As we approach April 2026, significant changes are set to take effect regarding compensation limits and statutory payment rates. These updates, introduced by the Employment Rights (Increase of Limits) Order 2026 and the Social Security Benefits Up-rating Order 2026 SI 2026/148, will impact various aspects of employment law. This blog includes everything you need to know.
Key Changes in Compensation Limits
The Employment Rights (Increase of Limits) Order 2026, effective from 6 April, introduces key adjustments to raise compensation limits and minimum awards applicable to certain tribunal awards and other payments under employment legislation. These include the following:
- Unfair Dismissal Compensation: The cap on the compensatory award for unfair dismissal will rise from £118,223 to £123,543. However, this is expected to be the last increase, as the compensatory award is set to be removed by the Employment Rights Act 2025, effective 1 January 2027. This change will coincide with the reduction of the qualifying period for unfair dismissal from two years to six months.
- Weekly Pay Limit: The amount of a week’s pay, crucial for calculating statutory redundancy payments and the basic award for unfair dismissal, will increase from £719 to £751.
- Tips Compensation: The limit on the compensatory award for failure to allocate and pay tips fairly will increase from £5,135 to £5,366.
- Guarantee Pay: This will see a slight increase from £39 to £41 per day.
- Minimum Basic Award: In cases of unfair dismissal related to health and safety, working time, employee representation, trade union, or occupational pension trustee reasons, the minimum basic award will rise from £8,763 to £9,157.
These new rates apply where the ‘appropriate date’ for the cause of action, such as the effective date of termination in an unfair dismissal claim, falls on or after 6 April 2026. If the date falls before this, the previous limits will still apply.
Updates to Statutory Payment Rates
The Social Security Benefits Up-rating rating Order 2026 SI 2026/148 will enhance payment for a range of statutory leave entitlements. These will include:
- Statutory Maternity Pay: From 5 April, After the first six weeks, this will increase to £194.32 per week, or 90% of the employee’s average weekly earnings, whichever is lower. This change also applies to statutory adoption pay, statutory paternity pay, statutory shared parental pay, statutory neonatal care pay, statutory parental bereavement pay, and maternity allowance.
- Statutory Sick Pay: From 6 April, this will rise from £118.75 to £123.25 per week. Notably, the three-day waiting period for statutory sick pay will be abolished, making sick pay payable from the first day of sickness absence.
These updates reflect the government’s commitment to ensuring fair compensation and support for employees across various circumstances.
Next steps for employers
Employers should prepare for these changes to ensure compliance and support their workforce effectively. We recommend that employers:
- Stay Informed: Keep up-to-date with the new legislation and ensure your practices align with these new regulations as they come into force this April.
- Training and Awareness: Train HR teams and managers on the changes to avoid non-compliance and disputes.
- Effective Date Awareness: Note that new limits apply to terminations on or after 6 April 2026, with statutory payment changes effective from 5 or 6 April 2026.
- Tribunal Claims: Be aware of increased compensatory awards and ensure robust procedures to mitigate risks.
If you would like to speak to anyone about the content of this blog please contact a member of the Employment team.
We publish blogs and social media posts to give a general overview of legal and commercial issues, relevant at the time of publication, which we hope you will find interesting. Please note that legal rules often change depending on the specific facts of a situation. The law also changes over time following changes in legislation or new court cases. We do not actively update our blogs or posts once they are published to reflect changes in the law.
As such, our blogs and posts are not intended to advise you on the law and must not be relied upon as legal advice. If you require advice on a particular issue then please contact us and we will be pleased to help.