For small and medium-sized enterprises (SMEs), payroll is rarely just about pressing a button. It is a balancing act of cash flow, compliance, and employee morale. As we head into the 2026/27 tax year, that balance is becoming a little trickier to maintain.
From a significant overhaul of sick pay to the “narrowing gap” in wage rates, April 2026 brings several shifts that specifically impact smaller teams. Here is what you need to prepare for to stay compliant and protect your bottom line.
1. The Big SSP Shake-up: No More “Waiting Days”
The most significant change for SMEs is the reform of Statutory Sick Pay (SSP) under the Employment Rights Act 2025. Historically, small businesses had a “buffer”: the first three days of an employee’s illness were unpaid (waiting days). From 6 April 2026, this buffer is gone.
- Day-One Rights: SSP is now payable from the very first day an employee is off sick.
- No Earnings Floor: The Lower Earnings Limit (£129) has been abolished for SSP. Every employee now qualifies, regardless of how few hours they work.
- The 80% Rule: For lower-paid staff, SSP will now be calculated as the lower of the standard weekly rate (£123.25) or 80% of their average weekly earnings.
What this means for you: If you have part-time or casual staff, your sick pay costs — and the admin time to calculate them — are likely to increase.
2. The 2026 National Minimum Wage Increases
The National Living Wage (NLW) continues to rise, but for SMEs, the real story is “pay compression.” As the minimum rates for younger workers rise faster than the rate for over-21s, the gap between your junior and senior staff is shrinking.
The Compliance Risk: With rates rising so frequently, it’s easy for salary sacrifice schemes (like pension contributions or cycle-to-work) to accidentally push an employee’s take-home pay below the legal minimum.
3. Benefits in Kind: The Final “Voluntary” Year
You may have heard that P11Ds are being scrapped. While the government has delayed mandatory “payrolling” of benefits until April 2027, April 2026 is your last chance to transition voluntarily. If you currently provide benefits like health insurance or company cars, payrolling them means you collect the tax through your monthly payroll rather than filing a mountain of paperwork in July.
Deadline: If you want to switch to the simpler payrolling method for the 2026/27 year, you must register with HMRC before 6 April 2026.
4. Reporting Hours: An HMRC U-Turn
There is some good news! HMRC recently scrapped the plan to force employers to report the “exact number of hours worked” in every RTI submission starting in 2026. After feedback from small business groups about the administrative burden, you can continue to report hours using the existing “normal hours” bands. This is one less software headache to worry about for now.
5. At a Glance: 2026/27 Statutory Rates
How to Prepare Your Business
The cumulative effect of these changes — particularly the new “Day-One” sick pay — means your 2026/27 budget might look quite different from last year.
- Review Sick Leave Policies: Update your employee handbook to reflect that the three-day waiting period no longer applies.
- Audit Your Lower-Paid Staff: Identify any part-time staff who previously didn’t qualify for SSP; they will now be eligible.
- Check Your “Buffer”: Ensure that staff just above the minimum wage aren’t “leveled down” by the new April rates, which can impact morale.
How CoreAcc Can Help
Running a business is hard enough without having to moonlight as a payroll legislator. Our team is here to take the weight off your shoulders and ensure your business remains fully compliant. We can assist you with:
- Cost Projection: We’ll model how the removal of SSP waiting days and the new NLW rates will impact your 2026/27 budget.
- Payroll Transition: Thinking of switching to payrolling benefits? We’ll handle the HMRC registration and setup before the April deadline.
- Policy Audit: We can review your contracts and handbooks to ensure your sick pay and leave clauses match the new “Day-One” legal requirements.
- Full Managed Payroll: Let us handle the monthly processing, RTI submissions, and pension auto-enrolment so you can focus on growing your business.
Don’t wait for a compliance error to land on your desk. Let’s make sure your payroll is April-ready today.
