The Employment Rights Act 2025: How Sick Pay Is Changing and What Businesses Must Do Now
- Trish Attah
- 2 hours ago
- 4 min read
The Employment Rights Act 2025 introduces the most significant reform to the UK’s statutory sick pay system in decades. From 6 April 2026, the way businesses manage sickness absence and statutory sick pay (SSP) will change fundamentally.
For many employers, these reforms will require updates to contracts, sick pay policies, payroll systems and absence management procedures.
This article explains the key changes and outlines practical steps businesses should take to ensure compliance.
Why Sick Pay Reform Is Happening
The government introduced these changes as part of its wider “Make Work Pay” programme, aimed at modernising employment protections and extending basic rights to more workers.
Historically, the UK has had one of the least generous sick pay systems in Europe, with many lower-paid workers excluded entirely. The new rules aim to ensure employees can take time off when ill without facing immediate financial hardship.
For employers, however, the changes will increase eligibility for sick pay and bring additional administrative and financial responsibilities.
Key Changes to Statutory Sick Pay
1. Sick Pay Will Start From Day One
Under the current system, employees only receive statutory sick pay from the fourth qualifying day of absence, meaning the first three days are unpaid “waiting days”.
From 6 April 2026, this waiting period will be abolished and SSP will be payable from the first day of sickness absence.
What this means for employers
Employers will need to pay statutory sick pay for short-term absences, including single days off sick, which were previously unpaid. This change alone could significantly alter how organisations manage short-term sickness.
2. Removal of the Lower Earnings Limit
Currently, employees must earn above the Lower Earnings Limit (LEL) to qualify for SSP.
From April 2026:
The LEL requirement will be removed
All eligible employees will qualify, regardless of their earnings level.
This change is expected to bring over one million low-paid workers into the sick pay system for the first time.
What this means for employers
Businesses with:
part-time staff
casual workers
lower-paid employees
will likely see a larger proportion of their workforce entitled to SSP.
3. New SSP Calculation Method
Another important reform is the way SSP will be calculated.
From April 2026, statutory sick pay will be the lower of:
80% of the employee’s average weekly earnings, or
the statutory weekly rate (£123.25).
This ensures lower-paid employees receive proportionate sick pay while preventing SSP from exceeding their usual earnings.
Average weekly earnings will generally be calculated based on the previous eight weeks of pay.
Why This Matters for Business Owners
Many organisations will feel the impact of these reforms because they:
expand eligibility for sick pay
require payment from day one
increase administrative complexity in payroll and HR
Research suggests that these reforms may have the largest workplace impact of all changes in the Act. (peoplemanagement.co.uk)
Employers may also experience:
more short-term sickness payments
increased payroll processing requirements
a need for clearer absence management policies.
How Businesses Should Update Their Policies
To ensure compliance, businesses should begin reviewing their HR documentation and procedures well before April 2026.
1. Update Your Sick Pay Policy
Policies should clearly reflect:
day-one SSP entitlement
removal of the earnings threshold
the new calculation method for lower earners
If your policy references “three waiting days”, it will need to be revised.
2. Review Employment Contracts
Employment contracts often reference sick pay entitlements. Employers should check that wording does not conflict with the new statutory framework. Key clauses to review include:
sick pay eligibility
notification requirements
occupational sick pay schemes.
3. Update Payroll Systems
Payroll systems must be configured to:
calculate SSP from day one
apply the 80% earnings rule where relevant
identify employees newly eligible for SSP.
Payroll teams may also need training to apply the new rules correctly.
4. Revisit Absence Management Procedures
Because sick pay will apply from day one, businesses may want to strengthen absence management processes, including:
clearer sickness reporting procedures
return-to-work interviews
monitoring patterns of short-term absence.
These measures help maintain fairness and prevent potential abuse of the system.
5. Budget for Increased Sick Pay Costs
While statutory sick pay rates remain relatively modest, the expansion of eligibility and removal of waiting days may increase employer costs.
Organisations should:
forecast likely SSP costs
assess the financial impact on smaller teams
review insurance or occupational sick pay schemes.
Want to know more about the Employment Rights Act 2025?
Watch our indepth YouTube videos for more information on how the Act will impact you.
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Disclaimer
All information within the post is provided for guidance only; always seek your own legal advice.
The information with this post was correct at the time of publishing, March 2026 but may be subject to change.
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