Employment Rights Act: What it means for you

These changes are designed to create a fairer and safer workplace, but they also make things more complicated for businesses, particularly for the HR and payroll teams who have to handle the implementation.

In this blog, I dissect the key changes introduced by the Employment Rights Act, exploring their direct impact on critical processes and outline the crucial steps your organisation must take to prepare. 

Key changes in the Employment Rights Act

On 6th April 2026, the Employment Rights Act will come into effect, following the governments intended roadmap released last year, these are now legal requirements for all organisations across the UK. The measures contained in the act are to be introduced in phases, the first changes include:

Statutory sick pay (SSP) reforms

One of the most immediate and impactful changes involves Statutory Sick Pay. The government is implementing two key reforms:

1. Removal of waiting days: Currently, employees are not entitled to SSP for the first three qualifying days of sickness. The bill will abolish this rule, making SSP payable from day one of an employee's absence.
2. Abolition of the Lower Earnings Limit (LEL): The requirement for an employee to earn above the Lower Earnings Limit to qualify for SSP will be removed. This extends sick pay rights to a significant number of lower-paid and part-time workers who were previously ineligible. This move will also introduce a new rate of pay of 80% of average weekly earnings which will apply for low earners.

Day one entitlement to paternity and parental leave

The act introduces a right to both paternity and parental leave from the very first day of employment. This is a significant shift from a system which often requires a minimum period of service. This change aims to provide greater support and flexibility for new parents from the moment they join a company.

A new compliance agency

To ensure these new rules are followed, on 7th April the Fair Work Agency will be formally established, centralising responsibility for enforcement of employment rights, including National Minimum Wage. This agency has the power to conduct audits and issue fines and penalties to non-compliant employers. This signals a move towards closer scrutiny of adherence to employment law, making it more critical than ever for businesses to get their processes right.

Future roadmap

Some of the headline measures from the Employment Rights Act are not planned to be introduced until 2027. These include

• Changes to zero-hour contracts that will require employers to offer fixed-term contracts based on the hours worked in a set reference period
• Gender pay gap and menopause action plans
• Day 1 protection from unfair dismissal
• Bereavement leave

What does this mean for your team?

These legislative changes create significant new administrative responsibilities. HR and payroll teams are at the forefront of implementing them. The impact will be felt across several key areas of both functions.

System and process updates

The SSP reforms have a direct and heavy impact on both HR payroll software and processes. Systems must be reconfigured to calculate sick pay from day one and accommodate the removal of the LEL. This isn't a simple switch; it requires careful updates to ensure calculations are accurate and compliant from the moment the new rules take effect. With payroll teams already spending, on average, a day a week on admin-heavy processes, this additional layer of complexity could cause issues. 

Likewise, in HR, many of the reforms will require clear visibility over your people data. For example, Redundancies now need to be tracked across multiple sites. This means your systems need to be equipped to handle this data, centralise it, and process it, all while keeping employees and managers aware of the new normal.

Managing flexible workers

For organisations that rely on zero-hour or variable-hour contracts, the new legislation will demand a complete review of how these employees are managed. Payroll teams will need to work closely with HR to track hours, manage contract changes, and ensure communications with employees meet the new statutory requirements. This will necessitate better integration with workforce management systems and more sophisticated data analytics to manage workforce changes effectively.

Increased compliance burden

With the formation of a new compliance agency and the threat of fines, the pressure on everyone to ensure 100% accuracy intensifies. Payroll and HR managers will need to go beyond processing tasks and take on a stronger role in ensuring compliance. This requires a deep understanding of the new legislation, robust auditing procedures, and the ability to provide detailed analytics to prove compliance.

How to prepare your team

With major changes closer than ever, the time to prepare is now. Waiting until the legislation is fully passed will leave you scrambling to catch up. Here are three steps your organisation should take now.

1. Ensure your current systems and processes are in line with legislation

Start by conducting a thorough audit of your existing software and processes. Are they fit for purpose? Can your system be easily configured to handle the upcoming SSP changes? What about parental leave allowance? Identify any gaps or weaknesses now so you have time to address them. This is also an opportune moment to review your reliance on manual, admin-heavy tasks and explore how automation could build greater resilience into your payroll function.

2. Seek specialist expertise if you require support

Navigating the complexities of legislation, is a serious task, and making a mistake can be costly. Consult specialist advisors in key areas (like payroll or unionisation) who truly grasp the intricacies and won't just interpret the legislation; they'll help you operationalise it within your critical functions. It may be time to explore how a trusted partner can offload this burden, bringing specialised knowledge and robust systems to the table, and ensuring your business remains compliant without needing an in-house expert.

3. Stay informed with training and updates 

The updates are not just going live in April 2026, they will continue through to 2027. Keep up to date on legislative changes through regular training and awareness efforts. Provide ongoing learning opportunities and clear, accessible internal documentation. Staying informed and prepared is the best way to navigate changes smoothly.

Navigate the future of work with confidence

The Employment Rights Act represents a significant step forward for UK workers, but it also presents a considerable challenge for employers. The organisations that will navigate this change successfully are those that prepare now, investing in their people, processes and technology.

At MHR, we're closely monitoring every development to ensure our technology and services are ready. When new legislation hits, we're leading the conversation with our experts at the helm, helping you understand how this impacts your team. We build systems that can roll with the changes, so get in touch to find out more.