Employment law reforms looming

Claire Scanlan, an employment law solicitor with Buckles Solicitors, explains the employment law changes small businesses need to prepare for in 2026

With employment law reforms landing in both April and October, employers will need to adapt to higher statutory costs, expanded worker rights and a more interventionist regulatory framework, all while continuing to manage day-to-day operational pressures.

One of the most noticeable shifts from April 2026 is the move towards immediate employment rights. Paternity leave and unpaid parental leave will become “day one” entitlements, removing the qualifying periods that previously gave employers a short window before these rights applied. While this change is intended to improve fairness and access, it also means that businesses will need to factor family-related absences into workforce planning from the outset of any new hire.

At the same time, statutory family pay rates will increase, with maternity, paternity, adoption, shared parental, bereavement and neonatal care pay rising to £194.32 per week. For employers who offer enhanced benefits, this uplift may have a knock-on effect on overall employment costs, making it important to understand how contractual schemes interact with statutory minimums.

Sickness absence

Sickness absence will also look very different. Statutory Sick Pay will become payable from the first day of illness, and the lower earnings limit will be removed, extending eligibility to a much wider group of workers. Although the weekly rate will rise to £123.25, the more significant change is cultural as much as financial. Employers will need clear, consistent absence management processes to balance employee wellbeing with business continuity.

These changes arrive alongside higher minimum wage rates, with the National Living Wage rising to £12.71 per hour (21+), £10.85 (18-20), and £8.00 (16-17 and apprentices). For many small businesses, particularly those with larger hourly-paid workforces, this will be one of the most immediate cost pressures of the year. Reviewing pay structures early can help avoid last-minute adjustments and employee relations issues.

April also brings a sharper focus on how employers handle difficult decisions. Where collective redundancies are proposed, failure to consult properly will now carry a potential protective award of up to 180 days’ pay, doubling the current maximum. This significantly raises the financial risk of getting process wrong at an already challenging time for a business.

October 2026

Further change follows in October 2026, reflecting a broader policy shift towards stronger worker protections. The use of “fire and rehire” to impose contractual changes will be tightly restricted, placing genuine consultation and clear business justification at the centre of any contract variation exercise. Trade unions will gain enhanced workplace access rights, and employers will be required to confirm workers’ right to join a union in writing.

Looking ahead, employers should also expect extended tribunal time limits (three to six months), new protections for zero-hours and casual workers including cancelled shift compensation and guaranteed hours, and a positive legal duty to take all reasonable steps to prevent sexual harassment, including by third parties such as customers or clients.

For small businesses, the common thread running through these reforms is preparation. Updating contracts and policies, training managers and understanding how costs may shift over time will be essential. While 2026 brings undeniable challenges, early planning can help employers adapt with confidence rather than react under pressure.