Significant updates to statutory compensation limits and employment-related payments will come into effect from 6 April 2026, following the introduction of the Employment Rights (Increase of Limits) Order 2026. These annual revisions impact a wide range of employment rights, from redundancy payments to unfair dismissal awards. Employers should ensure that they are fully prepared for the new thresholds and employees that they are aware of their rights.
· The maximum amount of a “week’s pay”, used when calculating statutory redundancy pay and the basic award for unfair dismissal, will rise from £719 to £751.
· The upper limit for the compensatory award in unfair dismissal cases will increase from £118,223 to £123,543. This revised limit is expected to take effect from 1 January 2027, coinciding with a major policy change reducing the qualification period for unfair dismissal claims from two years to six months.
· Where a dismissal is automatically unfair due to reasons relating to health and safety, trade union membership or activities, employee representation, or occupational pension trustee duties, the minimum basic award will increase from £8,763 to £9,157.
· Statutory guarantee pay, payable when employees are not provided with work during a work stoppage, will increase from £39 to £41 per day.
· The Social Security Benefits Up-rating Order 2026 has also introduced increases in statutory payments related to family leave. From 5 April 2026, the rate for Statutory Maternity Pay (after the initial six-week period) will be £194.32 per week, or 90% of the employee’s average weekly earnings, whichever is lower
· The same increase applies, from 6 April 2026, to statutory adoption pay (after the first six weeks), statutory paternity pay, statutory shared parental pay, statutory neonatal care pay, statutory parental bereavement pay and maternity allowance.
· Additionally, statutory sick pay will rise from £118.75 to £123.25 per week from 6 April 2026. (Note that, by virtue of S.10 ERA 2025, the three-day waiting period for statutory sick pay will be abolished so that sick pay will be payable from the first day of sickness absence. This change is also expected to come into force on 6 April.)
Where the “appropriate date” in a claim fall before 6 April 2026, the previous limits will continue to apply, regardless of when compensation is ultimately awarded.
These changes mark a significant adjustment to statutory compensation and payment structures, reinforcing the need for employers to update internal processes, payroll systems, and HR policies ahead of April 2026. With further reforms expected in January 2027, particularly the reduced qualifying period for unfair dismissal, businesses should proactively prepare for a shifting employment law landscape. Staying informed will be essential in managing risk, supporting employees, and maintaining best-practice employment standards.