Payroll and key statutory changes from April 2026

Why is it relevant?

As your trusted tax, accounting and business advisory partner, our priority is to provide clear communication and reliable support. Below, we outline key statutory changes affecting payroll coming to effect from April 2026 – helping you stay informed while we take care of the detail. As a payroll bureau, we will guide you through every stage of these reforms, ensuring your payroll remains compliant, accurate and audit-ready.

Who does it affect?

The various changes to payroll and employment law will affect all UK employers alike, from Owner Managed Businesses to large multinationals with subsidiaries in the UK.

What do you need to know?

1. Day-One Rights for Parental Leave

Paternity leave and ordinary parental leave will become a day-one right, meaning eligibility applies from an employee’s very first day of employment. This significantly increases the importance of robust new starter processes, timely data collection and accurate HR payroll alignment.

2. Statutory Sick Pay (SSP) Changes

From April 2026:

Day-one entitlement – SSP will be payable from the first day of sickness, removing the three-waiting day period.

Removal of the Lower Earnings Limit (LEL) – the current earnings threshold of £125 per week will be abolished, meaning employees no longer need to meet a minimum income level to qualify.

Those earning below the LEL will be paid differently – employees earning below the current LEL will receive the lower of either 80% of their normal weekly earnings, or the statutory flat rate.

SSP errors will fall directly within the FWA’s enforcement remit.

While the changes to SSP have been designed to make sick pay more accessible and inclusive, particularly for those on lower incomes or working part-time, they will introduce additional costs for employers – many of whom are already managing rising employment expenses such as National Minimum Wage (NMW) increases and National Insurance contributions.

3. New Holiday Pay and Leave Record-Keeping Requirements

From 6 April 2026, all UK employers will be legally required to retain holiday pay and annual leave records for a minimum of six years. This change – introduced through the Employment Rights Bill – brings annual leave documentation in line with the rigorous record-keeping already required for NMW compliance. The reforms coincide with the launch of the Fair Work Agency (FWA).

Six-year statutory recording – employers must keep ’adequate records’ which should include but not limited to the amount of statutory leave taken. The calculation of holiday pay in lieu of holiday upon termination and the calculation of holiday pay is to include any regular and/or contractual elements.

Alignment with NMW standards – mirroring the existing NMW standards for six-year retention.

Enhanced enforcement powers – we will come to the FWA in a moment.

4. Countdown on for Introduction of the Fair Work Agency

The clock is ticking for businesses to prepare for the launch of the FWA in April 2026. Employers who fail to comply with the employment rights enforced by the FWA could face significant consequences, including financial penalties.

The FWA will have immense authority, including the ability to:

Enforce employer failure to make payments to workers, including holiday and SSP.

Issue notices of underpayment if employees haven’t received these payments, which can go back up to six years and payable within 28 days of issue.

Investigate employers it believes are failing to comply with employment law, with the ability to enter a business’ premises, interview staff and check records, computers and equipment.

5. Payroll Enforcement, RTI and PBiK Focus

Real time information (RTI) submissions will be closely monitored for accuracy.

Payrolling Benefits in Kind (PBiK), mandatory from 2027, will see increased enforcement with focus on correct assessment, reporting and alignment across payroll and HR data.

What should you do next?

While there is still time before the new tax year, it is advisable for employers to begin planning for these changes. Key things to consider include:

Budgeting for increased employment costs, particularly for those with a high incidence of short-term sickness. SSP is treated differently to paternal and maternal payments and is not recoverable from HMRC.

Reviewing payroll systems to ensure readiness of day-one SSP processing and removal of the LEL earnings threshold.

Updating employment contracts and sickness policies, even where you operate an enhanced sickness scheme.

Audit existing documents and records, ensuring holiday entitlement and pay is being calculated correctly.

Updating internal record-retention policies to reflect the new six-year requirements and establish destruction schedules in line with data protection legislation.

Training payroll and HR teams to manage the new compliance requirements effectively.

Contact us

We will continue to update payroll systems, strengthen compliance controls and support statutory payments. If you have any questions regarding what’s mentioned above, or concerning payroll in general, please do not hesitate to get in touch with your usual Blick Rothenberg contact, or Jim Brown using the form below.