From Bill to Act: what SMEs need to know about the Employment Rights Act 2025
The Employment Rights Act 2025 represents the most significant overhaul of employment law in decades. Part of the government’s plan to Make Work Pay, the Act introduces a wide range of measures designed to modernise workplace rights, strengthen employee protections, and promote fairer working practices.
Following receipt of Royal Assent in December 2025, the practical changes will be phased in over the coming years. This blog focuses on major provisions expected to come into force up to and including April 2026 (subject to consultation outcomes and secondary legislation). For SMEs, April 2026 marks the first major impact. For information on changes later in 2026 and into 2027, come back to our blog pages to read the second blog in this series.
April 2026: pay, leave and redundancy pay
From April 2026, a number of significant changes affecting pay, leave and redundancy are expected to come into force:
Statutory sick pay will become available from day one of absence, with the removal of the lower earnings limit
Paternity leave and parental leave will become day one rights, allowing new employees to take leave immediately
The maximum protective award for collective redundancy failures will double from 90 to 180 days’ pay
A new Fair Work Agency will launch, bringing together enforcement of statutory rights such as holiday pay and sick pay
Why do SMEs need to act now on Statutory Sick Pay changes specifically?
The reforms to Statutory Sick Pay (SSP) mark its biggest reform in decades. While designed to improve support for employees, the changes will significantly affect costs, compliance and processes, especially for SMEs.
From 6 April 2026:
SSP will be payable from day one of sickness (no waiting days)
The Lower Earnings Limit will be removed, meaning all employees qualify, including part-time and low-paid workers
SSP will be paid at the lower of 80% of average weekly earnings or the statutory flat rate
In practice, this means more employees will qualify, payments will start sooner, and employers are likely to pay SSP more often. For smaller employers, these reforms could have a disproportionate impact:
Higher SSP costs due to expanded eligibility
Increased short-term absence costs with day-one payments
Greater compliance risk if policies, contracts or payroll systems aren’t updated
More administrative pressure on HR and payroll teams
Getting this wrong could lead to employee disputes or unlawful deduction claims, making early preparation essential.
What do SME employers need to do now?
Although these provisions are now set out in law, employers should continue to track the implementation roadmap closely. This is a crucial time to:
Review leave policies
Review redundancy processes
Assess whether internal systems and platforms can support these new requirements
Communicate relevant changes clearly to employees
In relation to SSP, it’s critical that SME owners start preparing now by:
Reviewing and updating sickness absence and SSP policies
Amending employment contracts
Checking payroll systems can calculate SSP under the new rules
Training managers on the updated entitlement
Budgeting for increased SSP costs
Communicating changes clearly to employees
Ultimately, the Employment Rights Act 2025 aims to help employers build a more engaged, secure and resilient workforce for the future. I will be returning to this topic later in the year to explore changes planned beyond April and into next year.
If you would like to find out more about the upcoming changes, and the support available to help get your team ready, please get in touch with me, Amy Byrne.
Author biography
Amy Byrne, Co-Sourcer, People