If you’re running a growing business, chances are your payroll and pension responsibilities are growing too. As we move into the 2026/27 tax year, there are some important updates on the horizon — and this year, one change in particular stands out as the most significant reform to Statutory Sick Pay in four decades. Here’s a breakdown of what’s changing and what you need to do.
National Minimum Wage Increases
New Rates from 1 April 2026
| Rate Category | From April 2026 | Previous | Increase |
|---|---|---|---|
| National Living Wage (21+) | £12.71 | £12.21 | +4.1% |
| 18–20 Year Old | £10.85 | £10.00 | +8.5% |
| 16–17 Year Old | £8.00 | £7.55 | +6.0% |
| Apprentice Rate | £8.00 | £7.55 | +6.0% |
The government has signalled its intention to eventually lower the National Living Wage age threshold to 18, meaning further compression between age bands in future years. Employers should review pay structures now, particularly where employees sit close to the minimum, as pay compression between entry-level and more senior roles can be an unintended consequence of these annual uplifts.
Review all salaries to ensure compliance from 1 April 2026 and factor the increases into payroll budgeting for the year ahead.
Statutory Sick Pay — The Biggest Change Since 1985
This is the headline change for 2026/27. The Employment Rights Act 2025 is introducing the most substantial reforms to Statutory Sick Pay (SSP) since the system was revised in 1985, and they take effect from 6 April 2026.
What’s changing
The three-day waiting period is abolished. SSP will be payable from the first qualifying day of sickness absence. Short-term absences that previously attracted no SSP cost will now do so.
Currently, employees must earn at least £125 per week to qualify for SSP. From 6 April, this threshold is scrapped entirely — extending eligibility to an estimated 1.3 million additional workers, including part-time, casual, and lower-paid staff.
SSP will be paid at the lower of £123.25 per week (up from £118.75) or 80% of the employee’s Average Weekly Earnings. Lower earners will receive a proportional amount rather than the flat rate.
Update payroll systems promptly — confirm with your software provider when the 80% AWE calculation will be available. Review and update any sickness absence policies that reference waiting days or earnings thresholds, and check whether any occupational sick pay schemes need adjusting.
Holiday Pay and Employment Law Reforms
The government has been consulting on reforms to holiday entitlement calculations — particularly for irregular hours and part-year workers. While some implementation has been staggered, the changes can affect payroll reporting and leave accrual, especially for businesses with flexible or seasonal workforces.
The Employment Rights Act 2025 also introduces day-one rights to paternity leave and unpaid parental leave from April 2026, removing the previous minimum service requirements.
Start conversations now with your payroll provider or HR adviser about adapting processes, particularly if you employ workers on variable hours or term-time contracts.
Other Statutory Payment Rate Increases
From 6 April 2026, the weekly rate for Statutory Maternity Pay, Paternity Pay, Adoption Pay, Shared Parental Pay, Parental Bereavement Pay, and Neonatal Care Pay all rise to £194.32 (up from £187.18). The Lower Earnings Limit for qualifying for these family-related payments increases from £125 to £129 per week.
Update payroll systems with all new rates ahead of 6 April to avoid under- or overpaying staff.
Why This Matters
As your team grows, so does your compliance exposure if payroll isn’t handled correctly. Non-compliance — even if accidental — can result in fines, HMRC enforcement action, and unhappy employees. This year, with the most significant SSP reforms in 40 years coming into force alongside NMW increases and Employment Rights Act changes, getting payroll right matters more than ever.
Payroll is more than processing payslips — it’s about staying on the right side of employment law.
Need guidance on managing payroll costs?
Contact our Payroll Team today — whether you’re an existing client or need help preparing for the April 2026 changes.
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