The real cost of Day One SSP for recruitment agencies

Recruitment agencies should be paying close attention to one of the most immediate, and expensive, elements of the forthcoming Employment Rights Bill: reforms to Statutory Sick Pay (SSP). 

Under current rules, SSP only kicks in from day four of absence. But in 2026, this three day waiting period is set to be scrapped, meaning SSP will be payable from Day One of any employee’s sick leave. 

On paper, this change is in line with the Bill’s overall objective of strengthening workers’ rights, which we absolutely support. But we also understand that for recruitment businesses operating on tight margins, especially those managing large volumes of temporary or short-term workers, the cost implications could be eye-watering.  

According to estimates from the Institute for Fiscal Studies, the average additional cost to employers could be around £130 per employee per year. When you multiply that across hundreds, or even thousands of placements, it’s clear that this isn’t just a compliance tweak, it’s a material business cost.

Unlike traditional employers, many recruitment agencies work with flexible or contingent workforces where high turnover and short-term engagements are the norm. Those employing these workers on their own payrolls will feel the pinch of Day One SSP rights most of all. And it doesn’t stop there. The change will also require agencies to overhaul policies, payroll systems and contracts. 

What’s changing and when? 

The ERB is currently at committee stage in the House of Lords. The government is keen for it to be passed before parliament’s summer recess, which begins on 22nd July, so even with the potential for delays, that seems the most likely time for it to be passed into law.

Once the Bill is passed and receives Royal Assent, the provisions are expected to be implemented over the following 12-18 months. On the current roadmap, it is likely that the SSP changes, and along with some other Day One rights will come into play from April 2026.

1. SSP from Day One

Currently, SSP is only payable after 3 consecutive days of absence. This change removes the 3-day waiting period. SSP will be payable from the very first day of a qualifying sickness absence.

2. Lower Earnings Limit scrapped

The  existing £123/week earnings threshold for SSP eligibility will be removed. This expands access to around 1.3 million low-wage workers who were previously excluded.

3.  New Rate Mechanism for Low Earners

For those earning below the standard SSP rate, payment will be 80% of their average weekly earnings, or the flat SSP rate, whichever is lower. The SSP flat rate increased to £118.75 per week from April 2025.

The cost to your business

The government estimates employers will face £1.6 billion in additional SSP costs annually. For agencies placing hundreds or thousands of temps, especially in sectors like healthcare, industrial and logistics, these additional costs could erode already tight margins.

Lewis Gosling, Head of Technical Implementation at Liquid Friday, said:

“Recruitment agencies need to be aware that Day One SSP isn’t just a policy shift, it brings real financial implications, especially for businesses with large temporary workforces. At Liquid Friday, we’re here to help agencies prepare for these changes with confidence and clarity, so they can continue to grow sustainably.” 

What recruitment agencies should be doing now

Here are some practical steps recruitment businesses can take before the reforms kick in:

Review and update your policies

Make sure your sickness absence policy reflects Day 1 SSP entitlement. Adjust any enhanced sick pay schemes to continue from Day 4 if desired, but make these changes before October 2025. 

Evaluate financial exposure

Forecast the impact of removing the 3-day SSP waiting period across your current contractor base. Make sure to factor in the long-term cost of extending SSP to previously ineligible low earners. 

Train your teams

Ensure your payroll, HR and account managers understand the SSP changes and can communicate them clearly, particularly where cost increases will be passed on to the end client or reflected in charge-out rates.

Manage absenteeism proactively

If persistent short-term absence is an issue in your workforce, now is the time to tackle it with better tracking and return-to-work processes.

Think bigger: rethink your engagement strategy

The changes to SSP, and wider Day One rights, highlight a more fundamental question: is your current worker engagement model still fit for purpose?
As SSP becomes a more immediate costs, the distinction between different types of employment types, and who carries what risk, becomes more important than ever.

Now is the time to review:

• How do you engage your workforce? (PAYE, umbrella, outsourced)
• Do your contracts include suitable variation clauses?
• Does your engagement model support sustainable, compliant growth post-2026?

At Liquid Friday we are here to help. We’re already working with forward-thinking agencies to help them stay ahead of the Employment Rights Bill.


👉 Speak to your Liquid Friday Account Manager or get in touch