Employment news in brief - July 2026

Here's our round-up of employment law news for July 2026

New research based on responses from 985 UK HR and compliance professionals, suggests many UK organisations may be unprepared for tougher legal requirements designed to prevent workplace sexual harassment. A survey found significant gaps in manager training, risk assessments and workplace preparedness ahead of changes due to take effect in October 2026. 

Key findings:

• 21% of organisations provide no specific sexual harassment training for managers
• Only 30% of businesses provide dedicated manager training on responding to sexual harassment complaints
• 32% of employers include manager training within broader staff training rather than offering role-specific guidance; and
• 34% of organisations said they have never carried out a sexual harassment risk assessment.

Our own research, conducted in June 2026, found that few organisations had completed a risk assessment to identify the specific risks faced by their staff. 

New report exposes continuing motherhood penalty in the workplace

A new report from Pregnant Then Screwed has highlighted the ongoing challenges faced by mothers balancing work and family life, finding that financial pressures, childcare barriers and workplace discrimination continue to affect employment outcomes across the UK. 

Based on responses from more than 5,000 women, the  State of the Nation 2026 report provides a detailed picture of the experiences of parents during pregnancy, maternity leave and beyond.

Key findings:

• Almost 1 in 5 single mothers do not return to the workforce following maternity leave
• 16% of mothers caring for disabled children leave the workforce altogether
• 82% of mothers who ended maternity leave early said they could not afford to stay off work any longer
• More than 1 in 10 parents who request flexible working have their request refused
• Nearly 3 in 10 mothers reduced their working hours because of childcare costs
• 1 in 4 mothers were unable to return to work full-time due to childcare costs, and
• More than a quarter of parents waited over 12 months for a childcare place.

The report concludes that, although some progress has been made in recent years, significant barriers remain.

Government launches £60 million fund to improve employment support

The government has announced a new £60 million innovation fund aimed at developing fresh approaches to helping disabled people and individuals with health conditions move into and remain in work. The initiative, known as the Pathways to Work Innovation Fund, will invite businesses, charities and organisations across the UK to bid for funding from September to trial new employment support solutions. 

The fund forms part of the government’s wider £3.5 billion employment support package, which is designed to improve opportunities for disabled people and those facing health-related barriers to employment. 

The announcement comes against a backdrop of rising economic inactivity linked to ill health. government figures show that 2.8 million people are currently out of work due to ill health, while the Keep Britain Working review estimates that health-related economic inactivity costs the UK economy £212 billion each year.

Pay rises alone may not be enough to retain staff

Employers may need to look beyond salary increases if they want to attract and retain talent, according to new analysis from recruitment firm Reed. 

Employers continue to offer enhanced sick pay despite SSP reforms

Many employers continue to provide occupational sick pay significantly above statutory minimum levels, according to new research from Incomes Data Research (IDR). 

The research found that occupational sick pay remains commonplace, with most employers offering enhanced support beyond SSP. Across organisations that provide the same terms for all employees, the median entitlement is equivalent to 6.5 weeks’ full pay during the first year of employment after probation, rising to 19.5 weeks’ full pay for employees with five years’ service. 

Three-quarters of employers with occupational sick pay schemes apply the same provisions across their workforce, although some offer enhanced terms based on role or length of service. The most generous arrangements are typically found in the public and not-for-profit sectors, where longer-serving employees may be entitled to up to 26 weeks’ full pay followed by 26 weeks on half pay. 

Draft Code on tipping reforms withdrawn ahead of planned October changes

The government has withdrawn the Draft Revised Code of Practice on Fair and Transparent Distribution of Tips, less than two weeks after it was laid before Parliament on 29 June 2026. The draft Code was withdrawn on 9 July 2026 without an official explanation. 

Stakeholders, including the Unite trade union have criticised the draft code and asked for it to be withdrawn. Unite argued that the proposed guidance gave employers too much control over how tips are distributed and did not provide workers with sufficient influence over decision-making.

The draft revised Code was intended to support new tipping provisions introduced by the Employment Rights Act 2025 which require employers to:

• consult workers on their written tipping policy

• review the policy at least every three years; and 

• provide an anonymised summary of the consultation. 

The government had indicated that the revised Code and associated reforms were expected to take effect in October 2026, subject to parliamentary approval. That timetable now looks extremely optimistic. And, until a new Code is approved, the existing 2024 statutory Code remains in force.

LPC considers future National Living Wage targets

The Low Pay Commission (LPC) has published a 72-page report setting out the evidence and criteria the government will need to consider to meet before deciding whether the National Living Wage (NLW) target could be increased beyond its current level of two-thirds of median earnings. 

The report is intended to support future policy discussions and will not affect NLW rates due to take effect from April 2027.

The LPC concluded that any decision to raise the target is a political choice. It says there are two credible approaches: retaining a target-based system (which drives further reductions in low pay and inequality) or returning to a more flexible, qualitative approach that allows annual decisions to respond to economic conditions. It also suggests hybrid models, such as treating two-thirds of median earnings as a minimum floor rather than a fixed target.

UK job vacancies fall to five-year low

Job vacancies in the UK have fallen to their lowest level in five years, as businesses become more cautious about recruitment.

The Office for National Statistics said vacancies dropped to 707,000 in the March to May period, the lowest level since February to April 2021. The professional services sector saw the largest fall in vacancies, but retail and hospitality also saw significant drops.

HMRC data also showed that new hires fell to a five-year low, with just under 540,000 new recruits recorded in April.

Unemployment fell slightly to 4.9% in the three months to April, while regular pay growth (which excludes bonuses) remained at 3.4%. However, private sector wage growth is now rising at its slowest rate in five and a half years.

PIP review calls for major reform of disability benefit system

A landmark government review has concluded that Personal Independence Payment (PIP) is no longer fit for purpose, highlighting significant concerns about how the benefit operates and supports disabled people. The interim findings of the Timms Review, published by the Department for Work and Pensions, represent the first comprehensive review of PIP since its introduction in 2013. 

The review found that, while PIP remains a vital source of financial support for many disabled people, it is failing to reflect changes in disability, health and employment over the past decade. Evidence gathered from more than 38,000 individuals and organisations suggests that the benefit can create barriers to work, physical activity and participation in community life, particularly for people with fluctuating or less visible conditions. 

Concerns were also raised about the assessment process. The report found that 90% of respondents viewed the process negatively, with many describing it as “dehumanising”, “degrading” and “stressful”. The review highlighted inconsistencies in the use of supporting evidence and identified low levels of trust in the current system.

MPs back additional support for 66-year-olds ahead of State Pension age increase

A cross-party parliamentary committee has called on the government to increase Universal Credit payments for 66-year-olds who have not yet reached State Pension age, as the qualifying age for the State Pension is gradually increasing from 66 to 67 between 2026 and 2028. It wants the government to consider making a temporary increase in benefits for people affected by the higher State Pension age, to reduce the risk of financial hardship.

Our newsletters

We publish monthly employment and education newsletters. If you'd like to be added to the mailing list, please let Joanne Moseley know.