As we enter the new financial year, UK employers are facing one of the most significant overhauls of employment law and workplace regulation in decades. With the elements of the Employment Rights Act 2025 and the wider government ‘Plan to make work pay’ kicking in, organisations will see major shifts across pay, leave, benefits, worker protections and compliance.
To help you stay ahead, here’s a clear, straight‑to‑the‑point rundown of what’s changing and what it means for your business.
1. Employment Rights Act (ERA) 2025
The ERA 2025 is behind many of the headline changes hitting employers this financial year, marking the biggest shake-up in worker protections in a generation. Here are some of the key changes.
Launched in April 2026:
Day‑one rights for paternity and unpaid parental leave
Bereaved partner’s paternity leave
Statutory sick pay (SSP) becomes a day‑one right
Whistleblowing protections expand
Collective redundancy consultation changes
Fair Work Agency (FWA)
Launching in January 2027:
Unfair dismissal qualifying period reducing from two years to six months
You can read more about navigating the Employment Rights Act 2025 in our recent blog by Martin Graves, Chief People Officer at Reed Global here.
2. Pay, wages & statutory rates
Minimum wage rates rose again last week. From Wednesday 1 April 2026 the new rates are:
For those aged 21 and over: £12.71 an hour
For those aged between 18 and 20: £10.85 an hour
For those aged 16 to 17, and for apprentices: £8.00 an hour
Also, from the same date, we saw rates for maternity, adoption, shared parental and related leave rise to £194.32 a week (or 90% of earnings if lower), an increase from £187.18. Statutory sick pay will also increase to £123.25 a week.
3. Benefit-in-kind (BIK) overhauls
This financial year introduces major shifts in how benefits in kind are reported, taxed and administered, marking one of the biggest changes to employer compliance in years.
From April 2026:
Tax‑free reimbursement expanded: Eye tests, flu jabs and homeworking equipment can be reimbursed tax‑free.
Company car easement: Temporary CO₂ rules will soften rising tax bills for plug‑in hybrids.
From April 2027:
Full mandatory payrolling: Nearly all BIKs must be reported and taxed through payroll each pay cycle, rather than at year‑end, effectively replacing P11Ds.
What employers should do now:
Check your payroll system supports real‑time BIKs, brief employees on changes to payslips, tighten data sharing with benefit providers, and consider voluntary payrolling in 2026/27 to smooth the switch.
4. Gender pay gap and menopause action plans
Large employers (250+ employees) are encouraged to start publishing their gender pay gap action plans and menopause support strategies from this April, before they become mandatory next year. This marks a shift toward greater transparency and workplace wellbeing accountability.
On this, Bridget Phillipson MP, the Secretary of State for Education and Minister for Women and Equalities, said: “Too many women are still not paid fairly, held back at work due to inconsistencies in support or find common sense adjustments for their health needs overlooked or dismissed. We’re acting to empower women at work and work with businesses, so we all benefit from unleashing women’s talents.”
5. Holiday pay – new six‑year record‑keeping requirement
This is a sleeper issue that could surprise employers. From 6 April 2026, all employers must keep six years of detailed holiday pay and leave records, covering:
Leave taken
Pay calculations (including overtime, commission and allowances)
Accrued leave and rolled‑up holiday pay where applicable
The newly formed Fair Work Agency can issue unlimited fines, seize documents, and investigate non‑compliance as a criminal offence. This will require many organisations to upgrade their leave management systems.
6. Payroll and tax threshold changes
The personal allowance remains at £12,570, and tax bands are unchanged. Many employees will quietly drift into higher tax brackets due to inflation, so your payroll and HR teams are likely to see more queries about tax code changes as a result.
The secondary threshold remains low at £5,000, meaning employer national insurance contributions will remain at 15%, and continue to be a major cost pressure. If you haven’t yet modelled the impact, now is the time.
7. Umbrella company labour chain reform
From 6 April 2026, liability for PAYE and NIC will no longer sit solely with umbrella companies. Instead, responsibility will be shared across the supply chain, with recruitment agencies and end clients becoming jointly and severally liable depending on how that chain is structured.
Where no recruitment company sits in the chain, the end client takes full responsibility. This marks a major shift designed to crack down on tax avoidance and disguised remuneration schemes, making rigorous due diligence on umbrella partners more important than ever.
Change has arrived and continues to come down the track. The sooner you and your team can prepare, the stronger a position you will be in. While the scale of change may feel daunting, it also brings opportunities to modernise processes, strengthen compliance, and create fairer, more supportive workplaces.
If you want to grow and strengthen your team to start the new financial year strong, get in touch with a specialist consultant today.
