What are the new sick pay rules in the UK?
UK statutory sick pay rules changed fundamentally on 6 April 2026. The Employment Rights Act 2025 introduced three reforms that affect every employer with UK headcount: day-one entitlement replacing the three-day waiting period, removal of the Lower Earnings Limit that previously excluded 1.3 million workers, and a new calculation method based on 80% of average weekly earnings capped at £123.25 per week.
For international companies employing in the UK through an Employer of Record or their own entity, these changes create immediate payroll obligations and longer-term cost implications. The Fair Work Agency launched on 7 April 2026 with enforcement powers that include penalties of up to 200% of underpaid SSP, capped at £20,000 per worker, with exposure stretching back six years.
This isn't a minor administrative update. It's the most significant overhaul of UK statutory sick pay since the system was introduced in 1983, and it demands attention from anyone responsible for UK employment costs and compliance.
What Actually Changes on Payroll from 6 April
You start paying SSP from day one, not day four. The three-day waiting period is gone.
Part-time workers, zero-hours staff, and lower-paid employees who didn't qualify before? They do now. That's about 1.3 million more people eligible for SSP.
Forget the flat rate. You now calculate 80% of what each person typically earns per week, with a cap at £123.25. That means computing average weekly earnings for every employee.
The Fair Work Agency went live on 7 April 2026. Expect more audits and investigations than before.
Get SSP wrong and you could face penalties up to 200% of what you underpaid, maxing out at £20,000 per person. That stacks across multiple employees.
Six years of lookback can turn a small mistake into a big cheque. Legacy payroll errors from 2020 onwards are fair game.
If someone's off sick across the change date, you're running two rule sets. Don't reduce their SSP mid-absence just because the formula changed.
What are the three main SSP changes under the Employment Rights Act 2025?
The Employment Rights Act 2025 introduced three interconnected reforms to UK statutory sick pay that took effect on 6 April 2026. Each change addresses a different aspect of the previous system's limitations.
Day-one entitlement replaces the three-day waiting period
Previously, employees received no SSP for the first three qualifying days of sickness absence. The new rules eliminate this waiting period entirely. SSP is now payable from the first qualifying day an employee is absent due to illness.
This change has practical implications for absence management. Short-term sickness absences that previously generated no statutory payment now trigger SSP calculations from day one. For employers, this means more frequent SSP payments and the need for faster absence reporting workflows. Delays in notifying payroll increase the risk of incorrect SSP treatment and retrospective corrections.
Removal of the Lower Earnings Limit extends coverage to 1.3 million workers
The Lower Earnings Limit was an earnings threshold that excluded employees whose average weekly earnings fell below a specified amount. Under the old rules, part-time workers, those on zero-hours contracts, and lower-paid employees often didn't qualify for SSP regardless of their employment status.
From 6 April 2026, the LEL no longer applies to SSP eligibility. Employees qualify based on their employment status and other SSP conditions, not their earnings level. This extends SSP coverage to approximately 1.3 million additional workers who were previously excluded solely by falling below the earnings threshold.
New 80% of average weekly earnings calculation with £123.25 cap
The previous SSP system paid a flat weekly rate to all eligible employees regardless of their earnings. The 2026 reforms introduce a calculation based on 80% of an employee's average weekly earnings, subject to a maximum cap of £123.25 per week.
This means SSP payments now vary by employee. Lower earners receive 80% of their average weekly earnings. Higher earners converge on the statutory maximum of £123.25 per week, even when 80% of their earnings would produce a higher amount. Payroll systems must now compute average weekly earnings for each employee rather than applying a single flat rate.
How do the transitional rules work for sickness spanning 6 April 2026?
Sickness absences that started before 6 April 2026 and continued on or after that date require careful handling. The transitional rules protect employees who were already receiving SSP under the previous system.
If an employee's sickness absence began before 6 April 2026, the old rules continue to apply for the portion of absence that occurred before that date. This includes the three-day waiting period if it hadn't already been served. For the portion of absence from 6 April 2026 onwards, the new rules apply.
The key protection is that employees already receiving SSP at the previous flat rate shouldn't be disadvantaged by the switch to the 80% calculation. If the new calculation would result in a lower payment than the previous flat rate, the employee continues receiving the higher amount for that period of sickness.
Employers should document the method used for handling transitional cases. This documentation becomes important for audit defensibility if the Fair Work Agency investigates SSP payments during the changeover period.
What enforcement powers does the Fair Work Agency have for SSP underpayments?
The Fair Work Agency launched on 7 April 2026 with a specific remit that includes SSP underpayment enforcement. This represents a significant increase in the likelihood of investigations compared to the previous enforcement landscape.
Financial penalties for SSP underpayment can reach 200% of the underpaid amount, capped at £20,000 per individual worker. These penalties apply on top of the requirement to pay arrears. An employer who underpaid SSP to ten workers over several years could face arrears plus penalties totalling hundreds of thousands of pounds.
The six-year exposure window for back liability creates material risk. SSP underpayments from 2020 onwards could theoretically be investigated and penalised under the new enforcement regime. This makes historical SSP compliance a governance issue, not just a forward-looking payroll concern.
Investigations can be triggered by worker complaints or by non-compliant payslip records. The Fair Work Agency has authority to request payroll documentation and absence records going back six years.
What does this mean for international employers with UK headcount?
International companies employing in the UK face specific considerations that domestic employers don't. Whether you're using an Employer of Record or running your own UK entity, the SSP reforms affect your cost base and compliance obligations.
Cost implications for UK employment budgets
Day-one SSP increases the probability that very short absences generate statutory pay. Under the old rules, a one-day or two-day sickness absence cost nothing in SSP terms. Now, every qualifying day of absence from day one triggers a payment, significant given that 70% of sickness absences last just 1-3 days.
Teamed's analysis of UK payroll patterns suggests this creates a predictable cost-base uplift that employers should model in absence-rate scenarios, aligned with government estimates that reforms will increase SSP costs by £420 million annually. For a company with 50 UK employees and typical absence rates, the additional SSP cost from eliminating the waiting period could add several thousand pounds annually to employment costs.
The removal of the Lower Earnings Limit also affects employers with part-time or variable-hours workers. Employees who previously fell outside SSP eligibility now qualify, expanding the population of workers who can claim statutory sick pay.
Questions to ask your EOR or payroll provider
If you're employing in the UK through an Employer of Record, the EOR is the legal employer responsible for SSP compliance and payment.
You should verify with your provider how they've implemented the 6 April 2026 changes. Specifically, ask about day-one SSP triggers in their payroll system, how they calculate average weekly earnings for the 80% calculation, and how they're handling transitional cases for sickness that spans the changeover date.
International companies employing in the UK via an EOR should also contractually verify who bears SSP arrears, penalty, and defence costs. Statutory liability may sit with the legal employer even when the client company controls absence processes. If your EOR gets SSP wrong, you need to understand your exposure.
For companies running their own UK entity, the questions shift to your payroll bureau or in-house team. Have they updated their systems for the new calculation method? Do they have documentation for the transitional handling approach? Can they provide audit-ready payslip records that demonstrate correct SSP treatment?
How SSP compliance connects to employment structure decisions
The SSP reforms add another layer to the decision about how to structure UK employment. For companies early in their UK presence, using an EOR transfers SSP compliance responsibility to a specialist provider. This can be valuable when you don't have in-house UK payroll expertise.
As UK headcount grows, the economics shift. Teamed's Graduation Model framework helps companies evaluate when the recurring costs of EOR exceed the costs of running their own UK entity.
A company with 10-15 UK employees typically reaches the threshold where entity establishment makes economic sense. At that point, SSP compliance becomes your direct responsibility rather than your EOR's. The 6 April 2026 changes make that responsibility more complex than it was before.
Do the new SSP rules apply to part-time workers?
Yes. The removal of the Lower Earnings Limit specifically addresses the previous exclusion of many part-time workers from SSP eligibility. Under the old rules, part-time employees whose average weekly earnings fell below the LEL threshold didn't qualify for SSP regardless of their employment status.
From 6 April 2026, part-time workers qualify for SSP based on the same criteria as full-time employees. They must be employees (not self-employed), be absent from work due to sickness, and meet the other SSP conditions. Their earnings level no longer determines eligibility, addressing the issue where previously 33% of part-time employees received neither SSP nor company sick pay during absences.
The 80% calculation applies to part-time workers based on their actual average weekly earnings. A part-time employee earning £150 per week would receive SSP of £120 per week (80% of £150). A part-time employee earning £200 per week would receive the capped amount of £123.25 per week.
What is the SSP rate for 2026-2027?
SSP for the 2026-2027 tax year is calculated as 80% of an employee's average weekly earnings, capped at £123.25 per week. This replaces the previous flat-rate system where all eligible employees received the same weekly amount regardless of their earnings.
The £123.25 cap functions as a hard ceiling. Employees whose 80% calculation exceeds this amount receive £123.25. Employees whose 80% calculation falls below this amount receive the calculated figure.
For example, an employee with average weekly earnings of £400 would have an 80% calculation of £320. Because this exceeds the cap, they receive £123.25 per week. An employee with average weekly earnings of £120 would have an 80% calculation of £96, which they receive in full because it falls below the cap.
Practical checklist for UK SSP compliance
Here's what I'd check this week if I owned UK payroll risk.
1. Verify your payroll system has been updated to calculate SSP from day one of sickness absence rather than day four 2. Confirm the 80% of average weekly earnings calculation is correctly implemented with the £123.25 cap 3. Check that employees previously excluded by the Lower Earnings Limit are now included in SSP eligibility 4. Document your approach to transitional handling for any sickness absences that span the 6 April 2026 changeover 5. Review absence reporting workflows to ensure payroll receives notification quickly enough for accurate SSP treatment 6. Update sickness absence policies to reflect day-one entitlement 7. Train managers on the new reporting requirements and the importance of timely absence notification 8. If using an EOR, obtain written confirmation of their SSP compliance approach and clarify contractual responsibility for arrears and penaltiesWhat to Check Before Your First April Payroll Run
The 6 April 2026 SSP reforms represent a significant shift in UK statutory sick pay obligations. Day-one entitlement, expanded eligibility, and the new calculation method all create operational changes for employers. The Fair Work Agency's enforcement powers add financial risk to compliance failures.
For international companies with UK headcount, these changes fit into the broader challenge of managing UK employment compliantly. Whether you're using an EOR, running your own entity, or evaluating which structure makes sense for your situation, SSP compliance is now more complex than it was before.
Not sure if your UK setup is handling these changes properly? Worried your EOR might have missed something? Let's talk through it. Book your Situation Room and we'll review your SSP approach, spot the gaps, and help you decide what needs fixing.
