From April 2026, several important employment law changes are coming into effect — and for small business owners, these aren’t just technical updates. They will have a real impact on costs, processes, and hiring decisions.

If you employ staff (or are thinking about it), here’s what you need to know — in plain English.

The Big Shift: Employment Is Getting More Expensive

One of the key themes behind the 2026 changes is simple:

Employing people is becoming more costly and more complex

This isn’t just about wages increasing — it’s about:

• Higher payroll costs
• More administration
• Greater legal risk

For many small businesses, this means taking a more strategic approach to hiring.

National Minimum Wage Increases

Annual increases to minimum wage rates continue, which means:

• Immediate impact on payroll costs
• Pressure to increase wages across the business (not just entry-level roles)
• Reduced margins if pricing isn’t adjusted

 It’s not just a pay rise — it creates a ripple effect across your entire pay structure.

Statutory Sick Pay: A Major Change

Sick Pay from Day One

From April 2026:

• Statutory Sick Pay (SSP) is now payable from the first day of sickness
• The previous 3-day waiting period is removed

What this means for you:

• Increased cost of short-term absence
• More frequent payroll adjustments
• Greater need for absence tracking

Removal of the Lower Earnings Limit

Previously, lower-paid workers didn’t always qualify for SSP.

Now:

• More employees are eligible
• Part-time and lower-income workers are included

Result: more people claiming sick pay = higher overall cost

Redundancy Risks Have Increased

Another significant change is the doubling of penalties for getting collective redundancy wrong.

This is a big shift:

• Mistakes are now far more expensive
• “We’ll deal with it later” is no longer an option

Employment law compliance needs to be proactive, not reactive.

Have You Reviewed Your Contracts Recently?

With these changes, outdated contracts can quickly become a liability.

Now is the time to review:

• Sick pay terms
• Parental and paternity leave
• Notice periods and termination clauses
• Company policies

Your documentation must reflect current law — not how things used to be.

The True Cost of Employing Someone

When hiring, many businesses focus on salary — but the real cost is much higher.

You need to factor in:

• Wages and National Insurance
• Sick pay and holiday pay
• Insurance (e.g. Employers’ Liability)
• HR admin and compliance
• Potential legal risks

The true cost of an employee is often significantly higher than their salary.

The Strategic Question: Should You Hire at All?

With rising costs and increased regulation, hiring is no longer just an operational decision — it’s a strategic one.

Before employing someone, ask:

• Financial viability: Will they generate more than they cost?
• Cash reserves: Do you have a 3–6 month buffer?
• Compliance: Are your contracts up to date?
• Protection: Do you have the right insurance in place?
• Processes: Are you ready to manage sick pay and leave from day one?

 If the answer to these isn’t clear, it may be worth pausing before you hire.

Final Thoughts

The 2026 employment law changes are a clear signal:

Running a business with employees requires more planning, structure, and awareness than ever before.

But with the right preparation, you can:

• Stay compliant
• Avoid costly mistakes
• Make better hiring decisions

Need Advice?

If you’re unsure how these changes affect your business, it’s worth getting professional guidance before problems arise.

Amie Watson
📧 amie.watson@coalesco.co.uk
📞 0115 928 3228