-hours workers become eligible for guaranteed hour offers.
Client Action Plan:
Check Low-Earner Eligibility: Identify staff previously excluded from SSP by the Lower Earnings Limit to budget for increased costs.
Review Sickness Policies: Update staff handbooks to remove references to “3 waiting days” before April 2026.
Audit Probation Processes: Ensure your performance management is robust. With the 6-month unfair dismissal trigger, you should aim to complete probation reviews by month four or five.