Is your payroll ready for sick pay reform?

The countdown is on. From April 2026, the Government will overhaul Statutory Sick Pay (SSP) as part of its Employment Rights Bill reforms.

One of the most immediate and impactful changes is the removal of both the three-day waiting period and the lower earnings limit.

From day one of absence, even your lowest-paid employees will be entitled to SSP. This is a fundamental change in employer obligations, one that many businesses are not yet ready for.

The sick pay status quo is ending

At present, SSP only kicks in after three qualifying days of absence, and only for employees earning at least £123 per week. From April 2026:

• SSP will be payable from the first day of sickness absence.
• It will apply to all employees, regardless of how little they earn.

These changes are designed to create a more inclusive sick pay system, but they also produce new cost and compliance pressures for employers.

Why this change could hit your payroll hard

For small and medium-sized enterprises (SMEs) in particular, the risks of a financial impact are a real possibility.

If your business employs a high number of part-time, seasonal, or low-paid workers, your payroll costs could increase noticeably.

There is also a danger that, without an absence management system in place, businesses risk misuse or unplanned spikes in sick leave, especially if policies are not reviewed in time.

How to protect your bottom line before April 2026

Although nine months might sound like plenty of time, in business terms, it is no time at all. Here is what you should be doing now:

• Review your budgets – Factor in the potential increase in sick pay costs as part of your 2025-26 financial planning.
• Update payroll systems – Ensure your payroll software can accommodate day-one SSP and low-earner inclusion.
• Check contracts and policies – Your employee handbooks and sickness policies will need to be updated to reflect the new entitlements.
• Train managers – Line managers and team leaders should be clear on the new rules and the process for reporting and managing sick leave.
• Forecast absence risk – Work with us to model different absence scenarios and the associated costs.

We can help you understand how these reforms will affect your costs and support you in updating payroll systems.

If you are unsure how these SSP reforms could impact your business or simply want a plan in place now, speak with our team today.