HR Newsletter No: 174 - Employment Changes in 2026

There are some important changes to statutory rates of pay that the Government have already announced, to take effect in 2026.

National Minimum/Living Wage Rate Increases & Accommodation Rate

The National Living Wage is to rise by 4.1%. It will go from £12.21 to £12.71 per hour.

At the same time, the National Minimum Wage (NMW) rates will be increased as follows:

• from £10.00 to £10.85 per hour for 18 to 20 year olds (an 8.7% increase);

• from £7.55 to £8.00 per hour for 16 & 17 year olds (a 6% increase); and

• from £7.55 to £8.00 per hour for apprentices (a 6% increase);

Accommodation Rate

If you provide some form of staff housing as part of the contractual arrangements, then the daily accommodation offset will apply. This will change from the current rate of £10.66 per day to £11.10 (a 4.1% increase).

The effect of accommodation rates on the National Minimum Wage or National Living Wage depends on how much an employer actually charges for accommodation.  It’s calculated by ‘pay period’, the frequency interval that someone is being paid. If the accommodation is free, it still affects the minimum wage.   It does not matter if the cost of the accommodation is taken from the worker’s wages beforehand, or if the worker pays the cost after they get their wages.

Increased Statutory Rates

The rate for 2026/27 for Statutory Maternity (SMP), Paternity (SPP), Adoption (SAP), Parental Bereavement (SPBP) and Shared Parental (SShPP) Pay are set to increase from £187.18 to £194.32 per week.

Additionally, the rate of Statutory Sick Pay (SSP) is also set to increase from £118.75 to £123.25 per week.

The rates for Statutory Redundancy Pay, Statutory Guarantee Pay, and Tribunal Awards are not yet announced.  We will send an update as soon as the new rates are published. They are usually expected in March.

Implementation

It is worth noting that not all increases happen on the same date.  SSP, SMP, SPP etc. will increase on 6^th April 2026, with the NLW and NMW rates going up from 1^st April 2026.

Future Legal Rights

Now that the Employment Rights Act 2026 received Royal Assent as of 18^th December 2025, a number of new changes will take effect from April of this year, as follows.

Statutory Sick Pay (SSP)

From 6^th April 2026, the entitlement to SSP will become a day 1 right, removing the 3 “waiting days”, and the right to SSP will apply to all workers by abolishing the lower earnings eligibility threshold.  For employees who previously earned below the lower earnings limit, their SSP entitlement will be calculated as the lower of 80% of their average weekly earnings or the standard SSP rate.

These rules will mean that those earning just above the LEL, between £129 (the LEL rate from 6^th April 2026) and £154.05 per week, would see a reduction in their weekly SSP rate as a result of these changes. This is because 80% of £154.05 = £123.24 will be lower than the statutory rate of SSP from 6^th April 2026, £123.25 per week.

The Department for Work and Pensions (DWP) has released guidance for employers on how to manage the transition period when these changes come into effect for those on sick leave on the implementation date. The rules will be:

• workers who are serving their waiting days on 6^th April 2026 will become eligible for SSP from that date onward, regardless of how many days were served at that point.

• those who are already on sick leave but earning less than the LEL on 6^th April 2026 will also become eligible for SSP from that date onward.

• workers earning between £125 and £154.05 per week and already receiving SSP before 6^th April 2026 will be protected to prevent a reduction in their pay. They will continue to receive the flat rate, rather than 80% of their earnings, until they return to work, exhaust their 28-week entitlement, or their employment ends (whichever comes first).

The DWP guidance also provides further information on how average earnings and SSP payments will be calculated:

• 80% of usual earnings will be calculated on a worker’s average weekly earnings over an eight-week reference period.

• any 80% payments will be rounded up to the nearest penny.

• where there are linked periods of absence, the initial period’s average weekly earnings will be used for calculating the 80% rate.

With these changes, it will become even more important for employers to accurately record all types of sickness absence, especially if only SSP is paid and keep Payroll accurately informed of dates.  Further Management action should include keeping a watchful eye on workloads and working conditions, implementing robust measures to challenge consistent short term sickness absence that appears to have no underlying mediate conditions, undertake return to work meetings for all sickness absences not just for perceived “skivers”, and, managing long-term absences to ensure quicker return to work.

The new Fair Work Agency – see below - will oversee SSP enforcement, with stronger compliance measures.  

We are running a public training course on Thursday 5^th March on how to drive down sickness absence costs, so if you are interested and want to book a place, please contact Jackie Bolton on 01480 677981 or jackie@backuphr.com.  

Fair Work Agency

From April 2026, several separate agencies that deal with the enforcement of minimum standards, e.g.  HMRC that focus on e.g. National Minimum Wage compliance, and the Gangmasters and the Labour Abuse Authority are being brought together within one body called the Fair Work Agency (FWA).

The FWA will have powers to enforce the payment of statutory payments to employees, enabling them to recover underpayments quicker than through the current Tribunal system.  It will also be able to bring Tribunal claims on behalf of individuals who are unwilling or unable to do so themselves. Where an individual has started Tribunal proceedings, the agency will be able to provide legal support, assistance or representation.  The agency will have the power to recover any costs incurred from the business if the claim is successful.

Collective Consultation Awards

Collective consultation requirements apply in large redundancy or fire and re-hire situations, where 20 or more people are likely to be dismissed. Under the ERA 2025, from April 2026 the maximum award will increase from up to 90 days’ pay to up to 180 days’ pay.

Day One Paternity and Parental Leave Rights

Currently only employees with 26 weeks’ service are entitled to paid paternity leave, counted at the 15th week before the expected week of childbirth, or in the week their partner is notified of being matched for adoption. To take unpaid parental leave, the employee must have one year’s continuous service.

From April 2026, the ERA 2025 will remove this qualifying period so that both types of statutory leave become Day One entitlements.  This will now follow other stated family leave entitlements, such as Maternity and Adoption leave, which provide employees with the opportunity to take the leave from the start of their employment.  However, notice requirements have not changed and employees will still be expected to give the notice required under the law to take paternity and parental leave.  The transitional  arrangements are that employees will be able to give notice from 18^th February 2026 in anticipation of becoming newly eligible if they wish to take paid paternity or unpaid parental leave from 6^th April 2026.

From 29 December 2025, Regulations were rushed through to bring into force bereaved partner's paternity leave. This now provides access to special leave in situations where the mother or adopter of a child dies in childbirth, or within a year of the birth or adoption.

Sexual Harassment

From April 2026, any sexual harassment whistleblowing disclosure, including that which has occurred, is occurring, or is likely to occur, will qualify as a “protected disclosure”.

As with other qualifying disclosures, the disclosure will not need to be substantiated; however, the individual must have reasonable belief that it is true and it must be in the public interest.

As a result, any employee making a qualifying disclosure in relation to sexual harassment will be protected from suffering a detriment, and any subsequent dismissal for raising such a complaint, would be deemed automatically unfair.

Trade Unions

From April 2026, employers will be prevented from undertaking unfair practices as soon as the Central Arbitration Committee accepts an application for trade union recognition.

Additionally, balloting will be modernised with the introduction of “e-balloting” and making e-mail the preferred method of communication to inform employers of a ballot outcome.

And finally: Reduction in the Qualifying Period for Unfair Dismissal

We now know that the reduction from two years to six months (minus one week) to claim Unfair Dismissal will take effect from 1^st January 2027. It is worth pointing out that working backwards from this date means anyone recruited from 1 July 2026 onwards will have sufficient service to claim unfair dismissal by then.  Also, employees who started after January 2025 are also now on a countdown to receiving protection after this date who previously would not have been protected due to the 2-year rule.

What this means in practice for SME employers is that Managers must get more structured in their approach to taking on new people.

• Employers must get better at making good recruitment decisions rather than risking taking on candidates who do not fully meet the role requirements.

• Onboarding, induction and performance management for new starters must improve, with clearer delivery of job expectations, faster feedback/reviews and proper support during the early months of employment will need to be actively managed, with concerns not left unchallenged.

• Performance concerns regarding new starters will need to be tackled much sooner, as departing a poor performer will become more difficult than it is under the current two-year threshold.

In the Autumn, we will be running further Public training about all of the above requirements, so that employers can start preparing now as to what changes need to happen regarding tighter recruitment, onboarding, induction, the role of probationary periods and formal new starter performance management processes.

Clients are welcome to contact our Consultant Team, who would be pleased to advise you on any element of the issues arising from this newsletter or to book training places.