Employment Rights Bill: key payroll impacts and what you need to prepare for

The Department for Business and Trade (DBT) has published the Implementation Roadmap for the Employment Rights Bill, setting out a timeline for major changes to workers’ rights. While many of these reforms focus on employment law and HR policy, several have direct implications for payroll operations which employers need to prepare for.

From April 2026: Immediate payroll adjustments

• Statutory Sick Pay (SSP) reform
  The removal of the lower earnings limit and waiting period means more employees will qualify for SSP from day one of illness. Payroll systems will need to be updated to reflect these changes, and employers should prepare for increased SSP costs and more frequent processing.
• ‘Day one’ paternity and unpaid parental leave
  These entitlements will now apply from the first day of employment. Payroll teams must ensure leave tracking and pay calculations are adjusted accordingly, especially for new starters.
• Trade union measures
  While primarily HR-related, changes such as electronic balloting and simplified recognition may affect payroll deductions for union subscriptions and reporting requirements.

October 2026: Compliance and cost considerations

• Ending fire and rehire practices
  Although this is a legal reform, payroll may be involved in calculating redundancy pay and transitional pay arrangements if contracts are renegotiated.
• Fair pay agreement for adult social care
  Employers in the care sector should prepare for standardised pay structures, which may require payroll system reconfiguration and budget adjustments.
• Tipping Law Reform
  Employers in hospitality must ensure fair tip allocation is reflected accurately in payroll, with consultation processes documented and auditable.
• Sexual harassment protections
  While not directly payroll-related, any changes to compensation or settlements may require payroll involvement.

From 2027: Planning for long-term payroll impacts

• Bereavement leave
  Payroll teams will need to track and process this new leave entitlement, ensuring compliance with statutory or contractual pay obligations.
• Zero hours contracts reform
  Employers will need to offer stable hours and predictable income, which will affect payroll forecasting, budgeting, and contract setup.
• ‘Day One’ protection from unfair dismissal
  This may lead to changes in probationary pay structures and termination pay processing.
• Flexible working enhancements
  Payroll may need to accommodate more varied working patterns, affecting pay calculations, holiday accruals, and pension contributions.
• Gender pay gap and menopause action plans
  While voluntary at first, these may influence payroll reporting and data analysis requirements.

What payroll teams should do now

To stay ahead of these changes, we recommend:

• Reviewing payroll software capabilities to ensure it can handle new entitlements and pay structures.
• Updating internal policies and procedures to align with SSP and leave reforms.
• Training payroll staff on upcoming changes and how they affect calculations and compliance.
• Collaborating with HR and finance teams to ensure a joined-up approach to implementation.

Summary

As these changes approach, we understand that navigating new payroll requirements can be challenging. Whether you’re looking for guidance on specific reforms or considering outsourcing your payroll to ensure compliance and efficiency, our expert payroll team is here to support you.

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