Employment Rights Act 2025: What UK Employers Must Do Right Now for Payroll and HR Admin
Author: Staffinity Solutions Team | Published: June 2026 | Category: HR & Payroll Compliance
The Employment Rights Act 2025 is one of the most significant changes to UK employment law in recent years. For small and medium sized businesses, it brings important new responsibilities that affect everyday HR admin and payroll admin processes.
These changes matter from the moment a new employee starts work, through to sickness absence, family leave, flexible working requests, payroll calculations and benefits reporting.
Please note: this article is intended as practical compliance awareness only and does not constitute legal advice. For guidance specific to your circumstances, please seek advice from a qualified employment solicitor.
What Is the Employment Rights Act 2025 and Why Does It Matter for SMEs?
The Employment Rights Act 2025 was introduced to strengthen worker protections and modernise employment rights across Great Britain. For SMEs, the challenge is not just understanding what has changed. The real challenge is making sure your day to day HR admin and payroll admin processes reflect the latest rules.
Gaps between policy and practice are where businesses can become exposed. Poor records, outdated templates, missed payroll updates and inconsistent manager decisions can all create unnecessary risk.
That is why employers should now review their HR and payroll processes carefully, especially where admin is handled manually or across different systems.
Statutory Sick Pay From the First Full Day of Sickness Absence
What has changed?
From 6 April 2026, Statutory Sick Pay became payable from the first full day of sickness absence. The previous three waiting days have been removed.
The lower earnings limit has also been removed. This means more lower paid and part time employees may now qualify for Statutory Sick Pay. The rate of Statutory Sick Pay is calculated at 80% of average weekly earnings or the flat weekly rate, whichever is lower.
What does this mean for payroll?
Your payroll process must calculate Statutory Sick Pay from the first full day of sickness absence, not from day four.
Employers should check that:
- Payroll software has been updated
- Absence records are accurate and complete
- Managers understand when sickness absence starts
- Payroll staff know how to apply the new SSP rules
- Lower paid and part time employees are not missed
If your payroll admin support is handled in house, now is a good time to audit your SSP calculation process from start to finish.
Mandatory Payrolling of Benefits in Kind: Preparing for April 2027
What is changing?
Mandatory payrolling of most benefits in kind is expected to begin from April 2027.
This means most taxable benefits and expenses will need to be reported through payroll in real time instead of being dealt with mainly through the annual P11D process. This may include benefits such as company cars, private medical insurance and similar taxable employee benefits.
What does this mean in practice?
Employers should start preparing before the 2027 tax year. Even though April 2027 may feel far away, the change will affect payroll setup, employee communication, tax codes, payroll software and year end processes.
Employers should review:
- Which employees receive benefits in kind
- What benefits are currently reported through P11D
- Whether payroll software can process taxable benefits correctly
- How benefit values will be checked before each payroll run
- How employees will be informed about changes to tax treatment
- How payroll and HR teams will share benefit information
The annual P11D process will not disappear for every single situation straight away, but the direction of travel is clear. Employers should start preparing now so that payroll records are clean and benefit data is accurate before April 2027.
Unfair Dismissal Changes: Preparing for January 2027
What is changing?
Employees currently usually need two years of continuous service before they can bring an ordinary unfair dismissal claim.
From 1 January 2027, the qualifying period for ordinary unfair dismissal protection is expected to reduce from two years to six months. This does not mean all unfair dismissal rights become day one rights. Existing day one protections, such as protection from discrimination and some automatically unfair dismissal claims, will continue to apply.
What does this mean for HR admin?
Employers should treat probation, performance management and dismissal processes as high priority areas. If your business currently relies on informal conversations during probation, this is the time to tighten your process.
Your HR admin should include:
- Clear probation clauses in employment contracts
- Probation policies that are easy for managers to follow
- Written probation review dates
- Documented performance conversations
- Clear records of concerns raised with employees
- Evidence that employees were given a chance to respond
- Proper outcome letters after probation meetings
- Consistent dismissal processes across the business
Verbal warnings, undocumented concerns and informal decisions can create risk. Good HR admin makes it easier for managers to show that a fair and consistent process was followed.
Flexible Working: A Stronger Focus on Fair Decision Making
What has changed?
Employees already have the right to request flexible working from day one of employment.
Employers must handle statutory flexible working requests reasonably. They must also consult with the employee before refusing a request, unless the request is accepted in full.
The Employment Rights Act 2025 is expected to strengthen flexible working rules further in 2027. Employers who reject a request are expected to have to explain why the refusal is reasonable, using one or more of the eight statutory business reasons.
What should employers do now?
Employers should review flexible working policies and make sure managers understand that requests cannot simply be dismissed without proper consideration.
Your HR admin should include:
- A current flexible working policy
- A clear request form or written request process
- A consultation process before refusal
- A template outcome letter
- Records of each request and decision
- A clear explanation where a request is refused
- Manager training on the eight statutory business reasons
Flexible working is no longer something employers can treat as an informal favour. It should be handled through a clear, consistent and documented HR process.
Paternity Leave and Unpaid Parental Leave Changes
What has changed?
From 6 April 2026, employees became eligible for paternity leave and unpaid parental leave from their first day in a new job. Previously, employees needed 26 weeks of service for paternity leave and one year of service for unpaid parental leave.
Paternity leave also now has more flexibility than it did in the past. Eligible employees can take their two weeks of paternity leave in separate blocks and have more flexibility around when leave is taken.
What does this mean for HR admin?
Employers should make sure family leave policies, contracts, employee handbooks and HR systems have been updated.
Your HR admin should include:
- Updated paternity leave policy
- Updated unpaid parental leave policy
- Clear guidance on day one eligibility
- Accurate recording of split paternity leave
- Manager guidance on family leave rights
- Checks to make sure employees are not disadvantaged for taking leave
Family leave errors can create employee relations issues quickly. Clear HR records help prevent confusion and support fair treatment across the business.
Practical Compliance Checklist for Employers
SMEs should now review the following areas:
- Audit your Statutory Sick Pay calculation process
- Confirm SSP is applied from the first full day of sickness absence
- Check that lower paid and part time employees are not excluded incorrectly
- Review benefits in kind and prepare for mandatory payrolling from April 2027
- Check whether your payroll software can handle benefit reporting
- Review probation and dismissal processes before January 2027
- Update flexible working policies and manager guidance
- Make sure managers consult before refusing flexible working requests
- Update paternity leave and unpaid parental leave policies
- Review contracts, handbooks and employee facing documents
- Make sure HR records and payroll records are consistent
How Staffinity Solutions Can Help
At Staffinity Solutions, we support SMEs across the UK with practical HR admin support and payroll admin support.
We help businesses keep their employee records, payroll information, HR documents and compliance admin organised, so owners and managers can focus on running the business.
Our support can include:
- Employee file setup and maintenance
- HR document admin
- Absence and sickness record support
- Payroll admin coordination
- Benefits and employee data record keeping
- Onboarding and leaver admin
- Probation tracking
- Policy and handbook admin support
- HR system organisation
We are not a law firm and we do not provide legal advice. However, we help SMEs keep their HR and payroll admin organised, accurate and ready for review.
Book a free consultation with the Staffinity Solutions team today.
Frequently Asked Questions
Does the Employment Rights Act 2025 apply to all UK employers?
The Employment Rights Act 2025 applies mainly across England, Scotland and Wales. Most SMEs with employees in Great Britain should assume the core changes are relevant to them. Employers in Northern Ireland should seek separate advice because employment law can differ.
When did the Statutory Sick Pay changes start?
The Statutory Sick Pay changes started from 6 April 2026. SSP is now payable from the first full day of sickness absence, and the lower earnings limit has been removed.
When does mandatory payrolling of benefits in kind start?
Mandatory payrolling of most benefits in kind is expected to begin from April 2027. Employers should begin preparing their payroll systems, benefit records and employee communications before the new tax year.
Can we still dismiss someone during probation?
Yes, but employers should still follow a fair and documented process. From 1 January 2027, the qualifying period for ordinary unfair dismissal protection is expected to reduce from two years to six months. This means probation records, performance notes and outcome letters will become even more important.
Is unfair dismissal becoming a day one right?
Ordinary unfair dismissal protection is not becoming a day one right under the current implementation timeline. From 1 January 2027, the qualifying period is expected to reduce to six months. Some protections already apply from day one, including discrimination related claims and certain automatically unfair dismissal claims.
What are the grounds for refusing a flexible working request?
There are eight statutory business reasons for refusing a flexible working request. These include the burden of additional costs, inability to reorganise work among existing staff, inability to recruit additional staff, detrimental impact on quality, detrimental impact on performance, detrimental effect on ability to meet customer demand, insufficient work during the periods the employee proposes to work, and planned structural changes.
Employers should consult with the employee before refusing a request and keep clear written records of the decision.
Staffinity Solutions Ltd provides HR admin support and payroll admin support to SMEs across the UK. We are not a law firm and this article does not constitute legal advice.