The last few days have brought significant shifts in future employment law that present both challenges and clear advantages to employers.
The introduction of a six-month qualifying period for unfair dismissal rights, which may now be implemented as soon as next year, will benefit many short-serving employees by providing them with additional protection when compared to the current two-year service threshold. This does, however, offer significantly more clarity to all parties and flexibility to employers compared to the previously mooted “day one” rights.
The recently announced rise in National Minimum Wage from April 2026 presents businesses with increased costs, but at a significantly more modest increase than compared to previous years. These reforms aim to balance fair treatment and financial security for workers with practical safeguards for employers, fostering a more stable and transparent employment landscape.
From April 2026, the minimum wage is set to rise again, giving a pay boost to around 2.7 million people. Announced just ahead of the November 2025 Budget, this change marks another step towards improving earnings for many across the country.
However, the pay increases have caused some concerns amongst business owners who see this rise partnered with the recent increases to National Insurance Contributions by 1.2%, from 13.8% to 15%, from April 2025, as a steep challenge for businesses already under severe cost pressures. Be that as it may, are the increases as bad as they appear?
From April, workers aged 21 and over will see their minimum wage rise by 4.1%, taking the National Living Wage to £12.71 per hour. For younger employees, the increases are slightly higher: those aged 18 to 20 will benefit from an 8.5% uplift, bringing their hourly rate to £10.85. Meanwhile, the rate for 16- to 17-year-olds and apprentices will climb by 6%, reaching £8 per hour. These changes will affect around 2.7 million workers nationwide, delivering a welcome boost to earnings while remaining relatively manageable for employers.
To put this into perspective, here’s how the National Living Wage has changed in previous years in percentage terms:
|
Year |
Increase |
|---|---|
| 2025 – 2026 | 4.1% |
| 2024 – 2025 | 6.7% |
| 2023 – 2024 | 9.9% |
| 2022 – 2023 | 9.7% |
| 2021 – 2022 | 6.6% |
The trend is clear, recent years saw near double-digit increases, placing significant strain on payroll budgets. By contrast, the 2026 rise is the smallest in five years, signalling a shift towards stability and predictability. For employers, this should mean less financial turbulence and more opportunity to plan ahead both in terms of the initial costs and around future pay differentiation within roles. While any increase adds cost pressures, the 2026 adjustment reflects a more measured approach compared to those seen in previous years. This moderation offers employers breathing space to plan and budget effectively without the sharp shocks that characterised earlier changes.
With the increases taking effect in April 2026, employers should start preparing now. Begin by reviewing payroll budgets early. Understanding the financial impact ahead of time will help you plan for any adjustments without disrupting operations.
Next, communicate changes clearly to staff. Transparency builds trust and ensures employees understand how the new rates affect their pay. This is also an opportunity to reinforce your commitment to fair pay and compliance.
Rather than cutting hours or reducing headcount to offset costs, consider efficiency improvements. Streamlining processes, investing in technology, or upskilling staff can help maintain productivity while managing wage increases.
Finally, explore government support or training schemes. Initiatives such as apprenticeship programs or employment allowances can ease financial pressure and provide long-term benefits for both your business and your workforce.
When talking about the Employment Rights Bill, day 1 unfair dismissal rights is often the first thing that comes to mind. As one of the key manifesto pledges, the day 1 rights had caused huge controversy, with some welcoming the expansion of employee rights but many employers fearing the consequences. Following much back and forth between the House of Commons and the House of Lords, day 1 unfair dismissal rights have been abandoned and replaced with a six-month qualifying period.
This change should largely be welcomed as it provides a pragmatic compromise that safeguards both hiring confidence and operational flexibility. The previous proposal to extend protections from day one raised fears of excessive early-stage tribunals, and made employers, especially small businesses, reluctant to recruit or offer short-term contracts. Work-arounds relating to complex probationary arrangements were being mooted by Government and were likely to feature as part of the new rules. By establishing a clear “breathing space,” the six-month window enables organisations to implement standard probationary reviews, address performance or conduct issues, and end unsuitable matches without the fear of facing an unfair dismissal claim. By setting out this period in legislation, the law adds certainty and clarity for both employees and employers alike.
Nonetheless, employers should look to ensure their recruitment and onboarding procedures are as tight as possible, as the reduction in qualifying period needed to bring an unfair dismissal claim remains substantial. By clarifying probation procedures, enhancing manager training, and documenting outcomes, employers can ensure dismissals remain fair, transparent, and defensible.
In addition to the changes to day 1 unfair dismissal rights, it has been announced that compensation payment caps will be lifted. While we have yet to get confirmation on what this will look like, one possibility is that the cap of one year’s pay is removed, leaving the overall maximum award in unfair dismissal claims of £118,223 in place.
Here at Whitehead Monckton, our Employment Law team is fully up-to-date on this rapidly developing area of Employment Law, and is ideally placed to help you navigate this transition period.
Whether helping with policy reviews or providing you with legal support so you understand your position in light of the new changes, our expert team has years of experience in dealing with such matters across many sectors, including:
Working alongside HR consultancy experts Eclipse HR also ensures that, should you need HR advice, the integration is seamless, and the support offered is of the same high quality.
For support or guidance around these forthcoming changes, or to discuss any other employment related matter, get in touch.
