Employment Rights Act: What UK employers need to know in 2026

For HR, payroll and business leaders, these reforms are about more than compliance. They implicate policies, processes, workforce planning and technology. While some measures are already in force, further changes are expected throughout 2026 and 2027, meaning organisations must remain proactive and prepared.

In this blog, we'll explore the latest developments, what they mean for HR and payroll teams, and how employers can prepare for the next phase of employment law reform. 

Key changes employers should be aware of

The first phase of reforms introduced significant changes affecting employers across the UK. These include reforms to Statutory Sick Pay (SSP), enhanced family leave rights, and greater enforcement activity through the creation of the Fair Work Agency.  

Statutory sick pay (SSP) reforms

Changes to Statutory Sick Pay (SSP) have widened eligibility and increased employer responsibilities. Key updates include:

1. SSP becoming payable from the first day of sickness absence, removing the previous waiting period. 
2. Removal of the Lower Earnings Limit requirement, extending eligibility to more workers. 
3. New provisions designed to support lower-paid employees who were previously excluded from SSP entitlement.

For payroll teams, these changes require accurate system configuration, updated processes, and ongoing compliance monitoring.

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. This places greater emphasis on HR teams ensuring policies, documentation and manager training are aligned with current legislation from day one. 

Stronger enforcement and compliance

The establishment of the Fair Work Agency signals a more centralised approach to employment rights enforcement. The agency is responsible for monitoring compliance and can take action when employers fail to meet legal obligations.

As a result, organisations should expect greater scrutiny of employment practices, record-keeping, and payroll accuracy.

What changes are still to come?

While several reforms have already taken effect, some of the most significant measures remain on the horizon. Current government plans include further updates relating to: 

• Zero-hours and variable-hours contracts
• Gender pay gap reporting requirements and related action plans
• Day 1 protection from unfair dismissal
• Bereavement leave entitlements
• Additional workplace rights designed to strengthen employee protections

Although implementation timelines may vary, employers should review their readiness now rather than wait for final legislative deadlines.

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.

Increased operational complexity

Employment law reforms often introduce additional administrative requirements. Teams must ensure that processes are up to date, policies remain compliant, and employee communications reflect the latest legal obligations.

For payroll professionals, even seemingly minor legislative changes can have a significant impact on calculations, reporting, and compliance requirements.

Greater reliance on accurate people data

Many of the upcoming reforms depend on organisations having access to reliable workforce information. 

Whether managing leave entitlements, tracking working patterns or demonstrating compliance during audits, businesses need confidence in the quality and accessibility of their people data.

Stronger focus on workforce planning

Employers using flexible working arrangements, seasonal workers or variable-hours contracts may face additional administrative and contractual requirements in the future.

This reinforces the need for HR, payroll, and workforce management functions to work more closely together, supported by integrated technology and reporting.

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. Review your current processes

Start with a comprehensive review of existing HR and payroll procedures.

Ask questions such as:

• Are policies aligned with current legislation?
• Can your systems support new entitlement rules?
• Are manual processes creating compliance risks?
• Do managers understand their responsibilities?

Identifying gaps now helps reduce risk later.

2. Evaluate your technology

Technology plays a critical role in legislative compliance.

Modern HR and payroll platforms can automate calculations, improve visibility, reduce manual administration and help organisations respond more effectively to regulatory change.

Businesses relying on disconnected systems or outdated processes should consider whether their existing technology is fit for the future.

3. Keep employees and managers informed

Legislative change affects people across the organisation.

Regular communication, manager training and accessible guidance can help ensure everyone understands their responsibilities and feels confident navigating new requirements as they're introduced.

Preparing for the future of work

The Employment Rights Act is reshaping the employment landscape. While the reforms are designed to create fairer workplaces and stronger protections for employees, they also introduce new responsibilities for employers.

The organisations best positioned for success will be those that act early, investing in the right people, processes, and technology to remain compliant while supporting their workforce.

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.