Compensation Archives - Refreshing Law

April ERA Recap: Navigating the new employment reality

As we reach the end of April 2026, the UK’s employment landscape has undergone its most seismic shift in a generation. The “wait and see” period is officially over, with vast swathes of the Employment Rights Act 2025 now active. The rules of the game have fundamentally changed for every employer and employee in the country.

At Refreshing Law, we’ve spent the past month helping businesses transition through these updates. Here’s a summary of the new business reality, the challenges we’re seeing on the ground, and what you need to prepare for next.

The April recap

The start of this month wasn’t just a new tax year; it saw the activation of several transformative employment rights.

1. The end of the SSP waiting period

The three-day waiting period for Statutory Sick Pay (SSP) is now a thing of the past. As of 6 April, SSP is payable from Day 1 of illness. Low paid workers now also qualify for SSP for the first time as the lower earnings limit which blocked anyone earning less than £125 a week from getting SSP has now been removed.

The Impact: This was voted by 43% of employers as the reform they felt would have the biggest impact and many are already reporting that their absence rates have increased, particularly for our clients whose staff didn’t previously qualify for SSP due to the lower earnings limit. We’re already seeing businesses adjusting their cash flow and absence tracking to manage the immediate cost of short-term sickness, as well as implementing absence management policies that enable them to issue warnings when non disability or pregnancy related absences hit certain triggers.

2. The launch of the Fair Work Agency (FWA)

The FWA is now operational. It has consolidated the powers of HMRC’s Minimum Wage team, the GLAA and the Employment Agency Standards Inspectorate into a single, unified enforcement body.

The Impact: The FWA is a regulator with increased powers to proactively audit your business and initiate investigations. It can inspect workplaces, demand records and initiate employment tribunal complaints on behalf of workers. It also has the power to impose fines to those who underpay holiday, SSP or who do not pay national minimum wage. This can include penalties of up to 200%. Many SMEs are currently struggling with the new statutory duty to maintain six years of detailed leave records. Failure to produce these can now lead to criminal liability.

3. Family friendly “Day 1” rights are the new standard

We’ve moved into an era of immediate protection. Paternity Leave and Unpaid Parental Leave are now a legally protected right from the first date of employment. Previously employees had to have 26 weeks’ service to qualify for paternity and one years’ service to qualify for parental leave.

4. Collective consultation

Additionally, the maximum protective award for failing to consult in collective redundancies (where you propose to make more than 20 employees redundant at one establishment in a 90-day period) has doubled from 90 days to 180 days’ pay.

5. Sexual harassment whistleblowing

The final April change to flag is that workers who disclose sexual harassment are now entitled to whistleblower protection. To qualify, they must reasonably believe the disclosure is in the public interest. Whilst legally, sexual harassment was likely to constitute a protected disclosure even prior to this change, there has been so much talk about the ERA changes that it will inevitably lead to a greater awareness of sexual harassment whistleblowing as a claim and we may therefore see an uptick in ET complaints in this area as a result.

What’s next? The countdown to 2027

While we’ve cleared the April 2026 hurdle, the ERA roadmap has another tranche of changes in October 2026 and then two major milestones looming that will dwarf recent changes.

1. The end of the qualifying period

On 1 January 2027, the qualifying period for unfair dismissal will drop from two years to just six months. Employers must ensure that their recruitment and probation processes are incredibly robust, as the window to get it right is narrowing significantly.

2. The removal of the compensation cap

We’re currently in the final period of capped compensatory awards (now set at £123,543). On 1 January 2027, the cap will be removed entirely.

Why this matters: The UK is moving from a predictable regime to an uncapped one, diverging from European neighbours like Ireland and France. This will make high-earner litigation far more common and settlement negotiations much more complex.

Our legal perspective

The theme for the remainder of 2026 is preparation and procedural rigour. With the FWA looking back over the last six years and the removal of the compensation cap on the horizon, poor record-keeping is no longer an option.

Is your business protected? If you haven’t yet audited your payroll systems, updated your contracts to ensure that you are adequately protected or updated your staff handbooks/policies to reflect the Day 1 rights that came into force this month, now is the time.

Contact Refreshing Law today for a compliance review to ensure your business is ready for next year.

For more information about the changes ahead, please download our Employment Right Act timeline.

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We’re here to help with any questions or concerns you may have. Whether you need expert advice or would like an initial conversation about our services, pricing, or the options available, please don’t hesitate to get in touch. At Refreshing Law, what sets us apart from other law firms is that you’ll get to speak to an experienced employment lawyer right from the very first call.

02920 599 993

07737 055 584

lreynolds@refreshinglawltd.co.uk

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Lousha Reynolds
Refreshing Law

Removing the statutory cap in unfair dismissal compensation: how will the UK compare to other countries?

The Employment Rights Act 2025 was passed late last year, and you will be forgiven for trying to catch up with all the proposed developments — there are so many! One of the most significant is the removal of the statutory cap for the compensatory award in successful unfair dismissal claims (the cap is currently the lower of 52 weeks’ gross pay or £118,223).

The statutory cap will be removed at some point in January 2027

From the information currently available to us, it is likely to be 1 January 2027 on the same date that the qualifying period for unfair dismissal is reduced from 2 years to 6 months.

Once removed, how will the UK fare when compared to a very employee friendly Europe?

In most European counties, unfair dismissal compensation is capped. The aim is simple: balance fairness for employees with predictability for employers.

Let’s look at the different regimes:

France link compensation to length of service. Awards start at around three and a half months’ salary (for two years’ service) and cap at 20 months’ salary, even for long-serving employees.

Switzerland limits compensation to six months’ salary.

Sweden caps awards at 32 months’ salary, depending on service.

Spain applies a formula of 33 days’ pay per year of service (for post-2012 hires) but again capped at 24 months’ salary.

Italy operates a dual system. Employees hired after March 2015 face capped awards of:

6 to 36 months’ salary for large employers.

3 to 18 months’ salary for small employers.

Following a Constitutional Court ruling, judges now have discretion within those ranges — but the cap remains firmly in place.

Ireland caps unfair dismissal compensation at 104 weeks’ total remuneration.

Denmark applies caps under collective agreements (up to 52 weeks’ pay) or six months’ salary for salaried employees, depending on service.

The common thread for most European countries — compensation is capped, and employers are able to plan negotiations accordingly. Beyond Europe, caps are still the norm. In Australia for example, the Fair Work Commission can award compensation for unfair dismissal but only up to six months’ salary.

The UK will be joining a handful of countries which have uncapped awards. In Luxembourg, judges are given a wide discretion with no fixed statutory cap. Canada has no formal statutory cap, but compensation is typically limited to damages reflecting the employee’s reasonable notice period, rather than open-ended loss. Lastly, in Brazil, employers are required to deposit 8% of the employee’s monthly salary into an account which is managed by the Federal Savings Bank on behalf of the employee. If an employee is dismissed without cause the employer must pay to the employee, (in addition to the payment of accrued rights and as a penalty for unfair dismissal) an amount equal to 40% of that which the employer has deposited into the employee’s severance compensation fund during their employment. The amount of the penalty will therefore depend on the length of employment and on the amount of the employee’s monthly salary.

It is clear that the UK will be joining the minority rather than the majority of countries who have uncapped unfair dismissal awards.

What are the repercussions of an uncapped compensation regime?

The statutory cap currently guides settlement negotiations with parties often negotiating around three to six months’ pay to avoid the time and costs attached to tribunal hearings.

Without the statutory cap:

Claimants may be more willing to take cases to a final hearing, adding to an overburdened tribunal system.
It is more difficult for employers to quantify the financial risk of a dismissal, which will inevitably impact settlement negotiations.
High earners are no longer deterred from lodging Tribunal claims meaning an increase in litigation for this group.
There is likely to be more complex remedies hearings that need to consider quantifying bonuses, deferred incentives and unvested equity.
Where the Acas Code applies, a potential 25% uplift suddenly bites harder when the underlying award is not capped.
On a positive note, it is likely to result in a reduction in more complex discrimination claims and whistleblowing claims as there will no longer be a need to bring these claims to avoid capped compensation.

How should you prepare?

Employers would be wise to start taking preparatory steps to tighten up procedures and ensure a clear document trail is in place. With an extended early conciliation period, plans to increase tribunal time limits for lodging claims and existing tribunal delays, tribunal witnesses will be placed under significant pressure to recall events which took place possibly two to three years ago. HR teams can make both their and witnesses’ lives a lot easier with clear processes and consistent decision making.

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Kate Walsh
Refreshing Law