As the 2026/27 tax year approaches, several important payroll changes will impact businesses and employees. Understanding these updates is essential to ensure accurate payroll processing and effective workforce planning.
National Insurance Contributions (NICs)
Key updates for 2026/27:
- Lower Earnings Limit (LEL): increased slightly to £6,708 (from £6,500)
- Secondary Threshold: remains at £5,000, meaning Employers NIC is payable earlier than in previous years
- Employer NIC rate: remains at 15%
- Employment Allowance: rules and value remain unchanged at £10,500
Employers should ensure payroll systems reflect these thresholds to maintain compliance.
Plan 5 Student Loans
- Applies to: students starting higher education from 1 August 2023
- Action for employers: update payroll systems to correctly deduct Plan 5 repayments
National Minimum Wage (NMW) Rates from 1 April 2026
| Category | New Rate |
| Apprentice | £8.00 |
| Age 16-17 | £8.00 |
| Age 18-20 | £10.85 |
| Age 21+ | £12.71 |
| Accommodation offset | £11.10 |
Employers must review employee pay rates to ensure compliance.
Statutory Sick Pay (SSP) Reforms
The Employment Rights Act 2025 introduces significant changes to SSP from 6 April 2026:
Three key reforms:
- Day 1 payment: SSP will now be payable from the first day of absence (removing the three waiting days).
- Lower Earnings Limit removed: employees with previously low earnings will now qualify.
- Earnings-based model: SSP is calculated at 80% of average weekly earnings, subject to the statutory cap.
Practical implications:
- More employees will qualify for SSP
- Increased sickness absence payments
- Short-term absence costs likely to rise
Payroll considerations:
- SSP calculation will require average weekly earnings, not a flat rate
- Accurate systems and record-keeping are essential
- Financial impact is driven by both the rate and volume of payments
- Absence management becomes increasingly important for controlling costs
Preparing Your Business
To stay compliant and manage costs effectively, businesses should:
- Update payroll systems for NIC thresholds, NMW rates, Plan 5 loans, and SSP calculations
- Review absence policies and workforce planning
- Ensure accurate record-keeping for payroll and SSP calculations
At Pierce, we support businesses in navigating payroll changes efficiently, ensuring compliance while helping manage financial impact and workforce planning.