The new rules of work: how the April 2026 changes are impacting rewards and compensation

This year, April hasn’t just been another compliance deadline.

In addition to a variety of statutory updates, the first major wave of changes from the Employment Rights Act 2025 have also come into play, being described as the biggest overhaul of UK employment law in a generation.

With these changes set to revolutionise the way businesses drive their people strategy, it’s no surprise that when we asked our audience their thoughts, three in four HR and payroll professionals stated they are not yet fully prepared.

In our recent webinar, we discussed these changes and what they mean in practice, offering key insights from our people leaders:

• Lizzy Barry, HR Director
• Dan Grace, Director of HR Consulting
• David Kisiaky, Senior Manager of Product Management

The sentiment of uncertainty was clearly echoed, with thousands of you joining the webinar to help bolster your understanding of what’s changing and the impact it will have! 

In this blog, we’ve summarised some of the discussion from the webinar, covering key payroll changes and the impact they could have on the financials of your business.

Key April 2026 payroll changes

At a glance, the headline April changes include:

• 15% Employer NI rate (£5,000 threshold)
• £12.71 National Living Wage for those 21+
• £10.85 National Minimum Wage for those 18-20
• £8 National Minimum Wage for those 16-17
• £8 apprenticeship wage for those under 19
• £8 apprenticeship wage for those 19 and over, but in their first year
• Income Tax and NI thresholds remain frozen until April 2031
• Statutory Sick Pay (SSP) £123.25 weekly rate or 80% of average weekly earnings if lower
• £194.32 weekly rate for Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), Statutory Shared Parental Pay (ShPP), Statutory Parental Bereavement Pay (SBPP) and Statutory Neonatal Care Pay (SNCP)
• BIK rate changes, P11D updates and company car benefit unfreezing
• Day-one Statutory Sick Pay
• Day-one paternity leave
• Collective redundancy protection 
• Statutory Parental Bereavement Leave and Pay (Northern Ireland)

David helped position this year’s April changes, stating: “Overall, the cost of employment has gone up.

“The impact of this is that businesses now have to decide whether they hire more or fewer people, and which age groups to hire.

“All of these factors will impact employment levels across the market.”

During the webinar, we received numerous questions about the statutory rate changes, to which Lizzy advised viewers to visit GOV.UK, where you can find clear explanations for current and future rates of pay and how they apply.

Lizzy explained: “Take the time to read through those GOV.UK resources – they can be really valuable.”

Headline changes unpacked: day-one Statutory Sick Pay

Statutory Sick Pay is now payable from day one of illness.  

The Employment Rights Act removed the three waiting days for SSP, meaning employees will no longer need to wait until the fourth day to claim sick pay.   

Additionally, the Lower Earnings Limit threshold (LEL) has been abolished – those earning below the current rate of SSP will be set at 80% of their average weekly earnings, thereby making SSP accessible to more employees.  

Headline changes unpacked: day-one paternity leave

Previously, employees had to complete 26 weeks of employment to qualify for paternity leave.   

Now, under the April changes, paternity and ordinary parental leave, but not shared parental leave, become a day-one right.  

This means no qualifying period of service is required to assert these rights.  

Additionally, the restriction on taking paternity leave after shared parental leave is also removed.  

Headline changes unpacked: collective redundancy protection 

Protective awards for failure to collectively consult on redundancies involving 20 or more employees have been doubled from 90 days to 180 days’ pay per employee.  

Headline changes unpacked: Statutory Parental Bereavement Leave & Pay (Northern Ireland)​  

As of April 2026, workers in Northern Ireland now have day-one rights for Statutory Parental Bereavement Leave and Pay.  

This change is only applicable to employees gainfully employed in Northern Ireland.   

Employers will require proof of entitlement via an ‘employee workplace postcode’ reported on the FPS.  

Hope amongst the change

During the webinar, we surveyed attendees, asking what their biggest people challenges are heading into 2026.

Rising employment costs were the biggest challenge (35%), followed by legislative changes (25%) and employee retention (16%).

Lizzy offered some valuable perspective, saying: “Things like the rise in business rates and the legal minimum wage will further increase the cost pressures organisations are feeling, on top of the Employment Rights Act, meaning it’s a challenging time to do business.

“But I want to inject some hope.

“We’ve all faced similar challenges before – business has never been easy or smooth sailing.

“Legislative changes have happened in the past, we’ve coped with the pandemic and we’ve dealt with various economic challenges and setbacks over the years.

“This is an opportunity to sharpen the way we do things, making sure our policies and practices are compliant, thinking more deeply about how we operate and ensuring our systems and processes are set up to support business growth.”

Managing the cost implications

Dan reflected on recent conversations he’s had with clients in relation to the rising costs, stating: “The headline fact is that it’s getting more expensive to employ people, and it seems to be getting more expensive every year in the UK.

“The Employment Rights Act was a major piece of legislation to bring in, and it’s actually making a lot of my clients nervous about what the market looks like in the UK and where they go from here.

“What we’re really seeing is more of a long-term strategic risk as clients are seeing their costs grow year-on-year.

“A lot of the questions I’m getting now are about how to be more proactive with pay structures, rather than reactive.”

The risk of pay compression

The risk many businesses are facing as a result of all the changes is pay compression.

Dan took some time to explain the real-world implications of pay compression and what it means for workers: “The simplest way to explain pay compression is that people at the bottom end of the scale in entry-level roles are being paid more, which in turn compresses pay at higher levels if they’re not receiving equivalent pay increases.”

“Ultimately, not every business can afford to give all staff an almost 10% pay increase.

“As such, salary ranges get compressed, and more senior employees feel less valued for the work they’re delivering, because the pay band below them in the structure is suddenly much closer.

“I’d love to say there’s a silver bullet to resolve this issue, but unfortunately, there really isn’t one.

“However, there are a few solutions that can help.

“One option is to do a whole-structure pay review, which is very time-consuming, and if you bring in external consulting or benchmarking, that can be quite expensive too.

“Instead, what most of my clients are looking at is targeted bands or roles; if they see a specific grade increasing, they then look at the next two or three levels up.

“You could also identify your exceptional performers and give them an exceptional pay increase to retain them, but that may result in greater attrition among your other employees.

“It really comes down to your salary budget and whether you have the funds available.”

Advice for tackling pay compression

Lizzy shared some of her experience on tackling pay compression, advising: “The way we’ve addressed pay compression at IRIS is through structured pay scales, particularly in departments where there are high numbers of people doing the same sort of jobs.

“Essentially, we document the pay band that employees are expected to work within and the criteria they need to meet to move to the next step or promotion.

“We then review these year-on-year, taking minimum and living wage rate rises into consideration.

“Pay scales also offer employees a clear view of how they can progress, even if immediate pay increases in their current role aren’t on the table.

“Additionally, if we’re forecasting wage increases, we don’t just look at how to map that out for the year, but rather build it into our financial planning over the next five years.

“For us, it’s about partnering with our finance team and assessing how we can make sure it’s affordable in the long run.”

Looking at the total rewards package

When salary increases aren’t feasible across the board, a strong benefits offering can go a long way with helping retain and attract top talent.

David advises: “We shouldn’t view pay awards in isolation as they’re connected to other aspects of reward.”

Employee benefits are a fantastic way to bolster your rewards offering.

Dan adds: “Tailoring your benefits to your value proposition and total reward statements is a really important thing, so employees can understand how their money is working for them.”

Enhancing your employee benefits

Around six in ten employees feel their benefits package is inadequate.

With benefits playing an increasingly important role in job decisions, many workers are willing to switch roles for better packages, putting pressure on employers to improve and tailor their offerings.

Dan told us: “What makes modern benefits truly valuable is choice and flexibility.

“Early-career employees might prioritise professional development funds and student loan assistance, while parents need robust childcare support and family leave.

“On the other hand, employees approaching retirement could value pension top-ups and phased retirement options.

“The key is offering a flexible benefits platform where people can tailor their package to their current needs.

“Additionally, mental health and wellbeing support has become absolutely critical.

“Not just Employee Assistance Programmes, but proactive wellness initiatives, mental health days and access to counselling services.

“Financial wellbeing is equally important, with salary advance schemes, financial coaching and emergency hardship funds becoming standard expectations.”

Managing the pitfalls of salary sacrifice benefits  

While salary sacrifice benefits offer a fantastic way to offer more without increasing your spend, you must remain vigilant.

David explains: “If you offer salary sacrifice benefits, such as company cars, pensions or cycle to work, you must consider National Minimum Wage compliance.

“Continuing with the same level of salary sacrifice could cause issues.

“There are times when the gross pay left after salary sacrifice could take an employee below the National Minimum Wage, and at that point, HMRC will contact you because you’re underpaying your employees.”

Lizzy added to David’s point, sharing her experience: “HMRC doesn’t allow pay to fall below the National Minimum Wage, even if it’s through a salary sacrifice arrangement.

“You must consider how this impacts employees at different pay levels, so you’re not unintentionally preventing people from accessing those benefits.

“We’ve found at IRIS that employees who would like to salary sacrifice a range of benefits are sometimes unable to do so because of this.

“That can cause frustration, as they can’t access benefits that are available to others in the business.

“What we’ve started doing is providing options which can be purchased through salary sacrifice or from net pay, such as holiday buy, where we give employees the opportunity to buy up to five additional days of holiday.

“Doing so means if they’re close to the legal minimum wage, they have an option to structure their benefits differently.”

The role of automation 

During the webinar, we had a number of questions come in about how IRIS has managed benefits such as holiday buy.

Lizzy explained: “We’ve certainly found that, with many of these changes coming up, having systems that can automate them is really important.

“We manage things like holiday buy through our benefits system.

“When people are re‑enrolling in benefits at the start of our plan year, they can select the holiday buy days there, and the cost is taken out of their payslips over a 12‑month period.

“Automating these things, wherever possible, means it’s not a massive headache for our HR and payroll team, and it also enables employees to self‑serve, which is so important.”

Webinar: How April 2026 changes the way you hire, manage and retain your people

The businesses that treat April 2026 as a strategic opportunity, not just an operational headache, are the ones that will come out ahead.

If you’re looking for further guidance on what we’ve covered in this blog or want to understand the impact the Employment Rights Act will have on your recruitment and people processes, check out the on-demand webinar!

The free, practical session explored what the changes actually mean for how you attract candidates, structure your rewards, support your employees and manage risk.