Statutory sick pay reforms set to impact SME budgets and productivity

From April 2026, the UK Government will be enforcing reforms for statutory sick pay (SSP) under the new Employment Rights Act.

Under this law, employees will be given day-one rights to receive sick pay. The original three-day waiting period will be scrapped, allowing employees to get SSP from their first day of illness.

The new reforms will also remove the Lower Earnings Limit (LEL), meaning all employees will be eligible to receive payment regardless of income.

While this comes as good news for workers, this leaves businesses — particularly smaller firms — facing challenges in managing staff absences, additional costs, and general productivity.

As SSP becomes more accessible, SMEs will need to adapt their policies and practices to ensure they can continue to operate smoothly while still supporting their workforce.

The UK faces record-level of short-term absences

UK workforces have faced a drastic rise in short-term sickness absences over the last year.

Absence levels reached a record high of 9.4 days in 2025. Short-term absences in particular continue to be a pain point for businesses, as 37% of HR professionals say that high levels of short-term and frequent absence is their primary challenge when it comes to managing sickness. 

And business productivity is suffering as a result, especially for smaller businesses with a tighter budget. According to Unum, UK SMEs have lost £29bn annually due to sickness-related productivity losses, and there are calls for Government support and investment in employee health.

Mark Till, Chief Executive Officer at Unum said: “Now is the time to act and act and unlock greater investments into employee wellbeing.

“UK SMEs are under pressure: sickness absences are at their highest in 15 years, productivity is flatlining and budgets are tighter than ever. With the right policy framework, SMEs can unlock productivity and growth through better wellbeing investment.”

How will day-one SSP rights affect businesses?

The Government’s reforms for SSP rights are expected to start on 6 April 2026. As part of these reforms, SSP will be available to all workers from day one, rather than after three days.  Those off sick on low wages will also either receive 80% of their average weekly earnings or the £118.75 per week rate for SSP (whichever is lower).

However, for small businesses already struggling to manage staff absence, these changes could place more financial and administrative pressure on operations. As well as increased payroll costs, managers may have to spend more time processing SSP claims, monitoring absences, and adjusting work schedules to cover absent staff.

Unsurprisingly, many employers are concerned about these impacts, as a survey by Peninsula reveals that 42% of firms believe changes to the SSP will have a negative impact on their business. 

“Under the new rules, even brief periods of sickness that currently attract little or no SSP will become payable,” Tracey Burke, senior HR consultant at WorkNest told Personnel Today.

“For part-time and lower-paid employees, SSP could cover a much larger proportion of their usual earnings, reducing the financial impact of taking time off sick. Therefore, the risk of higher absence rates cannot be ignored.”

How can SMEs stay on top of managing absences?

With SSP becoming payable from day one, SMEs should be proactive in managing short-term absences. 

For example, promoting a healthy workplace — such as encouraging breaks and wellbeing initiatives like mental health support through an Employee Assistance Programme can help reduce the likelihood of sickness in the first place.

Additionally, clear and transparent sickness policies are a must. Employees should know how to report absences, what evidence is required, and how SSP interacts with other company benefits. This will help prevent confusion and ensure absences are legitimate and properly documented.

Flexibility can also go a long way, such as offering remote work, flexible working arrangements, or phased returns after illness. Monitoring absence patterns and addressing any recurring issues early on (such as through meetings or additional support) can help stop short-term problems from becoming long-term disruptions.

As for managing productivity, maintaining employee engagement, training staff to cover different roles, and using easy-to-manage absence tracking tools can help your business keep on top of important work even when people are off sick.

When put together, these actions can help better prepare SMEs to handle new SSP rules without major disruption or added stress to business operations.