Employment Law Changes 2026–2027: What UK Business Owners Need to Know (and Do)

The next two years will bring the biggest shift in UK employment law in a generation.

Between 2026 and 2027, changes from the Employment Rights Act 2025 will affect how you handle sickness, family leave, pay, restructures, unfair dismissal and more.

If you’re running or growing a business, you don’t need every legal clause, you need to know:

• What’s changing

• What actually applies to you

• What you should be doing now

At Magenta HR, we specialise in simple, real-world HR and Employee Relations for SMEs. This guide breaks down the key reforms and the priority actions that will protect your business.

1. Statutory Sick Pay: Day One and Wider Eligibility

From April 2026:

• SSP becomes payable from day one of absence (no waiting days)

• The Lower Earnings Limit is removed, more employees will qualify

• SSP will be the lower of:

– 80% of average weekly earnings, or

– the standard SSP rate (£123.25 per week from April 2026)

What this means for your business

Short-term sickness will cost more and affect more of your workforce, especially in smaller teams.

What to do now

✔ Update sickness and absence policies

✔ Check payroll can handle new calculations

✔ Strengthen absence reporting and return-to-work processes

✔ Train managers to manage attendance confidently and fairly

2. Family-Friendly Rights: Day-One Leave Entitlements

From April 2026, these become day-one rights:

• Paternity leave

• Unpaid parental leave

No qualifying service period.

Why it matters

Outdated policies or manager assumptions could quickly lead to grievances and legal risk.

What to do now

✔ Update family leave policies and handbooks

✔ Refresh onboarding information

✔ Brief managers clearly on the new rules

3. Pay, Compliance and Enforcement: Less Room for Error

Across 2026 you’ll see:

• Increases to National Minimum & Living Wage

• A new Fair Work Agency with enforcement powers

• Stronger tipping rules, 100% to staff with clear records

What this means

Even accidental underpayments carry greater risk, especially in hospitality, retail and variable-hour sectors.

What to do now

✔ Audit pay, overtime and allowances

✔ Review accommodation charges if applicable

✔ Create or refresh tipping policies and records

✔ Ensure payroll and HR records are inspection-ready

4. Redundancy, Contract Changes & Union Rights: Higher Stakes

Redundancy

• Protective awards increase from 90 to 180 days’ pay

• Lower thresholds will trigger collective consultation more often from 2027

“Fire and rehire”

• Automatically unfair unless genuinely essential to business survival

• Proper consultation and alternatives must be evidenced

Trade unions

• Contracts must include the right to join a union

• Easier recognition and stronger rep protections

What this means

Shortcuts in restructures or contract changes will become far more expensive.

What to do now

✔ Review redundancy and restructure processes

✔ Allow realistic consultation timelines

✔ Update contract templates

✔ Train managers on collective and union issues

5. Unfair Dismissal & Probation: Six Months Is Now Critical

From January 2027:

• Compensation caps removed, no upper limit on awards

• Unfair dismissal rights apply after six months (not two years)

• Applies retrospectively

Why this is a major shift

The old “two-year safety net” disappears. Your risk now starts early.

What to do now

✔ Strengthen probation and induction processes

✔ Ensure feedback is regular and documented

✔ Follow capability and disciplinary processes properly

✔ Keep clear HR records to evidence decisions

6. Harassment, Bereavement & Flexible Working: Culture Matters

Key changes include:

• Mandatory reasonable steps to prevent sexual harassment, including third-party risks

• Bereavement leave extended to miscarriage before 24 weeks

• Clear, specific reasons required for refusing flexible working

What this means

Policies alone won’t protect you, training, action and evidence will.

What to do now

✔ Update harassment and dignity policies

✔ Deliver regular training

✔ Amend bereavement policies and manager guidance

✔ Improve flexible working processes and documentation

How Magenta HR Helps You Stay Ahead

You don’t need to become an employment lawyer. You do need to be prepared.

At Magenta HR, we support business owners with practical, judgement-led HR and Employee Relations, cutting through noise and focusing on real risk.

We can help you:

• Audit contracts, policies and handbooks

• Create a clear, prioritised action plan

• Train managers on the real-world impact of the reforms

• Put simple, compliant systems in place that actually work

Ready to stress-test your HR for 2026–2027?

If you’d like tailored support for your business, get in touch with Magenta HR to book a free initial consultation.

Clear advice. Real protection. HR & Employee Relations done properly.