Day-one paternity leave and sick pay: what the new rules mean for SME employers
Posted on July 27, 2026
The Employment Rights Act 2025 introduced some of the most significant changes to UK employment law in a generation. For SME owners, two reforms are likely to have the greatest immediate effect: day-one paternity leave and Statutory Sick Pay from the first day of sickness absence.
According to research commissioned by ACAS, 30% of employers identified Statutory Sick Pay from day one as one of the reforms they would find hardest to implement. A further 27% highlighted paternity leave becoming a day-one employment right.
These concerns are understandable. A large organisation may be able to redistribute work or absorb additional employment costs relatively easily. In a business employing ten people, however, one unexpected absence can remove 10% of the workforce and have an immediate effect on customers, deadlines and colleagues.
Both changes have applied since 6 April 2026. SME employers should therefore already have updated their policies, payroll arrangements and management processes.
What has changed with paternity leave?
Eligible employees can now qualify for statutory paternity leave from their first day of employment. Previously, an employee would generally have needed 26 weeks’ continuous employment by the relevant qualifying week.
An eligible employee can take either one or two weeks of statutory paternity leave. This can be taken within the first 52 weeks following the birth of the child.
This means that an employee who joins your business shortly before their partner gives birth may be entitled to take paternity leave, even if they have only worked for you for a few days or weeks.
There is no exemption for small or micro businesses.
Day-one leave does not necessarily mean day-one pay
This is one of the most important distinctions for SME employers to understand.
Paternity leave and Statutory Paternity Pay are separate entitlements. Although qualifying employees can take paternity leave from their first day of employment, they will not automatically qualify for Statutory Paternity Pay.
The existing service and earnings requirements for Statutory Paternity Pay continue to apply. This means an employee may be entitled to take paternity leave but may need to take it unpaid if they do not qualify for statutory or enhanced contractual pay.
Employers should therefore assess two separate questions:
- Is the employee entitled to paternity leave?
- Is the employee entitled to Statutory Paternity Pay?
Failing to separate these questions could result in an employee being incorrectly refused leave or the employer paying the wrong amount.
Current information about eligibility, notice and protection is available in the ACAS guidance on paternity leave and pay.
What has changed with Statutory Sick Pay?
The second major reform concerns Statutory Sick Pay, commonly known as SSP.
Before 6 April 2026, eligible employees generally had to be absent for at least four consecutive days and SSP was not normally paid for the first three qualifying days. These were known as waiting days.
The lower earnings limit also meant that some low-paid and part-time employees did not qualify for SSP.
From 6 April 2026:
- SSP is payable from the first full day of sickness absence;
- the three waiting days have been removed;
- the lower earnings limit has been removed; and
- eligible workers receive the lower of 80% of their average weekly earnings or the statutory weekly rate.
The statutory weekly rate for 2026/27 is £123.25, although a lower-paid worker may receive less because the payment is capped at 80% of their average weekly earnings.
Unlike paternity leave, this is not quite a right that exists before someone begins employment. To qualify, the individual must have started work and meet the other eligibility requirements. However, once they have started, there is no minimum earnings threshold and SSP can be payable from the first full day of sickness.
Further calculation and transitional guidance is available from ACAS on Statutory Sick Pay and GOV.UK.
Why do these changes matter particularly to SMEs?
The direct financial cost is only part of the issue.
For smaller employers, the more significant challenge may be the combined impact of paying for absence, arranging cover and ensuring work is completed with fewer people available.
More short sickness absences will attract SSP
Under the old rules, an isolated one or two-day absence would not usually attract SSP because of the waiting days. It can now result in a statutory payment.
The removal of the earnings threshold also brings more part-time, irregular-hours and lower-paid workers within the SSP system. SMEs employing casual, seasonal or part-time staff may therefore experience a greater change than businesses with a mainly full-time, higher-paid workforce.
Payroll calculations are more complicated
Employers must calculate the correct SSP entitlement from the first full day of sickness and may need to apply the 80% earnings calculation for lower-paid workers.
This creates additional complexity where employees work variable hours or do not have a regular working pattern. Employers and employees should agree which days count as qualifying days where there is no established pattern.
New employees may take paternity leave
Recruiting someone shortly before the birth or adoption of a child no longer prevents them from qualifying for leave.
This can create short-term operational difficulties, particularly where the employee was recruited to fill a skills gap or complete urgent work. However, operational inconvenience does not remove the statutory entitlement.
There is a greater need for workforce resilience
These reforms reinforce the importance of cross-training, documenting key processes and making sure important customer or operational information is not held by only one employee.
For a small business, this is good practice for all types of absence, not just paternity leave and sickness.
Can an employer refuse paternity leave?
An employer should not simply refuse an eligible request because the timing is inconvenient.
The employee must still meet the statutory eligibility and notice requirements, but an employer cannot disregard the entitlement because the business is small or because arranging cover will be difficult.
Employees are legally protected against suffering a detriment or being dismissed because they take or propose to take paternity leave. A dismissal connected to paternity leave may be automatically unfair, regardless of the employee’s length of service.
Managers should therefore avoid comments suggesting that the employee is disloyal, unreliable or damaging their career by taking leave. They should also make sure the employee is not subsequently excluded from opportunities, training or promotion because of the absence.
If eligibility or notice is disputed, obtain professional HR advice before refusing the request.
Does day-one SSP mean employers cannot manage sickness absence?
No. Employees must still follow the organisation’s sickness reporting procedure and employers can still manage attendance.
The introduction of SSP from the first day does not prevent an employer from:
- requiring employees to report sickness properly;
- keeping accurate absence records;
- conducting back-to-work interviews;
- reviewing recurring or concerning patterns;
- applying reasonable absence management trigger points;
- asking for a fit note after more than seven calendar days; or
- investigating cases where there is credible evidence that an absence is not genuine.
However, employers must act fairly and distinguish between legitimate absence management and disciplinary action.
Particular care is needed where absence may be connected to pregnancy, disability, mental health, workplace injury or another protected or sensitive issue. Pregnancy-related sickness should be recorded separately and should not normally count towards ordinary sickness absence triggers.
Where a medical condition might amount to a disability, the employer should consider reasonable adjustments before moving towards warnings or dismissal.
Five practical actions for SME owners
1.Update your policies
Review your sickness absence, paternity leave and family leave policies. Remove any references to three SSP waiting days, the previous SSP earnings threshold or a 26-week service requirement for paternity leave.
2. Check your payroll system
Confirm that your software or payroll provider is applying SSP from the first full day of sickness and using the correct 2026/27 calculation.
Do not assume that a system update has automatically corrected every employee record or contractual arrangement.
3. Train managers
Managers need to understand the difference between paternity leave and paternity pay. They should also know how to record sickness, conduct return-to-work meetings and identify circumstances requiring HR advice.
4. Communicate the changes
Explain the new arrangements to employees, including their continuing responsibility to report sickness promptly and provide the information needed to assess family leave.
Clear communication reduces misunderstandings and makes it more difficult for outdated practices to continue informally.
5. Plan for short-notice absence
Identify business-critical roles and consider how work would be covered. Cross-training, written procedures and sensible handover arrangements can substantially reduce the impact of an employee being unexpectedly unavailable.
The bigger picture
The ACAS research found that these two reforms are currently creating more concern for employers than many of the other Employment Rights Act changes.
This does not mean that every SME will face a dramatic increase in costs or absence. It does mean that outdated policies and informal management practices now carry greater risk.
The most exposed businesses will be those that:
- refuse paternity leave because someone is a recent recruit;
- assume that day-one paternity leave must always be paid;
- continue withholding SSP for the first three days;
- exclude lower-paid or part-time workers from SSP;
- fail to update payroll calculations; or
- react to an absence without considering discrimination, family-leave or disability risks.
For most SMEs, the answer is not a complicated new HR system. It is a small number of clear, legally compliant processes that managers understand and apply consistently.
Is your business ready for the new rules?
SME HR Consultancy helps UK business owners understand employment law changes and turn them into practical policies and management processes.
We can review your sickness absence and family leave policies, check that your procedures reflect the new day-one rights and help your managers deal confidently with individual cases.
If you are unsure whether your policies are compliant, or you need advice about a sickness or paternity leave request, arrange a free 30-minute consultation with SME HR Consultancy.
Visit www.smehrconsultancy.com to book a conversation and make sure your business is protected.
