However, 2026 marks a shift in the financial framework governing these agreements, driven by the Government’s aim of reducing public spending on unemployment benefits. From 1 September 2026, employees will receive unemployment benefits for a shorter period than before.
What has changed?
Two notable changes for 2026 are:
- From 1 January 2026: Employer social contributions on mutual termination indemnities increased from 30% to 40%.
- From 1 September 2026: For any employees leaving under a mutual termination agreement with an effective termination date from this date onwards, the duration of unemployment benefits will reduce from 18 to 15 months for employees under 55, and from 27 to 20.5 months for those aged 55 and over.
What should employers do now?
Employers should familiarise themselves with the new rules around unemployment benefit coverage and be prepared for the possible impact they may have on future mutual termination negotiations with employees. If you need any support navigating these changes, please get in touch with a member of the MDR ONE team.
