Employment Rights Act 2025: What Changed for UK Employers on 6 April 2026

The biggest shake-up in UK employment law in a generation is now live

On 6 April 2026, the bulk of the Employment Rights Act 2025 came into force. For employers with 10 to 500 staff, this is not a distant policy discussion. It is the law you are already operating under.

The changes are wide-ranging: Statutory Sick Pay (SSP) now covers roughly 1.3 million workers who were previously excluded, several leave entitlements become day one rights, a new enforcement body launched with serious investigatory powers, and the qualifying period for unfair dismissal claims has been cut from two years to six months.

This guide breaks down every change that matters, gives you the exact figures, and sets out a practical checklist so you can get compliant quickly.

What the Employment Rights Act 2025 actually changes

The Act is the legislative vehicle for many of the reforms trailed in the government's "Make Work Pay" programme. Not every provision landed on 6 April, but the core changes below are now in effect. We have grouped them by the area of your business they hit hardest.

1. SSP reforms: day one, no earnings floor, 80% cap

What changed

Before 6 April 2026, SSP had three gatekeepers that locked out low-paid and part-time workers:

• A three-day waiting period before any payment.
• A Lower Earnings Limit (LEL), meaning employees earning below a threshold received nothing.
• A flat-rate payment that could exceed a low earner's normal weekly wage, creating odd incentives around reporting.

All three have been reformed.

Waiting period removed. SSP is now payable from day one of sickness absence. There is no longer a requirement for three "waiting days" before entitlement begins. For employers, this means SSP costs will increase for short-term absences, particularly in sectors with high absence frequency such as retail, hospitality, and care.

Lower Earnings Limit abolished. The earnings floor that excluded workers earning below the LEL has been scrapped. Approximately 1.3 million low-paid workers, many of them part-time, are now entitled to SSP for the first time. If you employ part-time or variable-hours staff, you almost certainly have people newly covered.

80% earnings cap introduced. To prevent SSP exceeding a low earner's normal pay, the Act introduces a cap: SSP cannot exceed 80% of the employee's average weekly earnings. The flat rate for 2026/27 is £123.25 per week, but a worker whose average weekly earnings are, say, £100 would receive £80 (80% of £100) rather than the full flat rate.

Why it matters

The combination of day one payment and no earnings floor means your SSP exposure is broader and kicks in sooner. Payroll systems need to handle the 80% cap calculation, which requires accurate average weekly earnings data for every eligible employee.

2. Day one rights: paternity leave, unpaid parental leave, bereavement leave

Several leave entitlements that previously required continuous service now apply from the first day of employment.

Paternity leave

Previously required 26 weeks' continuous service. Now a day one right. Eligible employees can take one or two weeks of paternity leave from their first day, provided they meet the other qualifying conditions (being the biological father, the mother's partner, or the intended parent in a surrogacy arrangement).

Unpaid parental leave

Previously required one year of continuous service. Now a day one right. Each parent is entitled to up to 18 weeks of unpaid parental leave per child, up to the child's 18th birthday. This was already the law in terms of total entitlement, but the removal of the qualifying period means new joiners can request it immediately.

Bereaved partners' leave (parental bereavement leave extension)

The existing right to two weeks' leave following the death of a child has been extended and is now a day one right. The government has also signalled a broader "bereaved partners' leave" entitlement, giving employees the right to time off following the death of a partner or spouse. Employers should ensure bereavement policies reflect these changes.

What this means in practice

If you have been relying on qualifying periods to manage short-service leave requests, that buffer is gone. Your policies, contracts, and manager training need updating. The financial impact of unpaid parental leave is limited (it is unpaid), but operational planning, particularly for small teams, requires attention.

3. The Fair Work Agency: inspection powers, record-keeping, penalties

A new enforcement body

The Fair Work Agency (FWA) launched on 7 April 2026. It consolidates enforcement functions previously spread across HMRC's National Minimum Wage team, the Employment Agency Standards Inspectorate, and the Gangmasters and Labour Abuse Authority.

This is not a rebrand. The FWA has broader powers than any of its predecessors, and it is designed to be proactive rather than complaints-led.

What the FWA can do

Inspection powers. The FWA can enter business premises to inspect records, interview staff, and investigate compliance with minimum wage, SSP, and other employment rights. It does not need a complaint to trigger an investigation.

Six-year record demands. The FWA can require employers to produce employment records going back six years. If you cannot produce them, that is itself a compliance failure.

Financial penalties. For minimum wage underpayments, the FWA can impose penalties of up to 200% of the arrears owed, capped at £20,000 per worker. For a business with 50 underpaid employees, the theoretical maximum penalty is £1 million before you even factor in the back pay itself.

Naming and shaming. The FWA will continue the practice of publicly naming non-compliant employers, which carries reputational risk well beyond the financial penalty.

Record-keeping

Six years is a long time. Many small and mid-sized employers do not retain detailed payroll and hours records beyond the statutory minimum of three years for most purposes. The FWA's six-year window means you should review your data retention policies now.

At a minimum, retain:

• Gross and net pay records for every employee
• Hours worked (including overtime and variable hours)
• SSP calculations and absence records
• Holiday pay calculations
• Employment contracts and any variations

4. National Living Wage and National Minimum Wage: exact figures for 2026/27

The following rates applied from 6 April 2026:

The standout figure is the 8.5% increase for 18 to 20 year olds. The government's stated aim is to bring the NMW rate for this age group closer to the NLW over time, eventually creating a single adult rate. If you employ a significant number of 18 to 20 year olds, your wage bill has jumped materially.

The apprentice rate and 16 to 17 rate are now aligned at £8.00 per hour.

Check your pay structures. Minimum wage compliance is not just about the headline hourly rate. Salary sacrifice schemes, deductions for accommodation, and unpaid training time can all push effective pay below the legal minimum. With the FWA now actively enforcing, accidental non-compliance carries real risk.

5. Unfair dismissal: qualifying period drops to six months

The change

The qualifying period for bringing an ordinary unfair dismissal claim has been reduced from two years of continuous service to six months.

This is one of the most operationally significant changes in the Act. Previously, employers had a substantial window in which they could terminate employment without facing an unfair dismissal claim (subject to automatically unfair reasons, which have always been day one rights). That window has now shrunk to six months.

What this means for employers

Probation periods need rethinking. Many employers set probationary periods at three or six months. A six-month qualifying period means that by the time an employee passes their probation, they may already have unfair dismissal protection. If you are going to exit someone, the process needs to start early and be well documented.

Performance management from day one. You can no longer afford to wait and see. If there are concerns about a new hire's performance or conduct, address them formally and early. Informal chats without a paper trail will not protect you at tribunal.

Dismissal procedures matter more. With a larger pool of employees who can claim unfair dismissal, following a fair procedure (investigation, hearing, right of appeal) is no longer optional for anyone beyond their first six months. The ACAS Code of Practice on Disciplinary and Grievance Procedures should be your baseline.

Redundancy protective award

Related but separate: the protective award for failure to collectively consult on redundancies has been doubled from 90 days' pay to 180 days' pay per affected employee. If you are planning redundancies involving 20 or more employees at one establishment, the cost of getting consultation wrong has doubled overnight.

6. Other notable changes

Flexible working

The right to request flexible working was already a day one right (from April 2024). The Employment Rights Act 2025 strengthens this further by requiring employers to state specific grounds when refusing a request. A blanket "business reasons" response is no longer sufficient. You must explain which of the eight statutory grounds applies and why.

Fire and rehire restrictions

The Act places new restrictions on "fire and rehire" practices, where an employer dismisses employees and re-engages them on less favourable terms. Dismissals carried out primarily to impose changed terms will be automatically unfair, removing the two-year qualifying period entirely for this category.

Third-party harassment

Employers now have a duty to take reasonable steps to prevent harassment of their employees by third parties, including customers, clients, and suppliers. This is particularly relevant for client-facing and public-facing roles. Your anti-harassment policies should be reviewed to address third-party conduct, and staff should be trained on reporting.

Tips and gratuities

Building on the Employment (Allocation of Tips) Act 2023, the enforcement regime is now consolidated under the FWA. Ensure your tipping policy is transparent and that 100% of qualifying tips are passed to workers.

What employers need to do now: a practical checklist

This is not an exhaustive compliance programme, but it covers the actions that matter most for the majority of employers with 10 to 500 staff.

Immediate (this month)

• Update payroll for new NLW/NMW rates. Confirm all employees are paid at or above the correct rate for their age band from 6 April 2026.
• Update SSP calculations. Remove the three-day waiting period, remove the LEL exclusion, and implement the 80% earnings cap. Test your payroll software handles this correctly.
• Review employment contracts. Remove or amend any qualifying period references for paternity leave, unpaid parental leave, and bereavement leave.
• Audit record-keeping. Confirm you retain payroll, hours, and employment records for at least six years, or begin doing so immediately.
• Brief line managers. They need to know that unfair dismissal protection now starts at six months, not two years.

Within 30 days

• Review your probation process. Align probation review timelines with the six-month qualifying period. Build in formal check-ins at one, three, and five months.
• Update your absence management policy. SSP from day one changes the economics of short-term absence. Consider whether your occupational sick pay scheme needs adjusting.
• Review flexible working procedures. Ensure refusal letters cite specific statutory grounds with reasoning.
• Update anti-harassment policy. Extend coverage to third-party harassment. Train managers on the new duty.
• Check redundancy consultation procedures. If you anticipate restructuring, factor in the doubled protective award (180 days).

Within 90 days

• Conduct a minimum wage audit. Factor in salary sacrifice, deductions, and unpaid time. Consider an external review if you have complex pay arrangements.
• Review fire and rehire practices. If you have used or considered this approach, take legal advice on the new restrictions.
• Update your employee handbook. Consolidate all policy changes into a single update and communicate to staff.

How PerkIQ helps

PerkIQ's benchmarking and benefits analysis tools are built around the UK regulatory landscape. When SSP rules change, the platform's scoring models update to reflect the new baseline, so your benefits strategy is always measured against current legislation rather than outdated assumptions.

The dashboard flags where your provision sits relative to statutory minimums and market benchmarks, which is particularly useful when changes like the SSP reforms shift the floor beneath you. And if you are reviewing your Employee Assistance Programme (EAP), occupational sick pay, or wider wellbeing offering in response to these changes, PerkIQ's provider directory and comparison tools help you evaluate options on cost, coverage, and employee impact without starting from scratch.

Sources

• Employment Rights Act 2025, legislation.gov.uk
• Department for Business and Trade, "Employment Rights Bill: Policy Summaries," 2025
• GOV.UK, "National Minimum Wage and National Living Wage rates from April 2026"
• GOV.UK, "Statutory Sick Pay: what employers need to know," updated April 2026
• ACAS, "Code of Practice on Disciplinary and Grievance Procedures"
• Low Pay Commission, "National Minimum Wage Report 2025"
• Department for Business and Trade, "Fair Work Agency: Guidance for Employers," April 2026

Published April 2026. This guide is for general information only and does not constitute legal advice. Employers should take professional advice on their specific circumstances.