Employment law changes are coming in April 2026 – What small business owners need to know

Designed to protect the rights of workers, the landmark Employment Rights Act 2025 became law on 18th December 2025. It marks the biggest overhaul in employment law for a generation.

Small business owners will need to ensure they understand what the changes mean and how to implement them to ensure they stay compliant. Here we explain the key changes coming in April 2026 and beyond and what actions you can take now to prepare.

What is the Employment Rights Act 2025?

Offering protection, fairer pay and more rights to millions of workers, the Employment Rights Act 2025 focuses on six key areas:

1. Ensuring jobs offer a baseline security to workers – includes zero-hour contracts, ‘fire and rehire’ or ‘fire and replace’ practices, unfair dismissal and collective redundancy rights.
2. Ensuring workers get fair pay – includes statutory sick pay and tipping.
3. Strengthening family-friendly rights – includes paternity and unpaid parental leave from day one, bereavement leave, protections against dismissal for pregnant women and flexible working requests.
4. Prioritising fairness, equality and wellbeing – includes steps to prevent sexual harassment, protect whistle-blowers and improve gender equality.
5. Modernising trade union legislation 
6. Improving enforcement of employment rights

These new laws are being phased in over a two-year period, with April 2026 one of the first implementation milestones. 

Employment law changes – April 2026

From 6th April 2026, the following will become law:

Statutory sick pay

Statutory sick pay will be payable from the first day of sickness, not the fourth day as was previously the case. The Lower Earning Limit will be removed, so all workers will now qualify for statutory sick pay. Statutory sick pay is paid at a flat rate of £123.25 per week or 80% of earnings, whichever is lower.

Paternity and unpaid parental leave 

Entitlement to both paternity and unpaid parental leave will become a right from day one – employees will no longer be required to have a qualifying service. Additionally, the restriction on taking paternity leave after paid shared parental leave will be removed, allowing parents greater flexibility. 

Collective redundancy rights

The maximum period of collective redundancy protective award will be doubled. If employers fail to consult on collective redundancy involving 20 or more employees, the protective award will increase to a maximum of 180 days’ pay.     

Whistleblowing protection for sexual harassment

Workers who make a sexual harassment disclosure will benefit from legal protection against detriment and unfair dismissal.  

Gender pay gap and menopause action plans 

From April 2027, action plans around the gender pay gap and menopause will be a mandatory requirement. They’re being introduced on a voluntary basis from April 2026. This is an opportunity to get ahead and showcase your business’s commitment to gender equality.

Other statutory changes – April 2026 

From the 1st April 2026, the National Living Wage and National Minimum Wage will increase:

• National Living Wage for workers over the age of 21 will rise by 4.1% to £12.71 per hour 

• National Minimum Wage for 18-20 year olds will rise by 8.5% to £10.85 per hour

• For apprentices and 16-17-year-olds the rate will rise by 6% to £8 per hour

Employment law changes – October 2026

While April’s changes include plenty to keep you busy, it will pay to be prepared for what else is coming. Looking ahead to the next milestone, October 2026, key changes that come into force then include:

• Fire and rehire practices ended

• Re-introducing the two-tier code for procurement to ensure terms and conditions between private and public sector employees are broadly similar when working on outsourced contracts 

• Tipping law tightened to increase transparency and accountability

• Trade unions – duty to inform workers of their right to join a trade union, strengthen trade unions' right of access, and new rights and protections for trade union reps

• Harassment – employers will be required to take “all reasonable steps” to prevent sexual harassment of their employees, and obliged not to permit the harassment of their employees by third parties

• Increasing employment tribunal time limits from three months to six months 

• Extending protections against detriments for taking industrial action

How small business owners can prepare for the employment law changes 

These changes are essential for protecting workers rights, but they will need careful consideration from small business owners. All businesses must now take a proactive approach to reviewing policies, documents and processes to ensure you’re compliant. 

With April and the new tax year on the horizon, here’s are our step-by-step guide to helping you prepare for these changes:

1. Create a compliance timeline – map out the changes happening in April, October and into next year to help you understand what needs doing and prioritise. Create deadlines and assign responsibility for the work that needs to be done, so everyone is clear on their role in preparing. 

2. Audit existing HR policies and documents to ensure they’re compliant – review contracts, staff handbooks, absence policies, redundancy and discipline procedures, flagging areas that will be affected and rewriting where necessary.
3. Train your managers to ensure they are able to deliver on the new law effectively
4. Update systems – ensure payroll, HR software and absence tracking can handle day-one statutory sick pay, updated minimum wage and new reporting requirements.
5. Seek expert help – If you’re unsure how these changes will affect your small business, please speak to a professional in employment law. Funding Circle does not provide financial, legal or tax advice.

If you plan to invest to stay compliant with the Employment Rights Act 2026, visit our website to see what finance might be available to you.

02/01/26: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.