Any links will direct to a third-party website and Sovereign IFA Ltd is not responsible for the accuracy of the information contained within linked sites.
As a business owner, you probably face many and varied demands on your time and energy every day, such as looking after staff, overseeing operations, and planning for growth.
With so much going on, it can be difficult to keep on top of changes in the law that could affect your business and how you manage it.
And yet, staying up to date with legislative reform is essential for protecting the financial stability of your business. Even small amendments could increase your costs and introduce risks if they’re overlooked.
Indeed, many changes to employment law are being phased in gradually between 2024 and 2027, which could make them easy to miss.
Keeping informed allows you to plan ahead and avoid reactive decisions. So, here are three rule changes to be aware of and factor into your financial plan.
1. Flexible working
“Flexible working” can include various arrangements tailored to the individual, including working remotely, part-time, or term-time only.
It has become increasingly popular in recent years, with many people seeing it as a way to achieve a healthy work-life balance.
Indeed, research by the Chartered Institute of Personnel Development (CIPD) shows that more than a million people left their jobs between 2024 and 2025 due to a perceived lack of flexibility.
Under legislation that came into force on 6 April 2024, employees have more rights to flexible working, including:
- A statutory right to request flexible working from day one of employment, removing the previous 26-week waiting period
- The right to submit two requests for flexible terms in a rolling 12-month period, rather than just one
- A two-month response period for employers to decide whether to agree to a request, down from three months
- Removal of the requirement for employees to explain how their requested working pattern could affect their employer
- Introduction of a mandatory consultation with the employee before their employer can reject an application for flexible working.
These rule changes could affect your team structure and its productivity. You might also face additional costs for temporary cover or training to ensure that a flexible worker’s responsibilities can be fulfilled when they’re not available.
As such, planning and careful cash flow management are essential, especially for small businesses.
2. Parental leave
The landmark Employment Rights Act 2025 introduced several changes to parental leave that took effect from 6 April 2026.
Paternity leave became a day-one right
Previously, an employee had to have 26 weeks of continuous service by the end of the 15th week before the baby was due to be eligible for paternity leave. This requirement has been removed, and new fathers can now take paternity leave from their first day of employment.
It’s important to note that the 26-week qualifying period for Statutory Paternity Pay remains unchanged. As such, you might want to consider offering paternity pay as part of your employee package to attract and retain top talent.
Restrictions on shared parental leave and paternity leave were removed
Previously, if an employee took shared parental leave, they would forfeit their right to paternity leave.
The new rules removed this restriction; employees can take paternity leave even if they have already had a period of shared parental leave.
Unpaid ordinary parental leave became a day-one right
This removes the requirement for an employee to have one year of continuous service before requesting blocks of time off to care for a child aged under 18.
In addition to these reforms under the Employment Rights Act 2025, a new Bereaved Partner’s Paternity Leave was introduced on 6 April 2026. This allows eligible fathers and partners to claim Bereaved Partner’s Paternity Leave if their child’s mother or primary adopter dies within the first year of their birth or adoption.
If your employees are likely to be affected by any of these changes, you’ll need to factor them into your resource planning, budgeting, and productivity assumptions – particularly if you have a small team where each person plays a key role.
3. Statutory sick pay
Historically, employees were not entitled to Statutory Sick Pay (SSP) for the first three days of absence from work due to illness.
The Employment Rights Act 2025 has made SSP a day-one entitlement, meaning your employees will be paid from the first full day of sickness absence.
According to the most recent figures from the Office for National Statistics (ONS), 148.8 million working days were lost due to sickness absence in the UK in 2025. The Royal Society for Public Health estimates that this cost the economy £141 billion. Minor illnesses, such as the flu, were the leading cause of time out of work.
The recent changes to SSP could potentially increase sickness absence in your business, as employees may be more likely to stay at home when they feel slightly unwell. While this rule change is a positive move towards better protection of employee rights and wellbeing, it’s important to plan for the potential impact on your workforce and cash flow.
We can help you adjust to legislative changes and mitigate the potential impact on your business
As you can see, even minor legislative changes could affect your business and its financial health. Moreover, this is not an exhaustive list of recent reforms and employment law continually evolves.
Indeed, the government has already announced plans for further changes in the next year. For example, from 1 January 2027, the qualifying period for an employee to claim ordinary unfair dismissal in Great Britain will reduce from two years to six months, and the statutory cap for compensation will be lifted. This could lead to higher operational costs and the risk of expensive settlements for employers.
That’s why staying on top of the rules that affect you and building them into your financial plan is crucial.
At Sovereign, we specialise in supporting business owners in managing their professional and personal finances. We can help you navigate legislative changes by:
- Explaining how legislative changes apply to your business
- Using cashflow modelling to make realistic projections and help you prepare for different scenarios, such as increased staff absences
- Offering guidance on building appropriate financial reserves to ensure you can cope with unexpected financial shocks
- Advising you on protection strategies to safeguard your business, such as key person cover
- Structuring your business finances as tax-efficiently as possible, in line with current rules and available reliefs.
Get in touch
If you’d like help reviewing your business or personal finances to ensure you’re complying with current legislation and prepared for upcoming changes, we’d love to hear from you.
Email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate cashflow planning or tax planning.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation
Approved by Best Practice IFA Group Ltd on: 16/7/26