Employment, contingent workforce and immigration | UK Regulatory Outlook January 2026

Employment

Employment Rights Act

The Employment Rights Act 2025 received royal assent and became law on 18 December 2025, with a number of changes coming into force over the next two years.

6 April 2026

The government's roadmap indicates that the following reforms may take effect in April 2026:

• Collective redundancy protective award – doubling the maximum period of the protective award.
• Day one paternity leave and unpaid parental leave.
• Sexual harassment included as a protected disclosure.
• Fair Work Agency body established.
• Statutory sick pay – remove the lower earnings limit and waiting period.
• Simplifying trade union recognition process.
• Electronic and workplace balloting.

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).

1 October 2026

The government's roadmap indicates that the following reforms may take effect in October 2026:

• Fire and rehire.
• 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

During 2027

The government's roadmap indicates that the following reforms may take effect 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.

National minimum wage increases

New national minimum wage limits come into force on 1 April.

The government has announced the increases to the statutory minimum pay rates which apply from 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.

Increases to statutory pay rates for family leave/sick pay

The proposed 2026-27 rates for statutory maternity, paternity, adoption, and shared parental will go up from £187.18 a week to £194.32 a week. Statutory neonatal care pay and parental bereavement pay will also increase by the same amount.

Statutory sick pay (SSP) will increase from £118.75 to £123.25 per week from 6 April 2026.

Employment Rights Act: Unfair dismissal reforms

The government has indicated that the reforms to the unfair dismissal qualifying limit and the removal of the statutory compensatory cap are expected to take effect from January 2027.

UK agency workers, umbrella workers and self-employed contractors

UK umbrella companies: new tax legislation introducing joint and several liability from 6 April 2026

New UK tax legislation will come into effect in April 2026 which will affect all those who have umbrella companies in their contingent worker supply chains.

An "umbrella company" will include anyone who employs agency workers to be supplied to work under a client hirer's control, meaning that UK employers of record (EORs), some consultancies and hire-train-deploy providers, as well as the more obvious umbrella companies will be caught.

Agencies (or in certain cases, client hirers) will be jointly and severally liable for any failure by an umbrella company to pay PAYE and National Insurance Contributions on payments to umbrella workers. There will be no statutory defence to liability, which means that compliance due diligence, relying on industry accreditations or payslip checking services will provide no defence to liability if an umbrella company fails to account to HMRC for any PAYE and/or NICs for any reason.

All those involved in the procurement, supply and payment of umbrella workers will want to ensure that umbrella arrangements in their contingent worker supply chains operate compliantly and do not present a joint and several liability risk.

See Osborne Clarke's full briefing.

New guaranteed hours rights for agency workers, launch of the Fair Work Agency and regulation of umbrella companies

The Employment Rights Act includes some new rights for agency workers. The following provisions are currently scheduled to commence in April 2026:

• Statutory sick pay payable from day one of absence with removal of the lower earnings limit. This will apply to agency workers as well as employees and workers.
• Fair Work Agency will launch to tackle enforcement or minimum wage, holiday and sick pay, labour exploitation and agency worker rights. The current Employment Agency Standards Inspectorate will become part of the Fair Work Agency to enable more joined-up regulation of the UK agency market.

Under the government's current proposed timetable, new rights for agency workers to be offered guaranteed hours contracts with hirers after they have worked a reference period, are expected during 2027. The government has indicated that a consultation on the details, including on what the "reference period" should be, will be issued in 2026. 

A consultation is also expected on changes to the Conduct of Employment Agencies and Employment Businesses Regulations 2003 to finalise how umbrella companies will be within the regulation of the Employment Agency Standards Inspectorate (which will become part of the Fair Work Agency from April 2026). This new regime will apply in addition to the new umbrella tax legislation and will affect those who use, supply and/or pay agency workers.

Consultation on new definitions of employment and self-employment?

Government plans, announced in August 2025, for a consultation on employment status by late 2025 have been delayed with no clear indication as to when they will commence.

The consultation is intended to clarify the current complex rules for determining whether someone is an employee, a worker or self-employed. The "single worker status" originally proposed by the government seems to have been dropped in favour of looking at the employment status framework and the possibility of a "dependent contractor" classification. Introducing a definition of "self-employment" is notoriously difficult and something governments on all sides have struggled to tackle for decades.

There are concerns that the Employment Rights Act, the recent increases in Employer's NICs and national minimum wage will incentivise a push towards increased use of self-employment engagements to reduce employment costs and avoid the new employment rights. 

First off-payroll tax assessments likely in 2026

It has been four years since the private sector off-payroll rules (IR35) were introduced, which means the first tax assessments are likely to be in 2026. Reports of HMRC enforcement in this area will likely affect end hirers' and agencies' view of the risk associated with using and supplying personal service company contractors.

UK immigration

2025 saw a significant number of changes and announcements in relation to UK immigration. There was an increase in compliance audits for licence holders, consultation on earned settlement being opened and significant changes to the skilled worker route.

It is anticipated that 2026 will bring with it additional changes which will affect not only employers who sponsor overseas workers but also those who do not. Most notably:

Changes to right to work checks

These changes will have an impact on most, if not all UK companies. The UK government launched a six-week consultation (29 October to 10 December 2025) on extending right to work checks to a wider part of the labour market, including the gig economy and zero-hours workers. Currently, employers are only required to conduct right to work checks for individuals classified as "employees", leaving significant gaps in sectors such as construction, food delivery, beauty salons, courier services and warehousing where businesses engage workers, individual sub-contractors, or use online matching services.

The proposed extension, to be implemented through the Border Security, Asylum and Immigration Act, will require all businesses engaging individuals under worker's contracts, sub-contractors, and online platforms to carry out right to work checks, with civil and criminal sanctions for non-compliance.

Changes to the settlement route following closure of the consultation

Under the proposed system, the baseline qualifying period for settlement will increase from five to ten years for most migrants, with adjustments based on four core pillars: character, integration, contribution, and residence. Applicants must demonstrate sustained economic participation through earnings above £12,570 for three to five years, achieve English language proficiency at B2 level, pass the Life in the UK test, maintain a clean criminal record, and have no outstanding government debt. The government will conduct a root-and-branch review of criminality thresholds, with the expectation that settlement should not be available to those with criminal records.

The system introduces a "time adjustment" model allowing migrants to reduce their qualifying period through exceptional contributions. High earners with taxable income exceeding £125,140 for three years could reduce their pathway by seven years, while those earning above £50,270 could earn a five-year reduction. Public service workers in skilled occupations (RQF Level 6 or above), including medical and teaching professionals, could also qualify for a five-year reduction.

Conversely, the qualifying period will be extended for those claiming public funds: by five years for less than 12 months of claims, and ten years for more extensive benefit usage. The consultation also proposes that benefits should be reserved for British citizens rather than those with settled status, and considers a separate 15-year baseline qualifying period specifically for low-skilled, low-wage Health and Care visa holders who arrived with non-working dependants.

Dates to keep in mind

8 January 2026 – Increase in English language requirements for new applicants to certain visa categories. Extending the English requirement to dependants.

12 February 2026 – Earned Settlement consultation closes. Expect changes to the qualifying period and requirements for indefinite leave to remain for main applicants and dependants. Removal of the long residence category also likely to be confirmed and date set.

Osborne Clarke's dedicated tracker is regularly updated following changes and any key dates are flagged.