Employment Rights Bill: Are You Ready for Holiday and Sick Pay Changes?

The Employment Rights Bill is making its way through Parliament, and while the headlines focus on workers’ rights, there’s a very real impact coming for employers’ budgets, payroll, and cash flow.

Two of the biggest changes most of our franchise clients will feel are around Statutory Sick Pay (SSP) and holiday pay. To be clear, this blog isn’t a deep dive into HR law – it’s our accountant’s take on what’s changing, when, and why it’s worth preparing now rather than scrambling later.

Statutory Sick Pay – more people are eligible, and sooner

Under the proposed rules:

• No lower earnings limit – even your lowest-paid workers will be entitled to SSP

• No waiting days – sick pay will kick in from day one, instead of after three days

• Rate change – the amount will be 80% of average weekly earnings or the flat SSP rate (currently £118.75/week from April 2025), whichever is lower

That means more people will qualify, they’ll qualify sooner, and in some cases, you’ll be paying more than you do now.

From a finance perspective:

• Build these costs into your 2026/27 payroll budgets – they’ll creep up, even in smaller teams

• If you already offer enhanced sick pay, double-check it works alongside the new SSP rules, so you’re not paying over the odds

• Make sure your payroll software can handle the ‘80% or flat rate’ calculation and apply day-one entitlement automatically

Holiday pay – clearer rules and tighter checks

The Bill also tightens how holiday pay works, particularly for irregular-hours and part-year workers. Rolled-up holiday pay (where it’s included in each payslip instead of being taken as leave) will be formally recognised, but only if it’s calculated and documented correctly.

There will also be a new Fair Work Agency keeping an eye on things like holiday pay and SSP. That means more scrutiny and the need for clear records showing exactly how you’ve worked things out.

From a finance perspective:

• Review how you’re accruing holiday pay – especially for staff whose hours vary

• Check your holiday pay rate includes the right elements (e.g., overtime or commission where required)

• Keep your audit trail clean – timesheets, pay elements, and payroll journals should all match

When will these changes hit?

Most of these reforms are expected to land from 2026, with exact start dates to be confirmed. Other measures will follow later, so this is one to keep on your radar for the next couple of years.

Start getting prepared

This isn’t about rewriting all your staff handbooks immediately – it’s about making sure your systems, budgets, and cash flow can handle the changes without nasty surprises.

1. Run your numbers – model the impact of day-one SSP and wider eligibility using your current absence data

2. Test your payroll – check with your software provider how they’ll apply the new SSP rules and holiday pay calculations

3. Tidy your records – if your holiday pay calculations aren’t backed by clear data, now’s the time to fix that

4. Update your forecasts – factor these changes into both your payroll budget and your cash flow planning

5. Get finance and payroll in sync – make sure the people approving pay changes know the new rules and your accounting team can trace everything back to source records

Why does this matter to your franchise business?

Holiday pay and sick pay affect your labour costs, margins, and even pricing decisions. The franchise businesses that take time now to model the impact will be the ones who can adapt without a hit to profitability.

And keep in mind, while this looks like an HR change, it’s your accountant who’ll make sure your payroll calculations, journals, and forecasts all line up, and keep you compliant without overpaying.

Let’s make sure you’re ready

Every franchise business is different. A small café with part-time weekend staff will need a different approach to a franchise business with staff on full-time salaries. Before you change your payroll setup, adopt rolled-up holiday pay, or adjust your sick pay policy, talk it through with your accountant.

At The Franchise Accounting Specialists, we can:

• Model the financial impact for your franchise business

• Make sure your payroll software is set up correctly

• Keep your records “Fair Work Agency” ready

If you’d like us to help you get ahead of these changes, get in touch – we’ll make sure you’re ready well before the rules kick in.