WFM UK | HR & Payroll: Legislation Update 2026

Overview

The UK legislative landscape affecting HR, payroll, and broader business operations has undergone substantial reform in recent years, and several further changes are planned over the next decade. Key areas include employment rights, family leave, payroll reporting, National Minimum & Living Wage, National Insurance, pensions, and benefits-in-kind.

This article reflects Fourth's update as of March 2026, and summarises what has already taken effect, what is imminent, and what is planned for the near and longer-term future, enabling employers to anticipate, plan, and comply with legal requirements. 

While the Employment Rights Act 2025 forms the central narrative due to its broad scope and impact over the next few years, the article also captures other important legislative and statutory changes affecting payroll, pensions, and benefits. 

Fourth will continue to release incremental updates as new legislation is introduced, alongside annual comprehensive updates (like this one) to ensure employers remain informed and compliant.

What has been Implemented Recently?

Employment Rights Act 2025

The Employment Rights Act 2025 became law on 18 December 2025, introducing a phased series of reforms that strengthen employee protections and reshape workplace rights. Key changes already in effect or imminently implemented include:

• Industrial Action and Trade Union Updates
  • From December 2025 and February 2026, the rules around industrial action and trade union ballots have been updated. Minimum service level requirements for strikes were removed, dismissal protections for employees taking lawful strike action were strengthened, and ballot procedures simplified. While these changes primarily affect public and unionised sectors, they have limited impact on most employers outside these areas
• Paternity Leave and Ordinary Parental Leave

  • Day-one rights for paternity leave and ordinary/unpaid parental leave take effect from 6 April 2026

  • From 18 February 2026, newly eligible employees can give notice of intent to take leave

  • The paternity leave notice period is temporarily reduced from 15 weeks to 28 days

  • Practical impact: HR must update leave policies and payroll systems to reflect early eligibility and shorter notice requirements

Other HR & Payroll Changes

This article touches on this, but more information is available in our New Tax Year (2026/2027) article

• Income Tax and National Insurance Thresholds:

  • Following the Autumn 2025 UK Budget, Income Tax rates and thresholds are frozen until 2031. National Insurance thresholds are also frozen, except the Lower Earnings Limit, which increased from £125 to £129 per week.

  • Practical impact: Payroll continues using existing rates, with only the LEL change affecting NIC calculations.

• Employment Allowance:

  • Previous Rule (April 2020 – April 2025): The allowance was classified as de minimis state aid, limiting eligibility to employers with Class 1 NIC liabilities below £100,000 and requiring checks.

  • Changes from April 2025: The allowance increased to £10,500, and the requirement to check for state aid eligibility was removed.

  • Final Removal: For the 2025/26 tax year, HMRC confirmed state aid rules no longer apply, and all related EPS fields have been removed for 2026/27 submissions.

  • Practical impact: All eligible employers can claim the full allowance. Employers no longer need to verify state aid eligibility.

What is Coming Very Soon? (April 2026)

Employment Rights Act 2025

Several important employment law changes take effect in April 2026, building on the reforms already implemented as part of the next phase:

• Paternity Leave and Ordinary Parental Leave

  • Day-one rights: Paternity leave and ordinary/unpaid parental leave will become entitlements from the first day of employment. Previously, employees needed 26 weeks (paternity) or 1 year (ordinary parental leave) of service

  • Shared parental leave: Restrictions on taking paternity leave after shared parental leave will be removed

  • Bereaved partner’s paternity leave: Eligible fathers/partners can take up to 52 weeks of unpaid leave if the mother or primary adopter dies, to be taken within 52 weeks of the child’s birth, adoption placement, or entry to Great Britain for overseas adoptions

    • Legislation here

    • Fourth article here

• Statutory Sick Pay (SSP)

  • SSP Payable from Day One: The previous three waiting days are removed, meaning eligible employees may receive SSP from their first qualifying day of sickness rather than from day four. This will likely increase the number of absences triggering statutory payments, particularly for short-term sickness

  • Removal of the Lower Earnings Limit (LEL) for Eligibility: Employees no longer need to meet a minimum earnings threshold to qualify, expanding coverage to lower-paid and irregular hours workers

  • Updated Calculation Method (80% of Average Weekly Earnings): SSP will now be calculated as the lower of:

    • 80% of the employee’s Average Weekly Earnings (AWE), or

    • The statutory weekly SSP rate for 2026/27 (£123.25)

  • Linked Periods of Incapacity for Work (PIW) Rules Remain Relevant: Periods of sickness separated by 56 days or fewer may still be linked, affecting entitlement and duration

  • Maximum Entitlement: Employees remain eligible for a maximum of 28 weeks across linked PIWs. Employers should monitor cumulative entitlement for employees with multiple sickness episodes

  • Annual SSP Rate Update: The statutory weekly SSP rate for 2026/27 will be £123.25, reflecting statutory uprating

  • More information available here: WFM UK | Payroll UK: Statutory Sick Pay (SSP) New Rules Effective 6th April 2026

• Collective Redundancy Protective Award

  • Maximum award for failing to consult on collective redundancies doubles from 90 days’ pay to 180 days’ pay

• Whistleblowing Protections

  • Sexual harassment becomes a qualifying disclosure, giving protection from detriment and unfair dismissal for whistleblowers

• Gender Pay Gap and Menopause Action Plans

  • Employers must create voluntary action plans addressing menopause support and gender pay gaps

  • Plans will become mandatory in 2027

• Trade Union Recognition

  • Procedures for trade union recognition will be simplified

  • An updated Code of Practice supporting this is expected in October 2026

• Fair Work Agency

  • The Fair Work Agency will be established on 7th April 2026, consolidating existing enforcement bodies and taking on the enforcement of employment rights such as holiday pay and statutory sick pay

Other HR & Payroll Changes

• Statutory Parental Bereavement Leave and Pay (Northern Ireland) comes into effect in April 2026

  • Day-one entitlement to Statutory Parental Bereavement Pay
    The previous requirement for 26 weeks’ continuous service is removed. Employees can qualify for pay from the first day of employment, provided they meet the earnings threshold

  • Coverage extended to miscarriage (before 24 weeks)
    Bereavement leave and pay now apply where a pregnancy loss occurs before 24 weeks, which was not previously covered by statutory bereavement legislation

  • Two weeks of statutory leave
    Eligible employees can take up to two weeks of Parental Bereavement Leave following the loss of a child or pregnancy

  • Leave flexibility
    The leave can be taken as one continuous two-week block or as two separate weeks, within 56 weeks of the loss

  • Statutory payment rate
    Pay is provided at the statutory weekly rate (for example, £194.32 from April 2026) or 90% of average weekly earnings, whichever is lower

  • Applies to both parents
    The entitlement applies to the individual who experienced the loss and their partner, where they meet the eligibility criteria

  • Self-declaration rather than medical evidence
    Employees are not required to provide medical evidence and may self-declare the bereavement when notifying their employer

  • Northern Ireland-specific payroll reporting
    The legislation introduces new payroll reporting requirements for employers operating in Northern Ireland, including additional FPS data items used to identify Northern Ireland bereavement payments.

  • Further System information can be found here

• For changes outside of the Employment Rights Act and other areas, review WFM UK | Payroll UK: New Tax Year 2026/2027 for all other changes effective from April 2026

Future Upcoming Employment Law & Payroll Changes

Employment Rights Act 2025

Items below are still subject to change and government consultations, but Fourth have visibility on what can be expected to change or be introduced.

August 2026

• Trade Union Ballots: Members can vote electronically or in person if agreed; removal of 50% turnout requirement begins (originally expected April 2026)

October 2026

• Harassment & NDAs: Employers liable for harassment by third parties unless “all reasonable steps” are taken; NDAs preventing harassment disclosures will be voided (exact date TBD)

• Tipping: Employers must consult on tipping policies and review them every 3 years

• Employment Tribunal Time Limits: Increased to 6 months for all claims

• Trade Union Rights: Employers must inform workers of union rights; provide access, accommodation, facilities, and time off for union representatives. Update to Code of Practice expected

• Protection Against Detriment for Industrial Action: Expanded beyond unfair dismissal

• Public Sector Outsourcing ‘Two-Tier Code’: Prevents differing T&Cs for ex-public sector employees

• New Adult Social Care Negotiating Body: Established to support sector negotiations

December 2026

• Mandatory Seafarer’s Charter: Sets higher standards for health & safety, pay, job security, and rest breaks

January 2027

• Unfair Dismissal Protections: Right applies after 6 months’ service; compensatory award limits removed

• Dismissal & Rehire (‘Fire & Rehire’): Becomes automatically unfair in most cases

2027 – Ongoing/Planned Changes

• Pregnancy & Maternity Rights: Increased protection against dismissal and discrimination

• Bereavement Leave: New statutory unpaid leave right

• Zero-Hours & Low-Hours Contracts: Right to guaranteed hours if requested

• Shift Compensation & Notice: Right to payment for cancelled/shortened shifts and reasonable notice for scheduling changes

• Flexible Working: Employer refusals must cite reasons from an approved list and explain why refusal is reasonable; legal requirement aligned with Acas Code

• Harassment Protections: Clarifies ‘reasonable steps’ to prevent sexual harassment

• Mandatory Gender Pay Gap & Menopause Action Plans: Follow-up to voluntary introduction in April 2026

• Collective Redundancy: Applies across the entire organisation; includes enhanced protections for maritime workers

• Trade Union Protections: Expanded protections, electronic voting for recognition/derecognition, new industrial relations framework

• Umbrella Companies Regulation: 'Agencies' definition expanded to include umbrella companies for enforcement

Other HR & Payroll Changes

• Mandatory Payrolling of Benefits in Kind: From April 2027, employers will be required to report all BIK items via payroll rather than relying on end-of-year P11D forms. This includes cars, vans, fuel, and other taxable benefits, fully integrated with FPS submissions

• Salary Sacrifice Changes: Employers should prepare for the £2,000 annual limit on certain salary sacrifice arrangements from April 2029

• Automatic Enrolment Pension: Pensions (Extension of Automatic Enrolment) Act 2023 received Royal Assent on 18th September 2023. We are yet to hear when this will come into effect, and it could still happen as early as 2026

  • Lower age eligibility: Potential reduction from 22 to 18 years old for automatic enrolment

  • Lower Earnings Limit removal: Contributions may be calculated from the first pound earned, increasing coverage for low‑paid workers

  • Re‑enrolment age reduction: Similar changes to re‑enrolment thresholds for employees

The information provided herein is for informational purposes only. It does not constitute legal, tax, accounting, or other professional advice. It describes functionality and configuration options available within Fourth's solutions and services. The appropriate settings for your organisation will depend on your specific circumstances and requirements, and Customers remain solely responsible for all decisions relating to the configuration and usage of Fourth's solutions and services. The information reflects Fourth's understanding of applicable laws and regulations at the time of publication and may not reflect subsequent changes. Customers should seek independent professional advice regarding their specific compliance requirements.