Employment Rights Act 2025:

The Employment Rights Act 2025 is now moving from headline policy into day-to-day employer practice.

Some changes have already started. Others are due later in 2026 and into 2027. Not every change is a payroll change, but many of them will affect absence, leave, onboarding, dismissal processes and the information employers need to pass to payroll.

For small employers, the main point is simple: this is not something to leave until the last minute.

What has already changed?

Several employment law changes took effect from April 2026.

The most relevant areas for employers are:

• Statutory Sick Pay
• Paternity Leave
• Unpaid Parental Leave
• The Fair Work Agency
• Wider changes to employment rights enforcement

From a payroll perspective, the Statutory Sick Pay changes are especially important.

SSP is now payable from the first full day of sickness absence, rather than from day four. The Lower Earnings Limit has also been removed, meaning more lower-paid employees may now qualify for SSP.

The rate is now based on 80% of an employee’s average weekly earnings or the flat weekly SSP rate, whichever is lower.

For employers, this means sickness absence needs to be recorded accurately from the first full day. If absence information is late, incomplete or unclear, payroll may not be able to calculate SSP correctly first time.

Paternity Leave and Unpaid Parental Leave

Paternity Leave and Unpaid Parental Leave are now available from the first day of employment in England, Scotland and Wales. Northern Ireland has separate rules in this area.

This does not mean every employee will automatically receive statutory paternity pay from day one. The service rules for paternity pay remain separate. But from a leave perspective, employers need to be ready for requests from new starters much earlier than before.

This makes onboarding, manager training and HR record keeping more important.

If a new employee joins and soon after requests family-related leave, managers need to know what information to collect, when to flag it, and who needs to be informed. The payroll impact may depend on the type of leave, the employee’s eligibility, and the timing of the request.

Why July 2026 matters for new starters

One of the biggest changes still to come is the reform to unfair dismissal protections.

From January 2027, the qualifying period for ordinary unfair dismissal is due to reduce from two years to six months for dismissals from 1 January 2027.

That means employees who start in July 2026 could reach six months’ service by January 2027. Employers should not treat this as a distant change. It affects hiring, probation management, documentation and how performance concerns are dealt with during the first few months of employment.

This does not mean employers cannot make decisions about new starters. It does mean those decisions need to be handled carefully, consistently and with proper records.

What employers should review now

The most useful step is to check whether your internal processes are ready.

Start with:

• Employment contracts
• Staff handbooks
• Sickness absence procedures
• Paternity and parental leave policies
• Probation review processes
• Manager guidance
• HR and payroll communication

For many small businesses, the risk is not that they deliberately ignore the rules. The risk is that information sits in someone’s inbox, a manager forgets to flag a change, or a leave request is handled informally without the right details being recorded.

That is where payroll issues often begin.

What this means for payroll

The Employment Rights Act is wider than payroll, but payroll still sits close to many of the practical changes.

For example:

If sickness absence is not reported properly, SSP may be wrong.

If parental leave is approved but not passed to payroll, pay may be affected.

If an employee’s status, hours or working pattern changes, payroll needs to know.

If a new starter leaves or is dismissed, dates and records need to be accurate.

The cleaner the information, the smoother the payroll process.

How Intelligent Payroll supports clients

As your outsourced payroll team, we make sure payroll is updated in line with the rules that affect pay, statutory payments and reporting.

Where a change affects payroll, we will apply it correctly. Where something depends on your internal HR decision, we may need information from you before payroll can be finalised.

That is why it is always better to flag changes early.

If you are unsure whether something affects payroll, send it to us and we can sense-check it. You will get a straight answer from someone who understands your setup.

This article is intended as a payroll-focused overview. For employment law advice on contracts, dismissals or HR policy changes, employers should speak to your HR or legal adviser.

Final thought

The employers who prepare during 2026 will have a much easier time than those who wait until the rules are already in force.

Review your policies, make sure managers understand what has changed, and keep payroll informed when sickness, leave or employment status changes.

The law is moving in stages. Your preparation should too.