UK employers face “payroll compliance cliff” as new reforms take effect – Sona

UK employers are being warned of a looming “payroll compliance cliff” as a wave of legislative changes between April 2026 and April 2027 significantly increases regulatory scrutiny and operational complexity.

A recent briefing led by Georgina Richards, director of payroll at Sona, and Paul Watson, VP at Sona, outlined how upcoming reforms will fundamentally reshape employer obligations, particularly for organisations managing large frontline workforces.

Central to the changes is the launch of the Fair Work Agency (FWA), a new self-funded enforcement body with the authority to investigate businesses retrospectively for up to six years.

Employers found to be non-compliant could face penalties of up to 200% of underpayments, capped at £20,000 per worker, alongside public naming and shaming.

At the same time, Statutory Sick Pay (SSP) becomes a day-one right from April 2026.

The removal of the £125 per week Lower Earnings Limit, combined with the introduction of a new 80% calculation, will significantly expand eligibility and add further complexity to payroll processes.

Additional reforms will require employers to closely monitor working patterns under new zero-hours legislation.

Businesses must track 12-week working histories and offer guaranteed hours that reflect actual working patterns, placing greater emphasis on accurate workforce data and scheduling systems.

Looking ahead to January 2027, further changes to employment rights will reduce the unfair dismissal qualifying period to six months.

This may also be accompanied by the removal of the current compensation cap, raising the financial risks associated with workforce management decisions.

Richards said: “The convergence of these reforms marks a transition from a reactive to a proactive enforcement era.

“Between the removal of SSP thresholds and the new requirement to track 12-week working patterns, the administrative burden on payroll and operations teams is set to skyrocket.

“In this new landscape, any disconnect between scheduling data and payroll records isn’t just an internal inefficiency; it’s a direct regulatory risk that could trigger substantial financial penalties.”