Key DWP & Statutory Changes for 2026/27 – The End of the SSP Earnings Test
The Department for Work and Pensions (DWP) has published its policy paper detailing the benefit and pension rates for the 2026/27 tax year, and the information contains crucial updates that will significantly impact payroll administration and employer costs.
Key Announcements
Increase in the Lower Earnings Limit (LEL)
Change to Statutory Sick Pay (SSP) eligibility
Here is what your business needs to know and what action you should be taking now to prepare for April 2026.
1. The Lower Earnings Limit (LEL) is Increasing
The Lower Earnings Limit (LEL) is the point at which an employee starts paying National Insurance contributions and is also the threshold for gaining entitlement to certain benefits.
2026/27 LEL Rate: The LEL is set to increase from the 2025/26 rate of £125.00 per week to £129.00 per week.
Impact on Payroll
The LEL primarily defines the point at which an employee accrues benefit entitlement and impacts the calculation of secondary National Insurance contributions in some salary sacrifice schemes. Payroll teams must ensure that £129.00 is correctly configured as the weekly LEL for the 2026/27 tax year to maintain compliance with NI calculations.
2. Landmark Change: The SSP Entitlement Test is REMOVED
This is the most critical change employers must prepare for. The policy paper confirms that Statutory Sick Pay (SSP) will no longer use the LEL as an entitlement trigger, due to reforms being introduced via the Employment Rights Bill from 6 April 2026.
Previously, an employee had to earn at or above the LEL in the relevant qualifying period to be eligible for SSP. This mechanism effectively excluded many low-paid and part-time staff from receiving sick pay.
What the SSP Change Means for Your Business
The removal of the LEL threshold, alongside other expected changes from the Employment Rights Bill (such as day-one SSP entitlement), will fundamentally reshape how employers manage sick leave:
Wider Eligibility: Up to 1.3 million additional low-paid and part-time workers who currently fall below the LEL will become eligible for SSP from April 2026. This increases the scope of your payroll responsibilities.
Increased Cost Exposure: The cost of SSP is borne entirely by the employer. Removing the LEL and the three-day waiting period (as also set out in the Bill) means your business will see a natural increase in overall SSP expenditure.
New Rate Calculation: For the very lowest earners, the SSP payment may be calculated as 80% of their normal weekly earnings, rather than the full flat rate (if 80% is lower than the flat rate). Payroll software must be able to handle this new calculation rule.
Action Plan: Preparing for April 2026
With the new rules coming into force from 6 April 2026, now is the time to prepare:
System Audit: Confirm with your payroll software provider that they will update their system logic to correctly apply the new £129.00 LEL and, critically, remove the LEL as an entitlement trigger for SSP.
Budget Forecasting: Review your past sickness absence data, particularly for part-time and lower-paid roles, and model the potential financial impact of paying SSP to a wider pool of staff, potentially from day one.
Policy Review: Update employee handbooks and contracts that reference the three-day "waiting period" for sick pay or the LEL earnings criteria. Ensure all managers are briefed on the new, more inclusive SSP rules.
Stay Informed: Monitor updates on the Employment Rights Bill, as further details on the full implementation of day-one SSP and the calculation methodology for low earners will be published.
Payment |
Rate 2025/26 |
Rate 2026/27 |
|---|
| Lower Earning Limit | £125.00 | £129.00 |
| Statutory Sick Pay | £118.75 | £123.25 |
| Statutory Adoption Pay | £187.18 | £194.32 | Statutory Maternity Pay | £187.18 | £194.32 | Statutory Neonatal Care Pay | £187.18 | £194.32 | Statutory Paternity | £187.18 | £194.32 | Statutory Shared Parental Pay | £187.18 | £194.32 | Statutory Parental Bereavement Pay | £187.18 | £194.32 |