Will sick pay changes be the final straw for some smaller firms?
Concern is growing that smaller businesses in the UK will be particularly affected following the government’s green light over sick pay entitlement from day one of a person’s absence.
A new package of workers’ rights, starting from April 2026, includes removing the lower earnings limit on statutory sick pay (SSP), meaning more people than ever will be in receipt of SSP when they are unable to work due to illness.
What’s changing?
From April 2026:
- SSP will be available from day one of absence, removing the current three-day waiting period.
- The Lower Earnings Limit will be abolished, expanding eligibility.
- Other changes include day one rights for paternity leave, unpaid parental leave, and extended protections in collective redundancy situations.
As a result of the changes, government figures estimate that up to 1.3 million more workers will qualify for SSP for the first time.
What this means for smaller employers
As well-intentioned as this policy is, it is likely to financially impact local employers, especially smaller businesses with employees on low wages, minimal hours or part-time contracts.
Many firms are already facing a cost of business crisis following the increase in national insurance contributions since the spring, along with the rises in the National Living Wage and the National Minimum Wage.
There have been reports of hire freezes and a fall in payrolled employees as they try to balance the books – and that’s before they face paying employees who will be entitled to sick pay from the first day of absence from next April, removing the current three unpaid waiting days.
We are already in discussions with worried businesses, from an employer solutions perspective, to look at options which help with tax/cost savings to alleviate additional costs to employers and, in a worst-case scenario, assist leaders who need to consider strategies for their company’s long-term viability.
Compliance under the microscope
Increased enforcement is compounding the pressure. Hundreds of companies have been named publicly by HMRC for underpaying staff wages, even by as little as 3p a week per an employee - payroll compliance is essential and cannot be fudged.
What the Government said
In part of a Ministerial foreword to Implementing the Employment Rights Bill – our roadmap for delivering change, Angela Rayner MP, Deputy Prime Minister, and Jonathan Reynolds MP, Secretary of State for Business and Trade, stated: “Measures such as a ban on exploitative zero hours contracts, the end of unscrupulous fire and rehire practices, parental leave and protections from unfair dismissal from day one will be truly transformative for many.
“Up to 1.3 million working people – some of the country’s lowest-paid employees – will get access to Statutory Sick Pay for the very first time.
“This is on top of the large pay rise that over three million people received in April through increases in the National Living Wage, worth an extra £1,400 per year for an eligible full-time worker, and the National Minimum Wage.
“As a result, businesses of all sizes who are already doing the right thing will no longer be undercut by those who don’t, raising the bar all round.
“All of which adds up to not just a new deal for working people, but also for business.”
Practical impact remains uncertain
It is the smaller businesses that are likely to be exposed most to the new changes because they often don’t have the deep cash reserves like the larger ones. The new package of workers’ rights from April risks breaking the camel’s back for some.
We are here to help
If you are concerned about how to manage this additional cost and process as required, Azets’ specialists can help:
- Assess the impact of the SSP changes both operationally and financially
- Identify cost savings and tax efficiencies
- Process full payroll on your behalf and ensure compliance
- Review and update your contracts and sickness absence policies and procedures to ensure they are robust and fit for purpose under the new regime.
- Advise on redundancies in line with current legislation and best practice.
Please get in touch with our team via the form below.
