Employment Rights update: Changes to compensation limits & statutory payment rates and what this means for employers

New statutory payment rates and compensation & minimum award changes

Statutory Pay Increases

• Statutory maternity pay (after the first six weeks) will be £194.32 per week or 90% of the employee’s average weekly earnings, whichever is lower

The same uplift also applies to:
-    Statutory adoption pay
-    Statutory paternity pay
-    Statutory shared parental pay
-    Statutory neonatal care pay
-    Statutory parental bereavement pay
 

• Statutory sick pay rises from £118.75 ---> £123.25 per week from 6 April 2026. Statutory sick pay will now also be paid from day one of the employees’ sickness, in comparison to it being paid from day four under current law

Compensation & minimum award changes

• Statutory redundancy and basic award calculations: the weekly payment (cap) will increase from £719 ---> £751

• The limit on the compensatory award for failure to allocate and pay tips fairly, will rise from £5,135 ---> £5,366

• Guarantee pay, which is the legal pay employees receive when employers cannot provide work, will increase from £39 to £41 per day

• The minimum basic award in cases where a dismissal is unfair by virtue of certain health and safety, working time, employee representative, trade union, or occupational pension trustee reasons, will increase from £8,763 to £9,157

• The limit on compensatory awards for unfair dismissal is currently the lower of 52 weeks’ pay or £118,223. From April 2026, this cap will increase to £123,543 (or 52 weeks’ pay, whichever is lower). Then from January 2027, this will be removed altogether, as there will no longer be any type of threshold on compensation for unfair dismissal

Why these changes in compensation limits & statutory payment rates matter

These changes significantly increase the costs and potential financial exposure for employers across dismissals, redundancies and statutory leave. Higher weekly pay limits mean redundancy payments and basic awards will cost more, while the removal of the unfair dismissal compensatory cap increases the potential liability in tribunal claims.

On the payroll side, higher family‑related payments and increased sick pay will push up employment costs from April 2026. Employers will need to factor these rises into their budgets and workforce planning. It’s also important to update HR systems, contracts, policies and guidance, and to make sure managers understand the operational and cost implications of staff being on sickness or family‑related leave. While managers can’t influence whether employees take these statutory leaves, they can manage the process, ensuring return‑to‑work meetings are carried out, evidence and reporting requirements are followed, records are maintained, and that any sickness‑related procedures or disciplinary steps are applied appropriately and in line with policy.

How our Employment team can help you

If you would like us to provide training on the changes coming in, to review your policies and contracts or you need assistance with any other employment related matter, please do get in touch with our Employment team on 020 8290 0440 (Bromley) or 01732 496 496 (Sevenoaks) or employment@thackraywilliams.com.