While the impending changes of the Employment Rights Act 2025 are at the forefront of most employers’ minds, the new financial year also brings with it the usual financial changes of which employers are required to be aware and implement. In this case, we are looking solely at the monetary changes affecting employers and what they will be liable to pay during the next financial year. With these changes coming into force in April 2026, now is a good time for employers’ to get their accounts in order.
Accepting in full the recommendations of the Low Pay Commission, the Government announced the following increases to the national minimum wage commencing from 1 April 2026:
- National Living Wage (NLW) (aged 21 and over): £12.71 (from £12.21).
- The 18 to 20-year-old rate: £10.85 (from £10.00).
- The 16 to 17-year-old rate: £8.00 (from £7.55).
- Apprentice rate: £8.00 (from £7.55).
- Accommodation offset: £11.10 (from £10.66).
Statutory maternity, paternity, adoption, shared parental, parental bereavement, neonatal pay are all also set to increase from £187.18 to £194.32 with effect from 6 April 2026.
From 6 April 2026 statutory sick pay (SSP) increases from £118.75 to £123.25 per week. In addition the removal of the lower earnings limit will see those who earn less than this paid SSP at a rate of 80% of earnings. All workers will now be eligible to receive SSP from the first day of absence rather than after the three-day unpaid waiting period currently in place.
The immediate effect of these increases is the rising payroll costs which will impact on budgeting and recruiting decisions. Employers are also likely to face increased expectations from higher-paid staff regarding their salary. These impacts will be particularly relevant to sectors which commonly take on apprentices or staff under the age of 20 e.g. hospitality or construction. Employers with increased numbers of part-time or lower paid staff who may have previously benefitted from not having to pay SSP will now require to factor this into their spending. Likewise, employers with sickness absence policies should consider updating these to reflect the revised eligibility requirements and the day one right. Beyond this, additional financial pressure is likely to cause some businesses to consider cost-cutting measures with the potential for redundancies as a consequence of increasing costs.
The changes do not stop there - On 6 April, various other changes also take effect including a doubled maximum period for collective redundancy protective awards (90 days’ pay to 180), new “Day 1” rights to Paternity Leave and Unpaid Parental Leave, strengthened whistleblowing protections in cases involving sexual harassment, and a new “Bereaved Partners’ Paternity Leave” allowing bereaved fathers and partners to take up to 52 weeks of paternity leave if the mother or adoptive parent dies within the first year of a child’s life/placement for adoption. Finally, on 7 April, the new Fair Work Agency will be established, overseeing compliance with employment rights, supporting fair pay and working conditions (among other things) as part of a more coordinated system for enforcing worker rights with financial penalties in place where breaches are discovered.
Accordingly, employers will soon be tasked with meeting increasing wage and absence costs while also familiarising themselves with new employee entitlements and the changes of the Employment Rights Act 2025. This is all in the knowledge that “getting it wrong” could see penalties from the new Fair Work Agency or could lead them to an Employment Tribunal (the collective maximum awards of which are also set to increase in April with figures still to be confirmed). Given this, employers should emphasise getting it right the first time – rising costs may be unavoidable – however, ensuring that policies, procedures and payroll systems are updated/introduced to reflect the new provisions or, in the worst case scenario, that redundancy procedures are carried out fairly and lawfully are among the steps that employers can take to protect themselves against those which are entirely avoidable. Accordingly, Thorntons are on hand to assist with employment law advice across Scotland whatever the issue may be. For more information, please visit our Employment Rights Act 2025 hub.
