National minimum wage reforms
The government promised to reflect the cost of living in the statutory minimum pay rates and remove the current age bands to ensure that every adult worker benefits from a genuine living wage.
It also wants to ensure that the statutory regulations on travel time in sectors with multiple working sites are enforced and that workers' contracts reflect the law.
NEW RATES IN FORCE 1 April 2026 (look out for new rates in April 2027)
- New minimum wage rates came into force on 1 April 2026.
- The remit of the Low Pay Commission (LPC) has been changed to take account of the cost of living.
- The LPC is consulting on a pathway to create a single adult minimum age rate.
- Enforcement of minimum pay for travel time will take place outside of the ERA.
- Action
Changes to statutory minimum wage rates bring increased costs for businesses which will need to be factored into the wage bill (along with changes to employer tax and national insurance contributions).
Pay processes should be audited to avoid inadvertent breaches of the statutory pay requirements; enforcement of the statutory minimum wage comes within the remit of the Fair Work Agency.
- In detail
The government has announced the increases to the statutory minimum pay rates which apply from 1 April 2026 (accepting in full the Low Pay Commission recommendations) as follows:
National living wage (NLW) for 21 and over: £12.71
National minimum wage (NMW) 18 to 20 year old rate: £10.85
NMW 16 to 17 year old rate: £8.00
Apprentice rate: £8.00
Accommodation offset: £11.10
These rates reflect the government's intention to achieve a single adult rate by narrowing the gap between the NLW and NMW year on year in order to achieve a single adult rate (although media reports suggest that this may be subject to delay given high levels of youth unemployment).
- Impact
- The LPC has reported seeing signs of employers finding it harder to adapt to NMW increases. Nevertheless, it anticipates consulting next year on the pathway to achieving the government's goal of reducing the NLW age threshold from 21 to 18.
- There remain ongoing concerns about the impact of the increases on employers' budgets.
Reforms to statutory sick pay
IN FORCE: 6 April 2026
Statutory sick pay (SSP) is now payable from day one of absence (the previous three day waiting period has been removed) and there is no longer a requirement to be earning at least the lower earnings limit. Those earning less than the lower earnings limit are entitled to SSP at a rate of 80% of their average weekly earnings.
From 6 April 2026, the rate of SSP increased to £123.25 per week (or 80% of average weekly earnings if lower).
- Action
This will bring an increased cost to businesses with SSP payable from day 1 of absence (although in some sectors employers will already operate more generous company sick pay schemes) and more individuals now being eligible with the removal of the earnings limit. The reforms will also apply to agency workers (see here).
Employment terms and policies governing sick pay and absence will need to be reviewed. There may be an uptick in short term sickness absence; managers should be trained on monitoring and managing these situations, including return to work meetings and check-ins. An awareness of wider considerations, including the need to make reasonable adjustments for those who are disabled, will be key to avoiding inadvertent disability discrimination.
Payroll practices will need to be adjusted and employers should ensure increased visibility over systems recording attendance. Enforcement of the SSP will come under the new Fair Work Agency bringing potentially greater scrutiny.
Review or consider introducing more generous company sick pay to encourage workers to take sickness absence when needed and potentially minimising the spread of illness at work and absences becoming more long-term, as well as being attractive for recruitment and retention. With an aging workforce, supporting employees managing health issues is likely to take on increasing significance.
- In detail
- SSP will be payable from day one of sickness absence (rather than from the fourth day of absence – with the three unpaid days at present, commonly referred to as "waiting days").
- The lower earnings limit to be eligible for SSP is removed, making SSP available to lower paid employees. Following consultation the Act provides that the rate of SSP for those earnings below the former lower earnings limit will be 80% of their normal weekly earnings.
- Impact
At present, low-paid employees may not meet the financial threshold for SSP or, where they do, be disinclined to take sickness absence where the first three days will be unpaid.
Strengthening tipping rules
Employers will be required to maintain a written tipping policy. Employers must consult with employee representatives (or affected employees where there are no representatives) when developing or revising their policies and review them at least once every three years. An anonymised written summary of consultation responses must be made available to the workforce.
ONGOING (anticipated by the end of 2026)
- Consultation: 'Strengthening the Law on Tipping': response and draft Code published.
- Originally expected to take effect October 2026 but now delayed until "by the end of 2026" following criticism of the draft Code of Practice by trade unions and which has been withdrawn from the parliamentary process as a result.
Action
Ensure compliance with the existing reforms which came into force on 1 October 2024, including the new Code of Practice on the fair and transparent distribution of tips.
Watch out for the revised Code of Practice when it is reissued and presented before Parliament.
Put in place a process for monitoring and reviewing any tipping policy; the three-year review cycle will begin from the date a policy is originally implemented, including polices already in place before the new rules take effect.
Consider how workers will be provided with an anonymised summary of feedback received during the required consultation processes.
In detail
Employers will be required to maintain a written tipping policy.
There must be consultation with workers (or their representatives) when developing or reviewing their policies. A review must take place at least once every three years, with the obligation arising from the first day on which the first version of the policy is made available (including policies in place before the new provisions came into force). A revised Code (following consultation) is expected to provide guidance on undertaking this consultation.
An anonymised summary of the views expressed in the consultation must be made available to all workers of the employer "at the place of business" where the tipping policy applies.
Impact
The Employment (Allocation of Tips) Act which came into force on 1 October 2024 requires employers to pass all tips to workers without deduction and that employers have a written policy on tip allocation; it does not require employers to consult with workers when developing these policies (although this is encouraged in the current Code of Practice).
The government's intention is to ensure that workers are actively involved in the development of tipping policies, particularly those who are typically low-paid workers. The revisions seek to "readdress imbalances in employee input into employer decision-making and will lead to fairer tip allocation systems and overall greater worker satisfaction".
- ERA: Expected in force October 2026
Holiday (entitlement and pay) records
IN FORCE: 6 April 2026
The statutory duty for all employers to keep records of annual leave (including pay) for six years is now in force.
Note: Separately, the FWA established under the ERA in April 2026 will be given powers to enforce holiday pay; currently anticipated to apply during 2027. A consultation is open on the proposed approach to statutory holiday compliance and enforcement by the FWA. The consultation closes on 22 September 2026.
- Action
Audit current records for monitoring holiday entitlement and pay, ensuring they are sufficiently clear. Records may be created, maintained and kept in such manner and format as the employer reasonably thinks fit.
Put systems in place to ensure that records are retained for six years and data protection retention policies are updated accordingly.
- In detail
- An amendment to the Working Time Regulations under the ERA requires employers to keep records demonstrating that all eligible workers have been afforded the paid statutory holiday to which they are entitled.
- The records must be "adequate" with no prescribed form, although they must contain sufficient information to demonstrate compliance with the new statutory requirement.
- The records must be kept for six years. Failure to comply will be a criminal offence punishable with a fine (unlimited).
- Impact
Keeping on top of holiday pay will be particularly important given the new onerous enforcement powers of the Fair Work Agency, including the ability to issue notices of underpayment and levy fines.
Ban on unpaid internships
The government published a Call for Evidence on 9 October 2025 and published its response on 27 February 2026.
This is not part of the ERA and no legislative initiatives have been announced.
Further guidance and enforcement action is expected via the Fair Work Agency.
This is not part of the ERA.
- Action
- The Call for Evidence is welcome reminder for employers of the difficulties of employment status in this area. A policy on offering work experience and internship opportunities should be drawn up to ensure that individuals are not informally invited into the workplace creating legal difficulties.
- In detail
- The government responded to the Call for Evidence on 27 February 2026. Rather than introducing legislative change it has confirmed that it will instead seek to tackle illegal internships via updated guidance, using the enforcement powers of the new Fair Work Agency and launching a communication campaign.
- Impact
- At present an individual's status will determine what employment rights and pay they are entitled to. There is no legal definition of "work experience" or "internship" etc. meaning that this can be a tricky area for employers to navigate when inviting individuals into the workplace to gain an understanding of the work they do.
Time off for public duties
The government has launched a consultation on reviewing the list of public duties eligible for the statutory right to reasonable time off work.
- Action
- Employers should review the outcome of the consultation and assess whether any of their employees currently exercise the right to time off for public duties or may be affected by the proposed changes. Policies on time off for public duties should be reviewed and updated once the outcome of the consultation is known.
- In detail
- The government's main proposals are to extend the right to special constables and others carrying out eligible public duties with a clear local focus e.g. governor for academies and academy trusts, fee-paid judges, lay panel members of the Judicial Appointments Commissions. However, it is intending to remove the right from those carrying out public duties for national public sector organisations, such as board members of national health organisations.
