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New compensation limits from 6 April 2026
With effect from 6 April 2026, there will be an increase in certain statutory pay rates. The key changes to these rates are set out below.
Unlike previous years, these routine updates to statutory rates take place in the context of more wide-ranging reforms to the UK employment law landscape. These include the anticipated removal from 1 January 2027 of the compensatory award cap for unfair dismissal, alongside the lowering of the qualifying period for unfair dismissal rights from two years to six months.
1. UNFAIR DISMISSAL
Until the cap is removed, the limit on the compensatory award for unfair dismissal will increase from £118,223 to £123,543.
2. LIMIT ON A WEEK’S PAY
The statutory limit on a week’s pay will increase from £719 to £751.
This is the limit applicable for the purposes of calculating various payments, including statutory redundancy payments and the basic award for unfair dismissal.
3. SICK PAY
Statutory sick pay (“SSP”) will rise from £118.75 to £123.25 per week. From 6 April 2026, SSP will be payable from day 1 rather than from day four of sickness, so the three-day waiting period will be abolished. In addition, those earning less than the lower earnings limit will now be entitled to SSP at a rate of 80% of weekly earnings.
4. PAY RATE FOR VARIOUS STATUTORY ENTITLEMENTS
The rate of payment for various statutory leave entitlements will increase. An increase from £187.18 to £194.32 per week (or 90% of the employee’s average weekly earnings, whichever is lower) will apply to statutory maternity, adoption, paternity, shared parental, neonatal and parental bereavement pay and maternity allowance.
5. MINIMUM BASIC AWARD FOR DISMISSAL ON CERTAIN GROUNDS
There has been an increase of the minimum basic award from £8,763 to £9,157 in cases where a dismissal is deemed unfair because of health and safety, working time, employee representative, trade union or occupational pension trustee reasons.
Other key changes from 6 April 2026 – Employment Rights Act 2025
At our annual employment law seminar on 18 March 2026, we discussed some of the key changes under the new Employment Rights Act 2025 (“ERA”).
In addition to the annual increases above, there are several other key changes coming into force from 6 April 2026 under the ERA including:
- Collective consultation
From 6 April 2026, the maximum protective award for failing to collectively consult will double from 90 days’ pay to 180 days’ pay. - Day one paternity leave and parental leave
Paternity leave and parental leave will now become a day one right, and the length of service requirement for eligibility will be removed. - Sexual harassment
Sexual harassment will now be classified as a protected disclosure of itself for the purposes of whistleblowing. - Fair Work Agency
The Fair Work Agency will be established in April 2026, which will have a range of enforcement powers, including the ability to enforce holiday pay, SSP and the national minimum wage. - Trade union recognition
Reforms to the recognition process will take effect on 6 April 2026, simplifying the process, and removing the need for unions to show that a majority of workers in a bargaining unit support recognition.
If you would like advice in relation to any of the above, would like to discuss your current employment practices, policies or procedures, or would like to discuss how your business may best navigate this period of major change for worker rights please contact Paul Reeves, Dermot Neligan or your usual Stephenson Harwood contact.
