With reforms to statutory sick pay (SSP) confirmed under the Employment Rights Bill, employers and payroll professionals need to prepare for changes expected to come into force from 2026. While no fixed date has been announced, discussions between the Chartered Institute of Payroll Professionals (CIPP) and key government departments suggest the intention is to implement these updates sooner rather than later.
Policy Development: A Collaborative Approach
The CIPP has played an important role in shaping these reforms. Working closely with the Department for Work and Pensions (DWP) and the Department of Health and Social Care, the CIPP hosted think tanks with its members to provide feedback on the proposed changes. The resulting consultation concluded in December 2024, with the government’s formal response published in March 2025.
Key feedback from the payroll profession included:
- Removing waiting days: This was widely welcomed as a way to reduce the administrative complexity and compliance risks linked with current SSP calculations.
- Cost concerns for employers: With rising employment costs, from increased National Insurance contributions to higher minimum wage thresholds, the affordability of enhanced SSP was a consistent theme.
- Level of sick pay: When asked what percentage of normal weekly earnings SSP should reflect, the most common response was 90%. This aligns with existing payroll systems already configured for statutory parental pay calculations, thereby easing implementation.
What’s Changing?
The Employment Rights Bill includes two major SSP reforms:
- SSP will be paid from the first day of sickness absence, removing the current three waiting days.
- SSP will be extended to employees earning below the Lower Earnings Limit (LEL), with these individuals receiving 80% of their normal weekly earnings, provided this amount is below the standard flat rate of SSP.
Statutory Sick Pay Payable from Day One
Under the new rules, employees will receive SSP from their first day of absence due to illness. The aim is to ensure people take time off when they need it most, reducing the risk of presenteeism and supporting better long-term recovery.
Employers should note the potential risk of misuse, concerns were raised during the consultation about employees taking advantage of the change, for example, through casual absenteeism. Clear and updated sickness policies and absence procedures will be important to help manage this.
There has also been clarification on the Period of Incapacity to Work (PIW). Rather than being scrapped, PIW rules will be amended to reflect the new SSP start point (day one), while continuing to serve their purpose for linked absences and entitlement calculations.
SSP for Employees Below the LEL
Another major change is the extension of SSP to workers earning below the Lower Earnings Limit. These employees will receive 80% of their normal weekly earnings, as long as this figure falls below the SSP flat rate.
In some cases, this means workers just above the LEL threshold may end up receiving less than under the current system. However, the trade-off is earlier eligibility since payment starts from day one, many will receive a greater total benefit over time. For example, a part-time employee earning £125 per week may receive more in the first nine weeks of absence than under the current model.
Employers are reminded that SSP is a statutory minimum: businesses can still offer enhanced occupational or company sick pay schemes if they choose.
Implications Across the UK
Although SSP is a devolved matter in Northern Ireland, the consultation confirmed that the upcoming changes will apply UK-wide. This commitment to consistency is good news for employers operating across multiple jurisdictions, helping reduce confusion and administrative overhead.
Looking Ahead
The CIPP continues to work with government departments on next steps, and plans are already in motion for further think tanks to support the development of employer and employee guidance.
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