Clause and Effect

Statutory Sick Pay

1. SSP will be payable from day one of sickness absence rather than day four.
2. The requirement to earn at least the Lower Earnings Level to be eligible for SSP will be removed.

The aim is to benefit those on short term absences of a day or two, dissuade people from continuing to work when they are not fit to do so, and also cut down on employees taking that fourth and fifth day when they possibly don’t really need it.

The current requirement to earn at least the Lower Earnings Level (currently £118.75 pw) precludes around 1.3 million employees in the UK, including part time employees; the new system will ensure that all employees have financial security during illness regardless of their income level.

The new calculation for SSP will be 80% of the employee’s average weekly earnings, subject to a cap equivalent to the Lower Earnings Limit in force each year.

MHA HR Solutions can amend your Contracts of Employment and Absence policies to ensure that they are compliant with the new legislation, and also advise you on individual cases of sickness absence.

Parental Leave and Paternity Leave

• Both will be “day one” employee entitlements (subject to eligibility)

Currently both are subject to a qualifying period of service: one year for Parental Leave and 26 weeks for Paternity Leave. These qualifying periods will be abolished such that eligible employees are entitled to both from their first day of employment.

Parental Leave will remain unpaid, whilst the 26 week qualifying period for Statutory Paternity Pay will stay in place.

This is intended to make workplaces more inclusive for new and expectant parents, including those in short-term or seasonal roles. Also, it aims to increase gender equality in child caregiving; whilst women can take Paternity Leave, it is predominantly taken by men.

MHA HR Solutions can amend your Paternity and Parental leave policies to ensure that they are compliant with the new legislation, advise you on individual cases of family-friendly leave, and supply you with appropriate template letters.

Unfair Dismissal

1. The qualifying service required to bring a claim will be reduced to six months.
2. The cap on compensatory awards will be removed.

The original proposal of the Employment Rights Bill was to make the right to claim Unfair Dismissal a “day one” entitlement; however, the House of Lords pushed back on this such that a qualifying period of service remains in place but will be reduced from two years to six months.

This will apply to dismissals from 1 January 2027 onwards i.e. any employee dismissed from 1 January onwards who has at least six months’ service will have the right to claim Unfair Dismissal.

This is aimed at balancing employee protections with employer flexibility. Employers will need to take greater care in recruitment, onboarding and induction processes to ensure that the correct hires are made. Greater emphasis will be placed on probationary periods with line managers needing to review performance during the first few months of employment and make decisions as to ongoing employment swiftly.

The cap on the amount which an employee can be awarded if the Employment Tribunal finds that their dismissal was legally Unfair (currently £118,123 or an amount equivalent to the employee’s annual salary, whichever is the lower) will be removed. This is effective from 1 January 2027. It will result in increased Unfair Dismissal awards, particularly for high earners or public sector employees on fairly modest salaries but who have very generous pension schemes.

MHA HR Solutions can amend your Contracts of Employment and Disciplinary Procedures, and supply you with the relevant template letters. We can also advise you on recruitment, onboarding and induction; poor performance or misconduct and how to terminate the employment of short service employees.

We can advise and assist you with disciplinary hearings to ensure that full legal processes are followed for longer service employees. In addition, we can draft Settlement Agreements or conduct Early Conciliation via ACAS for you, with a view to keeping you out of the Employment Tribunal thus removing the risk of costly awards being made against you.

Fair Work Agency

This is not a change to the law as such, but a new form of enforcement. The Fair Work Agency is a new government agency set up to enforce employee rights in respect of:

1. National Minimum Wage / National Living Wage
2. Statutory Sick Pay
3. Holiday and Holiday Pay
4. Tribunal Awards / COT3 Awards

This represents a real shift in the UK from employee rights being very much pursued on an individual basis. There has been no real collective mechanism for enforcing employee rights; it has very much been up to individuals to take action in the Employment Tribunal.

Non-compliance will probably render employers liable to civil penalties and there will also be public accountability, probably similar to the current “name and shame” of those who commit breaches of the National Minimum Wage.

MHA HR Solutions can conduct NMW / NLW audits for you; we can also advise you on holiday entitlements and holiday pay calculations.

Remember to keep checking in with our Employment Rights Act 2025 Hub on the MHA website!