UK Employment Law Changes 2026: Key Updates

Quick Answer: Key UK Employment Law Changes in 2026

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Overview of the Employment Landscape in 2026

2026 represents one of the most significant periods of employment law reform in the UK since the introduction of the National Minimum Wage in 1999. The Employment Rights Bill, introduced in October 2024, is progressing through Parliament with provisions being phased in throughout 2025 and 2026.

UK employers must prepare for substantial changes across multiple areas: unfair dismissal protections, zero-hours contract regulation, statutory sick pay reform, and trade union rights. This guide covers every change that affects UK employers and what practical steps you need to take.

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National Minimum Wage and National Living Wage 2026

Current Rates (April 2025-March 2026)

Expected April 2026 Rates

The Low Pay Commission recommends rates each autumn for implementation the following April. Based on the government's commitment to a genuine living wage, the NLW is expected to increase to approximately £12.75-£13.00 per hour from April 2026.

Employer Actions

• Review all employee pay rates against the new thresholds before 1 April
• Update payroll systems with new rates
• Check that salary sacrifice arrangements do not reduce pay below the minimum
• Review the impact on your overall wage bill and budget accordingly
• Update job advertisements and offer letters

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Employment Rights Bill: Key Provisions

The Employment Rights Bill is the most ambitious package of employment law reform in decades. Key provisions affecting employers include:

Day-One Unfair Dismissal Rights

Current position: Employees need two years' continuous service to claim ordinary unfair dismissal.

Proposed change: Unfair dismissal protection from day one of employment, subject to a statutory probation period (expected to be 9 months) during which a lighter-touch dismissal process applies.

Employer impact: This is the single most significant change. Employers will need to:

• Document performance concerns from day one
• Follow fair dismissal procedures even during probation
• Maintain proper records of any performance or conduct issues
• Ensure managers are trained on fair dismissal processes

Zero-Hours Contract Reform

Current position: Workers on zero-hours contracts have no guaranteed hours.

Proposed change: Workers will have the right to a contract that reflects the hours they regularly work, based on a 12-week reference period. Reasonable notice must be given for shifts, and compensation is required for cancelled shifts.

Employer impact:

• Review all zero-hours and casual contracts
• Analyse actual working patterns for each zero-hours worker
• Prepare to offer contracts reflecting regular hours
• Implement reasonable notice periods for shift changes
• Budget for shift cancellation compensation

Fire and Rehire Restrictions

Current position: Employers can dismiss and re-engage employees on new (often worse) terms, subject to following a fair process.

Proposed change: Automatic unfair dismissal if the employer dismisses and re-engages to vary contract terms, except in genuine cases where the business would otherwise become insolvent.

Employer impact:

• Genuinely negotiate contract changes rather than imposing them
• Explore all alternatives before considering dismissal and re-engagement
• Seek legal advice before proceeding with any fire-and-rehire scenario
• Document the business case thoroughly if insolvency is a genuine risk

Trade Union Rights

Proposed changes:

• Simplified trade union recognition processes
• New rights of access for unions to workplaces
• Repeal of the requirement for 50% turnout in strike ballots
• Electronic balloting permitted for industrial action

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Statutory Sick Pay Reform

Current SSP System

• Rate: £118.75 per week (2025/26)
• Waiting days: First 3 qualifying days are unpaid
• Lower earnings limit: Must earn at least £123/week to qualify
• Duration: Up to 28 weeks

Proposed Changes

The Employment Rights Bill proposes:

• Removal of the lower earnings limit: All workers would qualify for SSP regardless of earnings
• Removal of waiting days: SSP payable from day one of sickness (under consultation)
• Percentage-based SSP: For low earners, SSP would be a percentage of earnings rather than the flat rate

Employer Impact

• Increased SSP costs, particularly for businesses with many low-paid workers
• No more savings from the 3-day waiting period
• Administrative changes to payroll systems
• Review occupational sick pay schemes in light of changes
• Update absence management policies

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Flexible Working: Already in Force

The Employment Relations (Flexible Working) Act 2023 has been in force since April 2024:

• Employees can request flexible working from day one (previously 26 weeks' service)
• Employees can make two requests in any 12-month period (previously one)
• Employers must respond within two months (previously three)
• Employers must consult with the employee before refusing a request
• Employees no longer need to explain the business impact of their request

Eight Statutory Reasons for Refusal

Employers can only refuse a flexible working request for one of these reasons:

1. Burden of additional costs
2. Detrimental effect on ability to meet customer demand
3. Inability to reorganise work among existing staff
4. Inability to recruit additional staff
5. Detrimental impact on quality
6. Detrimental impact on performance
7. Insufficiency of work during the periods the employee proposes to work
8. Planned structural changes

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Carer's Leave: Already in Force

Since April 2024, employees have the right to one week of unpaid leave per year to provide or arrange care for a dependant with a long-term care need. Key features:

• Available from day one of employment
• Can be taken in half-days or full days (not individual hours)
• Does not need to be taken consecutively
• Employee must give notice at least twice the length of the leave requested
• Cannot be refused, but can be postponed if the employer would be seriously disrupted
• Employee is protected from detriment for taking carer's leave

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Neonatal Care Leave: From April 2025

Parents of babies admitted to neonatal care for 7 or more continuous days are entitled to:

• Up to 12 weeks of neonatal care leave
• Paid at the statutory rate (similar to other statutory leave payments)
• Available from day one of employment
• Can be taken as a single block or in non-continuous periods
• In addition to maternity, paternity, and shared parental leave

This affects employers across all sectors but particularly healthcare, where staff may also be providing the neonatal care.

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Paternity Leave Changes: Already in Force

From April 2024, paternity leave is more flexible:

• Can be taken as two separate one-week blocks (previously had to be taken together)
• Can be taken at any point in the first 52 weeks after birth (previously within 56 days)
• Notice requirements reduced to 28 days (previously 15 weeks before the expected week of childbirth for the dates of leave)

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Preparing Your Business for 2026

Compliance Checklist

• Review and update employment contracts to reflect new statutory rights
• Update employee handbook with new policies (flexible working, carer's leave, neonatal care leave)
• Train managers on day-one unfair dismissal requirements
• Audit zero-hours contracts and analyse actual working patterns
• Review payroll systems for NMW/NLW rate changes and SSP reform
• Update absence management policies for SSP day-one changes
• Review fire-and-rehire processes and ensure genuine negotiation
• Check pension auto-enrolment thresholds against NMW changes
• Brief senior leadership on the financial impact of changes
• Seek legal advice on any significant restructuring plans

Timeline for Action

Q1 2026 (January-March):

• Complete contract and handbook reviews
• Begin manager training programmes
• Audit zero-hours contracts
• Budget for increased wage and SSP costs

Q2 2026 (April-June):

• Implement NMW/NLW rate changes
• Update payroll systems for SSP reforms
• Offer guaranteed-hours contracts to qualifying zero-hours workers
• Complete manager training on new dismissal requirements

Q3-Q4 2026 (July-December):

• Monitor compliance with new requirements
• Review the impact of changes on business costs and operations
• Adjust policies based on emerging case law and guidance
• Prepare for any further Employment Rights Bill provisions

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How Grove HR Helps With Compliance

Grove HR is built for UK employment law and updates automatically when legislation changes:

• Contract management: Store and update employment contracts digitally
• Policy library: Pre-built UK policy templates updated for 2026 changes
• Leave management: Automatically calculates statutory leave entitlements including new categories
• SSP tracking: Updated calculations reflecting any waiting day changes
• Probation management: Structured probation reviews supporting day-one rights compliance
• Audit trails: Full records of every HR action for tribunal defence
• NMW alerts: Notifications when pay rates fall below statutory minimums

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Employment Law Changes: Sector-Specific Impact

Retail and Hospitality

These sectors will be most affected by zero-hours contract reform and NMW increases:

• Large numbers of workers on flexible contracts will need guaranteed-hours offers
• Shift cancellation compensation increases operational costs
• NMW increases disproportionately affect labour-intensive businesses
• Tip allocation legislation (already in force) requires transparent distribution

Action: Audit your workforce to identify how many workers regularly work consistent hours despite being on zero-hours contracts. Calculate the cost of moving them to fixed contracts.

Healthcare and Social Care

The combination of SSP reform and day-one unfair dismissal rights creates particular challenges:

• High absence rates mean SSP costs will increase significantly with day-one payment
• Agency staff reliance may increase as dismissal becomes harder during probation
• Neonatal care leave adds a new category of absence to manage
• Workforce planning becomes more critical with reduced flexibility

Action: Review your absence management costs and model the impact of SSP from day one. Ensure your probation processes are robust enough to withstand scrutiny.

Construction

The sector's reliance on subcontractors and short-term engagements means:

• Worker status determination becomes even more important
• Self-employed contractors may challenge their status to access new rights
• Fire-and-rehire restrictions affect project-based contract changes
• Health and safety obligations interact with carer's leave for older workers

Action: Review contractor relationships to ensure genuine self-employment. Consider employment status assessments for long-term contractors.

Professional Services

Firms with high earners and structured career paths face:

• Flexible working requests from day one may conflict with client-facing expectations
• Day-one unfair dismissal applies to newly qualified professionals
• Partnership structures may need review in light of worker status provisions
• International mobility interacts with new domestic rights

Action: Update your flexible working policy to handle day-one requests professionally. Train partners on the new dismissal framework.

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The Financial Impact of 2026 Changes

Modelling the Cost

For a typical UK SME with 50 employees:

Total first-year cost: approximately £7,700-£40,600 depending on your workforce composition. Ongoing annual costs will be lower as one-off items are absorbed.

Mitigating the Costs

• Invest in absence management: Reducing average absence by even one day per employee saves more than the SSP reform costs
• Improve onboarding: Better onboarding reduces early turnover, avoiding the cost of repeated recruitment
• Use HR software: Automating compliance reduces the management time spent on manual processes
• Train managers proactively: Well-trained managers make fewer costly mistakes

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Frequently Asked Questions

Will the Employment Rights Bill pass in its current form?

The Bill is progressing through Parliament with government backing. Specific provisions may be amended during the process, and implementation details will be subject to consultation. Employers should plan for the Bill's key provisions while watching for specific regulation updates.

When exactly do the changes take effect?

Different provisions have different dates. Flexible working, carer's leave, and paternity leave changes are already in force from 2024. NMW increases take effect each April. Employment Rights Bill provisions will be phased from 2025-2026 following consultation on implementation.

Do the changes apply to small businesses?

Yes. There is no small business exemption for most employment law obligations in the UK. NMW, unfair dismissal, flexible working, and SSP apply regardless of employer size.

What should I do first?

Start with changes already in force: update flexible working policies, implement carer's leave, review paternity leave. Then audit contracts, train managers, and budget for upcoming changes.

How does this affect employees on probation?

Under proposed day-one unfair dismissal rights, employees on probation will have protection, but a lighter-touch process will apply during the statutory probation period (expected 9 months). Employers will still need a documented reason and basic fair process.

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Key Dates for Your Calendar

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Worker Status and the Gig Economy

The Employment Rights Bill introduces important provisions on worker status that affect the gig economy and beyond:

Single Status of Worker

The Bill proposes simplifying employment status by moving towards a clearer distinction between employees/workers (with rights) and genuinely self-employed (without). This could affect:

• Delivery drivers, couriers, and ride-share workers
• Construction subcontractors who work primarily for one client
• Freelance consultants with ongoing relationships
• Agency workers in long-term placements

Implications for Employers

If you engage individuals as self-employed but they would meet the new criteria for worker status, they would gain rights including:

• NMW/NLW
• Statutory holiday
• Statutory sick pay
• Pension auto-enrolment
• Unfair dismissal protection (from day one under new rules)

The financial risk of misclassification is substantial. HMRC can pursue back-payment of tax and National Insurance, and individuals can bring claims for unpaid holiday and other statutory entitlements.

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Third-Party Harassment

The Worker Protection (Amendment of Equality Act 2010) Act 2023 introduced a new duty on employers to take reasonable steps to prevent sexual harassment of their employees. From October 2024, this includes:

• A positive duty to prevent harassment (not just respond to it)
• Liability extends to harassment by third parties (customers, clients, suppliers)
• Employers must demonstrate they took reasonable steps to prevent harassment
• Employment tribunals can uplift compensation by up to 25% where the duty is breached

Practical Steps

Risk assessment: Identify roles with high third-party interaction (customer service, reception, delivery, healthcare). These roles have the highest risk of third-party harassment and need specific preventive measures.

Training programme: Deliver training to all managers and customer-facing staff on:

• Recognising harassment (including subtle forms like persistent unwanted attention)
• Responding in the moment (de-escalation techniques)
• Reporting procedures (who to contact, what to document)
• Support available (EAP, counselling, time off)

Policy and process updates:

• Update anti-harassment policies to cover third-party harassment
• Train customer-facing staff on how to report and respond to harassment
• Display notices making clear that harassment is not tolerated
• Include anti-harassment expectations in client and supplier contracts
• Maintain records of steps taken to prevent harassment

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Summary

2026 brings the most significant package of employment law reform in a generation. The Employment Rights Bill fundamentally changes the employer-employee relationship by extending unfair dismissal protection from day one, reforming zero-hours contracts, and strengthening worker protections across the board.

Employers who prepare early will navigate these changes smoothly. Those who wait risk non-compliance, tribunal claims, and increased costs from reactive rather than proactive management.

The key actions are: audit your current practices against the new requirements, train your managers on the new framework, update your contracts and policies, and invest in HR systems that keep you compliant as the law evolves.

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Further Resources

For the latest updates on UK employment law changes:

• ACAS: Updated guidance on new statutory rights and employer obligations
• CIPD: Practical toolkits for implementing legislative changes
• GOV.UK: Official legislation and statutory instruments
• Employment lawyers: Seek professional advice for complex restructuring or contract changes

Staying informed and acting early is the best protection against non-compliance. With the right HR systems and trained managers, the 2026 changes are manageable for businesses of any size

Get started with Grove HR or book a demo to see how we handle UK compliance.