The transformation of the Employment Rights Bill into the Employment Rights Act 2025 marks a historic shift in UK labour law. While the legislation received Royal Assent in December 2025, the most significant changes for payroll and HR departments arrive in April 2026. This phased implementation gives businesses a window to prepare, yet the complexity of the new Statutory Sick Pay (SSP) rules requires immediate strategic planning. Every employer in the UK, including those in Northern Ireland, must understand these reforms to avoid compliance risks.
Phasing in the New Employment Landscape
The government is delivering the Act in distinct stages to ensure stability for both workers and businesses. Initial measures involving the repeal of the Strikes (Minimum Service Levels) Act 2023 are already in effect. By February 2026, parts of the Trade Union Act 2016 will follow. However, the most profound “Day 1” rights launch on 6 April 2026, fundamentally altering the relationship between earnings and absence.
The Launch of New Enforcement and Rights
A new “Fair Work Agency” will debut in April 2026 to consolidate employment rights enforcement into a single, powerful body. Simultaneously, entitlements like Paternity Leave and Unpaid Parental Leave will become available from the first day of employment. These changes reflect the broader “Make Work Pay” initiative, which continues to evolve through live consultations.
Major Reforms to Statutory Sick Pay (SSP)
Two structural changes will rewrite the SSP rule book from 6 April 2026 onwards. These reforms aim to expand the safety net to 1.3 million more workers and remove the financial penalties of short-term illness.
Pillar 1: Removal of the Lower Earnings Limit (LEL)
Legislators have officially abolished the income floor for SSP eligibility. All employees, regardless of their weekly earnings, will now be entitled to sick pay. This removal ensures that part-time and low-income staff receive support during illness.
The 80% vs. Flat Rate Calculation
Calculating the correct payment now involves a specific comparison. Employers must pay the lower of:
● 80% of normal weekly earnings (based on the average of the 8 weeks prior to the “critical date”).
● The uprated weekly flat rate of £123.25 (subject to final Parliamentary approval).
Pillar 2: Abolition of the Waiting Period
The mandatory three-day “waiting period” is a thing of the past. From April 2026, you must pay SSP from the first full day of sickness absence. This change effectively sets the “Period of Incapacity to Work” (PIW) at just one day, ensuring immediate financial support.
Technical Deep Dive: Calculations and Linking
Managing the new SSP landscape requires a firm grasp of how absences interact over time. The “Linked Periods” rule remains a core component of the legislation.
The 56-Day Linking Rule
Absences occurring within 56 days of each other are treated as a single, continuous period of illness. This continuity is essential because it determines the reference period for calculating an employee’s Average Weekly Earnings (AWE).
Example 1: Consistent Earnings (Amina)
Amina earns £140 per week and falls ill on 13 April 2026. Her AWE over the preceding 8 weeks is £140, meaning her SSP rate is £112 (80% of £140). She returns to work on 4 May for two weeks before falling ill again on 18 May. Because the gap is less than 56 days, the periods link. Her entitlement remains £112 per week, as the calculation from her initial PIW carries over.
Example 2: Pay Fluctuations (Ellis)
Ellis takes four days of sick leave on 4 May 2026 while earning £135 per week. His SSP is calculated at £108 (80%). Later that month, he receives a pay raise to £165 per week, but he falls ill again on 8 June. Since the 56-day link is still active, his SSP rate stays at £108 despite his higher salary. If he were to fall ill again in late November, the link would be broken. At that point, a new calculation would apply, resulting in the flat rate of £123.25 because 80% of £165 exceeds that cap.
Navigating the Transitional Protection Period
Special considerations apply to employees who are already absent when the new rules take effect. These “transitional protections” ensure a smooth shift from the old system to the new one.
Rules for Ongoing Absences
Absences beginning before 6 April 2026 will follow the previous system to determine initial eligibility and payment rates. However, workers already receiving SSP before the deadline will transition to the uprated flat rate during their continuous absence.
When Protection Ends
An employee will continue at the protected rate until one of the following occurs:
1. They return to work after being deemed fit.
2. They exhaust their 28-week maximum entitlement.
3. Their employment contract terminates.
4. They reach the exclusion period for pregnancy (Statutory Maternity Pay).
Case Studies: Joan, Clare, and Mary
Joan earns £125 per week and remains off sick through the 6 April transition. She receives the uprated flat rate of £123.25 until she returns on 8 April. Clare, earning the same amount, returns to work on 4 April. She receives no protection because her absence ended before the law changed. Mary, earning £148, also benefits from the uprated rate because her absence spans the 6 April threshold.
Employer Checklist: Getting Ready for April 2026
Proactive planning is the only way to ensure your payroll remains compliant. Use the next few months to audit your internal processes.
Step 1: Audit Your Payroll Software
HMRC has already shared technical guidance with software developers. You should contact your payroll provider now to confirm their systems can handle the “80% vs. Flat Rate” logic. Armstrong Watson’s payroll services, for example, are currently coordinating with providers to ensure these transitional arrangements are automated where possible.
Step 2: Update Internal Sickness Policies
Existing handbooks that mention “waiting days” are now legally inaccurate. You must revise these documents to reflect “Day 1” payments. Ensure your HR team understands that even staff earning below the old LEL are now eligible.
Step 3: Educate Your Management Team
Line managers need to be aware of the new Day 1 rights. They should be trained to identify linked periods of absence to assist with accurate reporting. Share this bulletin with your HR and line managers to ensure a unified approach.
Step 4: Monitor Official Updates
Keep a close watch on GOV.UK and business.gov.uk for finalised figures. While the £123.25 rate is the current target, it remains subject to final Parliamentary approval. If you have specific technical questions, email the DWP team directly at SSP.Team@DWP.gov.uk.
Why This Matters
The government introduced these reforms to simplify entitlements and ensure fairer pay for the UK’s lowest earners. By removing the earnings barrier and the waiting period penalty, the Employment Rights Act 2025 creates a more inclusive workplace. Employers who act now to update their systems and policies will find the transition seamless. Those who wait until the deadline risk financial errors and potential disputes with the new Fair Work Agency.
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