UK Employment Law Changes 2026: What Employers Must Know

The Employment Rights Act 2025 received Royal Assent on 18 December 2025, and its provisions are now rolling out in stages throughout 2026 and into 2027. For UK employers, particularly SMEs, these changes represent the most significant overhaul of employment law in a generation.

Here is a practical guide to what is changing, when it takes effect, and what you need to do to prepare.

Key Changes at a Glance

Does This Affect Your Business?

The Employment Rights Act 2025 applies to every UK employer, regardless of headcount. There is no small-employer exemption like there is for unfair dismissal automatic protections under TUPE. However, the practical impact varies by size:

• Under 10 employees: The biggest immediate hit is the April 2026 SSP reforms (especially day-one payment and the removed Lower Earnings Limit, which brings part-time staff into eligibility for the first time). Day-one parental leave also matters because cover at short notice is hardest with small teams. Audit your absence policy and parental-leave handbook section now.
• 10 to 49 employees: All of the above, plus you will feel the National Living Wage rise across more roles, and the shorter unfair dismissal window means dismissal procedures need formal documentation. Review your probationary period clauses ahead of the new statutory probationary period that starts in 2027.
• 50+ employees: All of the above, plus the strengthened sexual harassment duty (October 2026) is the highest-risk area. The "all reasonable steps" test is harder to meet than the current "reasonable steps". Train all line managers, document risk assessments, and make sure complaint channels are credible. The Fair Work Agency is more likely to audit larger employers proactively.

If you employ workers on zero-hours or low-hours contracts (any size), the 2027 reforms are the single biggest change you face. Start scenario-planning now.

April 2026: Statutory Sick Pay Reforms

One of the most immediate changes affects Statutory Sick Pay (SSP). From April 2026, SSP becomes payable from day one of sickness absence, removing the current three waiting days. The Lower Earnings Limit (LEL) is also being scrapped, which means around 1.3 million additional workers, many in part-time or lower-paid roles, will become eligible for SSP for the first time.

The calculation method is also changing. SSP will be the lower of either 80% of the employee's Average Weekly Earnings or the flat rate of £123.25 per week. Our detailed guide to statutory sick pay for employers explains how these calculations work in practice. For employers, the key action is to review your absence policies and payroll systems now. If you have occupational sick pay schemes, check whether they need updating to reflect the new SSP structure.

April 2026: Day-One Parental and Paternity Leave

From April 2026, paternity leave and parental leave become day-one rights. Currently, employees need 26 weeks' continuous service to qualify for paternity leave. Under the new rules, these entitlements are available from the first day of employment.

This is a welcome change for employees, but it means employers need to update contracts, handbooks, and onboarding materials. It also has practical implications for workforce planning, particularly in smaller teams where covering leave at short notice can be challenging.

April 2026: The Fair Work Agency

The new Fair Work Agency (FWA) is being established in April 2026 to consolidate enforcement of employment rights. It brings together functions currently spread across HMRC, the Employment Agency Standards Inspectorate, and the Gangmasters and Labour Abuse Authority.

The FWA will have powers to investigate and enforce compliance with National Minimum Wage, holiday pay, and SSP obligations. For employers who are already compliant, this should not cause concern. But it does signal a move towards more proactive enforcement, so now is a good time to audit your pay practices and ensure everything is in order.

April 2026: National Living Wage Increase

The National Living Wage rises to £12.71 per hour from April 2026, an increase of 4.1%. The rate for 18 to 20-year-olds jumps to £10.85 per hour, a more substantial 8.5% increase. Employers should review pay scales, particularly for roles close to the minimum, to ensure compliance and maintain any differentials you want to preserve.

October 2026: Extended Tribunal Time Limits

From October 2026, the time limit for bringing most employment tribunal claims is being extended from three months to six months. This is a significant change under the Employment Rights Act 2025 and amends the existing provisions in the Employment Rights Act 1996 (ERA 1996).

For employers, this means a longer window during which former employees (or current employees) can bring claims. Disputes you thought were time-barred may not be. The practical takeaway: maintain thorough records of all employment decisions, disciplinary processes, and grievance outcomes for longer. Do not assume that because three months have passed, you are in the clear.

October 2026: Strengthened Sexual Harassment Prevention Duty

The duty on employers to prevent sexual harassment in the workplace, introduced in October 2024, is being strengthened. From October 2026, employers must take "all reasonable steps" to prevent sexual harassment, replacing the current "reasonable steps" threshold.

This is not just a wording change. Tribunals will apply a higher standard when assessing whether employers have met their obligations. Our guide to workplace bullying and harassment covers the practical steps in detail. You should review your harassment policies, ensure training is up to date and documented, conduct risk assessments (particularly for customer-facing or lone-working roles), and be able to demonstrate a proactive approach to prevention.

January 2027: Unfair Dismissal Reforms

Perhaps the most talked-about change is the reduction of the unfair dismissal qualifying period from two years to six months. This applies to employees whose employment starts on or after 1 July 2026, with the new qualifying period taking effect from January 2027.

Alongside this, the Employment Rights Act 2025 introduces a new "initial period of employment", expected to be around nine months, during which a lighter-touch dismissal process will apply. The details of this statutory probationary period are still being finalised, but the intention is to give employers a reasonable window to assess new hires while still providing employees with protection from day one.

There is also a critical change to dismissal compensation: the cap on unfair dismissal awards is being removed entirely. This means potential liability becomes unlimited, which makes robust, well-documented dismissal procedures more important than ever.

Fire and Rehire Restrictions

From January 2027, dismissing an employee for refusing to accept changes to their contract (the practice known as "fire and rehire") will become automatically unfair, unless the employer can demonstrate genuine financial difficulties that threaten the viability of the business. This is a high bar. If you are considering contractual changes, take proper legal or HR advice before proceeding.

2027: Zero-Hours Contract Reforms

Later in 2027, new protections for workers on zero-hours and low-hours contracts will come into force. Workers will gain the right to guaranteed hours based on a 12-week reference period, reasonable notice of shifts, and compensation for shifts that are cancelled at short notice.

If your business relies on flexible staffing arrangements, start reviewing your workforce model now. Consider whether some zero-hours workers could be offered fixed-hours contracts, and ensure your scheduling practices can meet the new notice requirements. For a detailed breakdown of current rights, the exclusivity ban and what the 2027 reforms mean in practice, see our zero-hours contracts employer guide.

Changes Already in Effect

It is worth noting two changes that have already taken effect. From April 2025, employer National Insurance contributions increased to 15% (up from 13.8%), and the secondary threshold dropped to £5,000. This has already increased employment costs for many businesses. For a full recap of what took effect earlier, see our archive of employment law changes in 2025.

Additionally, from December 2025, ACAS early conciliation was extended from six weeks to 12 weeks. This gives more time for disputes to be resolved before reaching a tribunal, but it also means the process takes longer before you get certainty on whether a claim will proceed.

What Employers Should Do Now

With so many changes coming in stages, it is easy to feel overwhelmed. Here are the priority actions for the months ahead:

1. Review contracts and handbooks to reflect day-one parental leave rights, updated SSP provisions, and the new unfair dismissal qualifying period for employees starting from July 2026.
2. Audit payroll systems to ensure they can handle the new SSP calculation from April 2026 and the National Living Wage increase.
3. Update harassment prevention measures, including policies, training records, and risk assessments, ahead of the October 2026 strengthened duty.
4. Strengthen dismissal procedures and documentation, particularly given the removal of the compensation cap and the shorter qualifying period.
5. Review zero-hours and flexible working arrangements to prepare for the guaranteed hours reforms in 2027.
6. Keep records meticulously, as the extended tribunal time limits give employees twice as long to bring claims.

How Rebox HR Can Help

These changes are significant, but they are manageable with the right support. At Rebox HR, we help SMEs across the UK stay compliant and confident as employment law evolves.

Whether you need your contracts and policies updated, guidance on the new dismissal procedures, or ongoing support to manage these changes as they roll out, we are here to help. Our retained HR support packages give you access to qualified HR professionals whenever you need them, and our HR project support is ideal if you have a specific area to address, such as a policy overhaul or restructuring exercise.

If you would like to discuss how these changes affect your business, book a free consultation with our team today. Call us on 01327 640070 or complete the enquiry form and we will be in touch.