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Employment & Incentives: What to expect in 2026
Employment & Incentives: What to expect in 2026
8 January 2026
Series
Blogs
8 January 2026
In our Employment & Incentives What to expect in 2026 publication, we consider the key developments and issues to watch out for in the year ahead.
For employment law, 2026 marks the opening chapter of the most far-reaching reforms to workplace rights and protections in a decade, reshaping how employers approach risk and strategy.
At the heart of this sits the ERA 2025. From April 2026, it introduces day one rights to paternity and parental leave, expands whistleblowing protection to sexual harassment disclosures, doubles the maximum protective award for failure to collectively consult and establishes a new enforcement body, the Fair Work Agency.
Looking ahead, October 2026 will see the introduction of longer time limits for bringing tribunal claims, a duty on employers to take all reasonable steps to prevent sexual harassment, protection against third-party harassment and tighter rules on contractual variation. Changes to unfair dismissal and collective consultation thresholds, plus mandatory gender pay gap and menopause action plans, are expected to follow in 2027.
Outside of the ERA 2025, the government is also expected to consider further employment reforms, touching on areas like worker status, AI, non-compete clauses, whistleblowing and equality. Foreshadowed in the King’s Speech in 2024, the Equality (Race and Disability) Bill is expected in early 2026, paving the way for mandatory ethnicity and disability pay gap reporting for large employers, race and disability equal pay rights and equal pay claims for outsourced workers.
On the regulatory horizon, while the FCA and PRA have confirmed that they will not be taking their diversity and inclusion proposals any further, they will be focusing on how firms are tackling non-financial misconduct in practice, with new rules taking effect from 1 September 2026.
2025 saw significant changes and relaxations to the strict pay rules for CRD V UK banks and building societies, some of which apply immediately. Firms need to consider carefully the requirements and impact of implementing those changes. The regulators are now reviewing the investment firms, AIFMs and UCITS pay regimes, and this may result in reforms in 2026. The EU investment firms’ rules may also be reformed with the aim of achieving better alignment with the CRD, UCITS and AIFMD regimes for a level playing field and reduced administrative burdens.
The more flexible approach to executive pay is likely to continue in 2026, with companies having more freedom to operate the remuneration frameworks they consider competitive and appropriate for them. 2026 is a ‘triennial year’ in the standard three-year cycle for putting remuneration policies to a binding shareholder vote, so there are likely to be more votes on policies than in the previous two years. Companies will need to explain how their pay proposals align with the long-term interests of the company and its shareholders, and engage with investors early and constructively. 2026 may also see more flexibility on some form of equity compensation for independent non-executive directors, along the lines of US practice. But as well as potential opposition from investors, there are some legal challenges in structuring such arrangements.
Several income and capital gains tax increases apply from April 2026. Companies should therefore ensure they are making the most of the tax breaks and flexibilities of the tax-qualified share plans: CSOPs, SAYE and SIPs. And the higher limits for EMI options, also applying from April 2026, will undoubtedly make them increasingly attractive for start-up and scaling-up companies.
The securities laws and prospectus regime applying to offers of shares to employees is changing, although companies should see little difference in practice, and potentially fewer issues.
And finally, PISCES, the trading platform for shares in private companies, is now operational. It is doubtful whether unlisted companies will participate in PISCES solely for the benefit of employee shareholders and share plan participants, but where they do, this may replace (at least to some extent) employee benefit trusts, the usual market-maker for private company shares. Employees crystallising gains will, however, present some challenges (such as retention) so companies need to consider and plan carefully for the impact on employees of any trading event.
Read more about what is on the horizon in our “What to expect in 2026” publication here.
For more information on the upcoming employment law changes, visit our UK Employment Law Reforms Tracker