Employment law changes in 2025: key developments to watch

By Alex Jones, Managing Director of 365 Employment Law.

As we look ahead to 2025, several anticipated changes in employment law in the UK are set to impact both employers and employees. Below are some of the key developments expected to shape the employment landscape in the UK.

1. Minimum wage increases

The national living wage (NLW) increase will come into force on 1 April 2025. NLW will increase by £0.77 to £12.21. For 18-20 year olds, minimum wage will increase by £1.40 to £10 an hour, and for 16-17 year olds by £1.15 to £7.55 an hour. Employers will need to comply with this new minimum wage.

2. National Insurance increase for employers

From 6 April 2025, the government is implementing changes to employer national insurance contributions (NICs).

Two of these changes represent tax increases. The secondary Class 1 national insurance (employer) threshold will be lowered from £9,100 to £5,000 per year, while the main rate of secondary Class 1 National Insurance (employer) contributions will rise from 13.8 per cent to 15 per cent. Additionally, the rates for Class 1A and Class 1B employer contributions, which apply to taxable benefits-in-kind, will increase accordingly.

To partially offset these increases, the government is enhancing the employment allowance in two ways. It will become available to all employers, removing the current restriction limiting it to employers with an annual employer NICs liability of less than £100,000. Furthermore, the maximum amount employers can save through the allowance will increase from £5,000 to £10,500.

In addition, the government plans to increase the Class 1 lower earnings limit for 2024-25, which is the threshold at which employees start paying national insurance.

3. Statutory payments increase

Statutory payments are legal entitlements granted to employees in certain circumstances such as illness, maternity, paternity, or bereavement. From April 2025 several statutory payments rates in the UK will increase.

The statutory sick pay (SSP) will rise from £116.75 to £118.75 per week, with a qualifying threshold of £125 per week. Under the proposed Employment Rights Bill, sick pay could soon be payable from the first day of being ill, however this will likely not be in effect by next April.

The statutory maternity pay, maternity allowance, statutory adoption pay, statutory paternity pay, statutory shared parental pay, and statutory parental bereavement pay will rise from £184.03 to £187.18 per week.

In addition, the lower earnings limit (the weekly earnings threshold for qualifying for all the above payments, except maternity allowance) will increase to £125 (up from £123), while the threshold for maternity allowance will remain at £30 per week.

4. Neonatal Care (Leave and Pay) Act 2023

The Neonatal Care (Leave and Pay) Act 2023 introduces statutory paid leave for eligible employed parents whose newborn baby is admitted to neonatal care. Eligible employed parents will be entitled to receive 12 weeks paid leave, in addition to maternity leave and paternity, for instance.

Although the Legislation received Royal Assent on the 24th May 2023, it will come into force in April 2025.

5. New failure to prevent fraud offence

The Economic Crime and Corporate Transparency Act 2023 created a new corporate offence of failure to take reasonable steps to prevent fraud, which means that affected employers will be liable where a specified fraud offence is committed by their employees or other associated persons, for the employer’s benefit, and they did not have reasonable fraud prevention procedures in place.

The new offence will come into force on 1 September 2025 and will apply across the UK. This new offence applies to large organisations, defined as meeting two out of three of the following criteria: more than 250 employees, more than £36 million turnover and more than £18 million in total assets.  Affected employers should review their existing fraud prevention procedures in light of the guidance to see if any changes will be required to ensure compliance with these new requirements. Fines for a failure to take reasonable steps to prevent fraud will be unlimited.

6. Employment Rights Bill

The government’s Employment Rights Bill is due to receive Royal Assent this year, most likely at some point over the summer. The Bill proposes wide-ranging changes to employment law, from ‘day one’ unfair dismissal rights to greater rights and protections for trade unions.

The Bill is still working its way through the parliamentary process, with the Public Bill Committee due to report to the House of Commons by 21 January 2025. The government published four consultation papers on some of the more technical aspects of the Bill and these consultations closed in early December. Responses are likely to inform further changes to the draft legislation. We are expecting to see further consultations during 2025 on some issues, such as removing the qualifying period for unfair dismissal claims.

Although most of the changes outlined in the Bill are expected to come into force in 2026 and beyond, some of the trade union changes (repeal of the Strikes (Minimum Service Levels) Act 2023 and some of the measures previously introduced by the Trade Union Act 2016) will take effect in 2025, once the Bill becomes law.

During 2025, we are also expecting to see the draft Equality (Race and Disability) Bill, which will, among other things, make it mandatory for large employers to report their ethnicity and disability pay gap.

For further advice, either as an employer or employee contact us at 365 Employment Law.

Tel: 01903 863284

ajones@365employmentlaw.co.uk

www.365employmentlaw.co.uk