Statutory Sick Pay reform to take effect from April 2026

Following a recent consultation, the Department for Business and Trade (DBT) confirmed on 1 July that significant reforms to Statutory Sick Pay (SSP) will come into force from April 2026. While the changes aim to enhance support for employees, they will introduce additional costs for employers - many of whom are already managing rising employment expenses, including higher National Insurance contributions and minimum wage increases.

What’s changing?

From April 2026, the following reforms to SSP will apply:

• Day one entitlement: SSP will become payable from the first day of sickness absence, rather than the current system where payment begins after day three.
• Removal of the lower earnings limit: The current earnings threshold of £125 per week will be abolished, meaning employees will no longer need to meet a minimum income level to qualify for SSP.

Additionally, while the flat rate calculation we are familiar with will still apply, it will be determined differently for employees earning below the current lower earnings limit. These employees will receive the lower of either 80% of their normal weekly earnings or the government-set flat rate.

These changes are designed to make sick pay more inclusive and accessible, particularly for lower-income and part-time workers.

Reminder of employer obligations

Although SSP is set and regulated by the Government, it is the responsibility of employers to ensure that qualifying employees are paid SSP correctly and on time. Employers must also:

• Maintain accurate records of absences and payments.
• Ensure payroll systems are updated to reflect the new SSP rules from April 2026.

Tax implications

SSP is treated like regular earnings for tax purposes, meaning income tax and National Insurance contributions are deducted from SSP payments. Employers should ensure appropriate processing is made through payroll systems from date of changes coming into effect.

What to consider

While implementation is still some time away, it’s advisable for employers to begin planning for these changes. Key considerations include:

• Budgeting for increased SSP liabilities, particularly for businesses with a high incidence of short-term sickness absence, as SSP is treated differently from maternity and paternity payments and cannot be recovered from the government, leaving employers to bear the full cost of SSP payments.
• Reviewing payroll systems to ensure readiness for day-one SSP processing and removal of the earnings threshold.
• Updating employment contracts and sickness policies to reflect the upcoming changes even where you operate an enhanced sickness scheme.
• Training HR and payroll teams to manage new compliance requirements effectively.

We are here to help

Navigating changes to employment legislation can be complex. Our specialist teams are available to support you in preparing for these SSP reforms - whether it’s reviewing your policies, supporting with payroll processing, updating systems, managing the increasing costs, or providing compliance guidance.

Please get in touch via the form below.