Employment law reforms on the horizon

National minimum wage increases

From 1 April 2026, the national minimum wage rates per hour increase as follows:

• Workers aged 21 and over; an increase from £12.21 to £12.71
• Workers aged 18 to 20; an increase from £10.00 to £10.85
• Workers aged 16 to 17 and apprentices; an increase from £7.55 to £8.00.
   

New statutory family leave and sick pay rates

• Statutory maternity pay will increase from £187.18 to £194.32 on 5 April 2026
• Statutory paternity, adoption, shared parental, parental bereavement and neonatal care pay will increase from £187.18 to £194.32 on 6 April 2026
• Statutory sick pay will increase from £118.75 to £123.25 on 6 April 2026.

New compensation rates for unfair dismissal/week's pay

The limits that apply to certain awards in employment tribunals where the effective date of termination falls on or after 6 April 2026 are as follows:

• The limit on a week's pay increases from £719 to £751
• The maximum compensatory award for unfair dismissal increases from £118,223 to £123,543
• The minimum basic award for certain unfair dismissals (including health and safety dismissals) increases from £8,763 to £9,157
• The limit on the compensatory award for failure to allocate and pay tips fairly (or for failure to have a written tips policy or maintain records of how tips have been dealt with) increases from £5,135 to £5,366.

Employment Rights Act 2025 reforms coming into force on 6 April 2026 are as follows:

• Doubling of maximum protective award from 90 to 180 days' per affected employee for collective redundancy consultation failures
• Statutory sick pay payable from day one of absence and the removal of the lower earnings limit
• Statutory paternity leave and unpaid parental leave become day one rights and employees will be entitled to take paternity leave before or after shared parental leave
• A new right to bereaved partners paternity leave
• Protected disclosures expressly extended to include sexual harassment concerns; and 
• The introduction of a simplified process for trade union recognition. 

Gender pay gap and menopause action plans are also expected to be introduced on a voluntary basis, with a statutory requirement taking effect in 2027 (see below). 

New umbrella company tax legislation 

New umbrella company tax legislation introduces joint and several tax liability between an umbrella company and agency (or in some cases end hirers) for any failure by the umbrella company to pay full PAYE and NICs to HMRC. 

Employment Rights Act 2025 reforms coming into force on 7 April 2026 are as follows:

• Establishment of the Fair work Agency.
   

Employment Rights Act 2025 reforms expected to come into force on 1 October 2026: 

• Procurement – two tier code.
• Tightening tipping law.
• Duty to inform workers of their right to join a trade union.
• Strengthen trade unions' right of access.
• Requiring employers to take "all reasonable steps" to prevent sexual harassment of their employees.
• Introducing an obligation on employers not to permit the harassment of their employees by third parties.
• New rights and protections for trade union reps.
• Employment tribunal time limits.
• Extending protections against detriments for taking industrial action.

Conclusions from review of parental leave and pay expected to be published 

Employment Rights Act 2025 reforms expected to come into force on 1 January 2027: 

• Reduction in the unfair dismissal qualifying limit from two years to 6 months and the removal of the statutory compensatory cap; and
• New statutory obligations applying to certain contractual variations and fire and rehire. 
   

Employment Rights Act 2025 reforms expected to come into force during 2027:

• Gender pay gap and menopause action plans (introduced on a voluntary basis in April 2026)
• Rights for pregnant workers
• Introducing a power to enable regulations to specify steps that are to be regarded as "reasonable" to determine whether an employer has taken all reasonable steps to prevent sexual harassment
• Blacklisting
• Industrial relations framework
• Regulation of umbrella companies
• Collective redundancy – collective consultation threshold
• Flexible working
• Bereavement leave
• Ending the exploitative use of zero hours contracts and applying ZHC measures to agency workers.

Draft Equality (Race & Disability) Bill and gender pay gap outsourcing  

The government has recently announced its commitment to introduce mandatory ethnicity and disability pay gap reporting for large employers. However, no timeline for implementation has been published. We are still awaiting the outcome of the Call for Evidence on proposed wider equality reforms. 

The government's roadmap to implementation of the Employment Rights Act 2025 indicates that implementation of the gender pay gap outsourcing measures within that Act are dependent on timelines for broader changes, including the related measures in the above Bill.