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    WFM UK: Overview of the Employment Rights Bill and Legislative Updates for 2026

    Overview

    This article outlines the important information around the impending Employment Rights Bill and new & updated legislation confirmed for implementation in April 2026 so far, based on the most recent information provided by the UK government and HMRC. It offers a concise summary of the key changes and how these legislative updates are expected to impact businesses and individuals. The aim is to provide readers with a clear and practical overview to help prepare for the upcoming regulatory changes.

    _Warning.png Important: Whilst the below is based on information received directly from HMRC & the UK Government, some updates or parts of updates are subject to ultimate confirmation and may be subject to change.

    Finger01.png Please note: A further article will be published after the UK Government's Autumn Budget, highlighting any further legislation updates, as well as the annual New Tax Year release note in March 2026, confirming updates and that they have been implemented into the UK HR & Payroll solution.

     

    Contents

     

    Employment Rights Bill

    On 1st July 2025, the UK Government published the implementation roadmap for the different legislation changes under the Employment Rights Bill. Whilst not all aspects impact the UK HR & Payroll solution from a software product perspective, Fourth urges employers to review this document to understand when each change is planned to be implemented.

    Items impacting the UK HR & Payroll solution set to take effect in April 2026 are outlined below, along with other confirmed legislation. More information regarding items set to take effect in October 2026 or later in 2027 will be published when consultation periods are completed and clarified guidance is supplied.

     

    Statutory Sick Pay (SSP)

    From April 2026, as per the Employment Rights Bill roadmap (Page 9, Point 30), the UK Government will implement several key changes to Statutory Sick Pay (SSP) as part of its wider employment law and welfare reforms. These updates aim to modernise the system, improve access to support for employees, and clarify employer responsibilities.

    What can be expected?

    • Eligibility Expansion: SSP will be available from the first day of sickness absence, removing the current three-day waiting period. In addition, the rules around a Period of Incapacity for Work (PIW) are being relaxed, a PIW will now arise from just one day of sickness (or two or more consecutive days), rather than the current requirement of four days in a row.
    • Removal of the Lower Earnings Limit (LEL): The existing threshold, which requires employees to earn above the LEL (currently £123 per week) to qualify for SSP, will no longer apply to SSP eligibility. This means all employees, regardless of income level, will be entitled to SSP as long as they meet other qualifying conditions. This change will particularly benefit part-time, zero-hours, and lower-paid workers who were previously excluded
    • 80% of Earnings Rule: Employees will be entitled to 80% of their normal weekly earnings, or the flat rate (currently £118.75 per week), whichever is lower. This represents a shift from the previous flat-rate-only model and is intended to create a more equitable system for lower earners
    • Flat Rate Adjustment: The weekly rate of SSP will increase in line with inflation, with the confirmed new rate set to be announced in late 2025 or early 2026
    • SSP Enforcement and the Fair Work Agency: Responsibility for the enforcement of SSP rights will be transferred to a new Fair Work Agency, led by the Department for Business and Trade, moving away from HMRC. This agency will consolidate enforcement functions for employment rights to improve consistency, efficiency, and accessibility for workers and employers

    Impact on Employers

    The removal of the waiting period and the expansion of eligibility to include lower earners are likely to increase the number of absences subject to SSP, and employers will need to manage and be prepared for high volumes of SSP being paid. There is currently nothing of note regarding an SSP reclaim scheme. 

    Fourth's Response

    Ahead of April 2026, Fourth will ensure that the necessary updates are made to the absence functionality and payroll calculations to ensure our customers remain compliant with this new legislation. For those interested in how this impacts our current roadmap, these changes will be incorporated into our in-progress and ongoing Absence Functionality Code Refactor.

     

    Statutory Parental Bereavement Leave & Pay (Northern Ireland)

    _Warning.png Important: These changes only apply to employees gainfully employed in Northern Ireland. Under this section, there is no change to Statutory Parental Bereavement Leave & Pay for those employed in England, Scotland & Wales. 

    The Parental Bereavement (Leave and Pay) Act 2018 was introduced to support and manage grief in the workplace following the loss of a child. The Northern Ireland assembly was suspended from 2017 to 2020, and the original policy could not be introduced. Following its return, the Parental Bereavement (Leave and Pay) Act (Northern Ireland) 2022 introduced a two-phase approach to implementing Statutory Parental Bereavement Leave and Pay (SPBL/P). While the first phase aligned Northern Ireland’s provisions with those in Great Britain, the second phase, now due to take effect in April 2026, introduces significant changes to eligibility criteria and scope of entitlement for those employed in Northern Ireland.

    What can be expected?

    • Day-One Eligibility for Bereavement Pay: Employees in Northern Ireland will be entitled to Statutory Parental Bereavement Pay from the first day of employment in the event of either the stillbirth of a child (after 24 weeks of pregnancy), or the death of a child under the age of 18. This removes the current requirement of 26 weeks continuous employment, which will, however, continue to apply in Great Britain
    • Inclusion of Miscarriage (Up to 24 Weeks): For the first time, miscarriage, defined as a pregnancy loss before 24 completed weeks, will be covered under Statutory Parental Bereavement Leave and Pay in Northern Ireland. This too will be a 'Day One' right, ensuring that eligible employees receive support regardless of their length of service
    • Separate Reporting Requirements: Due to the distinct nature of these entitlements, payments for miscarriage-related leave and the existing bereavement leave must be reported and accounted for separately in payroll, thus the RTI Data submitted to the HMRC. This will include three new data items on the Full Payment Submission (FPS) and two new data items on the Employer Payment Summary (EPS)

    Impact on Employers

    With bereavement leave and pay now extended to cover miscarriage-related loss and being available from day one of employment, employers with employees in Northern Ireland should be prepared for increased claims for Statutory Parental Bereavement Pay in such unfortunate circumstances.

    Fourth's Response

    Ahead of April 2026, Fourth will ensure that Statutory Parental Bereavement Leave & Pay functionality is updated to accommodate the changes for employees employed in Northern Ireland, utilising the Northern Ireland Location flag at Location level in the HR module. FPS & EPS submissions will also be updated to support the updated reporting requirements. The functionality for employees outside of Northern Ireland will remain unchanged (it is currently understood that no changes to Statutory Parental Bereavement Leave & Pay won't take effect until 2027 for those in the rest of Great Britain, as per the Employment Rights Bill Roadmap (Page 9, Point 33).

     

    'Day One' Right for Statutory Paternity Leave & Unpaid Parental Leave

    As part of the UK Government’s Employment Rights Bill, employees will gain 'Day One' eligibility for Statutory Paternity Leave and Unpaid Parental Leave. This reform removes the current length-of-service requirements, allowing qualifying employees access to these family-related leave rights from the very start of their employment. As per the Employment Rights Bill Roadmap (Page 9, Point 30), it is expected that this will take effect from April 2026. However, no affirmative guidance has been published as of right now.

    What can be expected?

    • Statutory Paternity Leave: Currently requires 26 weeks’ continuous service before the 15th week before the due date or adoption placement. The changes will mean eligible employees will have access to paternity leave from day one of employment
    • Unpaid Parental Leave: Currently limited to employees with at least one year of service. The changes will mean eligible parents will be able to take unpaid parental leave immediately upon starting employment

    Impact on Employers

    Employers should be prepared to receive and accept requests for Paternity and Unpaid parental leave from newer employees who would have otherwise been subject to the continuous service requirements. Without affirmative guidance, it is currently understood that Statutory Paternity Pay will still need the continuous service requirements.

    Fourth's Response

    When said affirmative guidance is published, Fourth will ensure that any validations and restrictions on taking leave are removed in line with the updates to Statutory Paternity Leave (and possibly pay) as well as Unpaid parental leave.

     

    Student Loan Plan Type 5

    From 6th April 2026, a new Student Loan plan type will be introduced, known as 'Plan Type 5'. This plan applies to students who began eligible higher education courses from August 2023 onwards and forms part of a wider reform to student finance aimed at reducing repayment thresholds and extending repayment periods.

    What can be expected?

    • Repayment Start Date: Repayments for Plan 5 borrowers via PAYE will begin from 6 April 2026
    • Earnings Threshold: Repayments are calculated at 9% of earnings above £25,000 per annum, before tax and National Insurance. This threshold is lower than the current thresholds for Plans 2 and 4
    • Collection Method: Plan 5 will be operated and collected in the same way as existing student loan plans through the PAYE system. Deductions will be based on instructions from HMRC via SL1 start notices, which employers will begin receiving from March 2026
    • Default Plan Type: In the event an employee does not know their Student Loan Plan Type, then Plan Type 5 will be considered the new default plan type for employers to apply from April 2026

    Impact on Employers

    Little impact on employers outside of being aware of Plan Type 5, and ensuring it is used as the default plan type in the event an employee does not know theirs. Employers remain responsible for ensuring Student Loan deductions are correctly deducted and reported to HMRC, where the instruction to do so is provided.

    Fourth's Response

    Ahead of March 2026, Fourth will ensure that the functionality to apply and deduct Student Loan Plan Type 5 is fully implemented, along with the necessary RTI updates to support its receipt, application, deduction, and reporting.

     

    Removal of State Aid Items from Employer Payment Summary

    From 6 April 2026, employers will see a simplification in how they claim Employment Allowance, as state aid sector declarations will no longer be required via the Employer Payment Summary (EPS).

    Previously, Employment Allowance was considered a form of de minimis state aid under EU rules. As a result, employers had to declare their relevant sector (e.g. agriculture, fisheries, road transport) or confirm that state aid rules did not apply when submitting their EPS to HMRC. From 6 April 2025, HMRC confirmed that Employment Allowance no longer counts as de minimis state aid. However, during that year, employers were still asked to select data item 203 ("State aid rules do not apply to employer") as a transitional measure.

    Important: If not already, check if Employment Allowance is being claimed. From April 2025, Employment Allowance increased from £5,000 to £10,500, and the £100,000 Employment Allowance Threshold was removed, meaning all companies with Class 1 NIC liability can claim Employment Allowance (subject to further rules, such as Connected Companies). A check was completed by Fourth's UK HR & Payroll Product Team, and it was recognised that a large number of customers were not claiming their Employment Allowance for the 2025/2026 Tax Year.

    What can be expected?

    • Removal of Data Items from Employer Payment Summary: The following data items will be removed entirely from the EPS:
      • 199 – Employer is in the agriculture sector
      • 200 – Employer is in the fisheries sector
      • 201 – Employer is in the road transport sector
      • 202 – Employer is in the industrial/other sector
      • 203 – State aid rules do not apply

    Impact on Employers

    No negative impact on employers. The impact on employers is positive, with no need to consider this information previously reported to HMRC.

    Fourth's Response

    For EPS submissions from April 2026, Fourth will have removed these data items as they are no longer required. Where a customer ticks yes to claiming employment allowance under any given company, the field for selecting which sector the business applies to will either be hidden or made non-mandatory.

     

    Review of Parental Leave & Pay

    The UK Government has initiated its first full review of the parental leave and pay system in Britain, aiming to better support working families and give children the best start in life. As part of the Plan to Make Work Pay, this review will examine all types of parental leave (including maternity, paternity, and shared parental leave) with the goal of making the system fairer, simpler, and more accessible for modern families.

    Currently, many families face financial and practical barriers to taking parental leave. For example, one in three fathers do not take paternity leave because they cannot afford it, and uptake of shared parental leave remains low. The review recognises the critical importance of this early family time for bonding, recovery, and adjustment, while also highlighting how improved parental leave supports gender equality and boosts the economy.

    The government will consult widely with parents, employers, and experts to inform potential reforms, aiming to create a more inclusive, flexible, and supportive system that benefits families and businesses alike. This effort aligns with broader government missions to grow the economy, improve living standards, and remove barriers to opportunity.

    What can be expected?

    • Legislative Updates: Employers should anticipate potential changes to parental leave and pay laws, including possible expansions in eligibility, duration, and pay levels to make the system more supportive and equitable
    • Simplified Processes: The review aims to make parental leave rules easier to understand and apply, reducing administrative burdens and clarifying employer obligations
    • Increased Leave Uptake: As financial and practical barriers are addressed, employers may see a rise in take-up of paternity and shared parental leave, requiring adjustments to workforce planning and absence management
    • Stronger Enforcement: There may be enhanced enforcement measures ensuring employers comply with parental leave rights, aligning with the government’s wider agenda to protect employee rights
    • Consultation and Engagement: Employers can expect to be consulted during the review process, with opportunities to provide input on how reforms affect businesses and to receive guidance and support on implementation
    • Focus on Flexibility and Inclusion: Changes may promote more flexible working arrangements and support for diverse family needs, encouraging employers to foster inclusive workplace cultures

     

    Ending the Exploitative use of ZHCs and Applying ZHC Measures to Agency Workers

    As part of its wider Employment Rights Bill and the Plan to Make Work Pay, the UK Government has committed to ending the exploitative use of zero-hours contracts (ZHCs) and extending key protections to agency workers. These changes aim to tackle insecurity in the labour market by improving predictability, fairness, and job stability for workers who have historically lacked guaranteed hours or consistent income. The reforms are intended to ensure that flexible working arrangements are used responsibly, balancing the needs of employers with fair treatment and greater security for workers across all sectors.

    What can be expected?

    • Right to Guaranteed Hours: Workers on ZHCs or unpredictable contracts will have a new right to request guaranteed hours after a qualifying period. This measure is intended to reduce one-sided flexibility and provide greater financial and scheduling certainty for workers
    • Shift Management: Employers will be required to provide reasonable notice of shifts, preventing short-notice scheduling. These measures will also mandate employers to offer compensation for cancelled, moved or curtailed shifts, reflecting the impact of last-minute changes on workers’ income and personal lives
    • Exclusivity Terms in ZHCs: The use of exclusivity clauses (which prevent workers from taking other jobs despite having no guaranteed hours) will be restricted or banned, giving workers more freedom to pursue additional employment if they choose
    • Protections for Agency Workers: The same rights around shift notice, payment, and predictability will be extended to agency workers, ensuring consistency in treatment regardless of the worker’s contractual relationship
    • Collective Agreements: Some employers may be able to contract out of certain provisions through formal collective agreements with trade unions. However, this will be tightly regulated to ensure workers' core rights are not undermined
    • Repeal of the Workers (Predictable Terms and Conditions) Act 2023: This Act will be repealed and replaced by new, more robust provisions within the Employment Rights Bill, ensuring a comprehensive and up-to-date framework for predictable working terms
    • Amendments to Sections 1 to 5 of the Employment Rights Act 1996: Additional changes will be made to the core employment legislation to reflect these new protections - particularly around statements of terms, rights from day one, and contract clarity

    Impact on Employers

    Employers will need to adapt to new legal obligations aimed at reducing insecure work, including providing reasonable notice for shifts, compensating for cancellations, and handling requests for guaranteed hours. These rights will also apply to agency workers, requiring consistent treatment across the workforce. Employers must review contracts, update internal processes, and ensure compliance with revised employment laws, including the removal of exclusivity clauses in zero-hours arrangements. While these changes may increase administrative duties and potential staffing costs, they are designed to promote fairer working conditions and improve workforce retention.

    Fourth's Response

    As per the Employment Rights Bill Roadmap we understand that this piece won't be implemented until 2027 (Page 9-10, Point 33), and will continue through consultation in Autumn 2025 (Page 8, point 22). We recognise, however, that this will be a considerable change for employers and want to highlight this early, and continue to do so. We aim to support our customers in adopting these changes, automating as many processes as possible and updating the system to be compliant with this, and all applicable aspects of the Employment Rights Bill.

     

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