UK Employment Law in 2025: Key Changes Every Employer Must Act on Now

As we progress through 2025, the UK employment law landscape is undergoing significant transformations that demand employers' close attention. Staying abreast of these changes is not merely a matter of compliance but a strategic imperative to safeguard your organisation against legal pitfalls and to foster a fair and productive workplace.

1. National Minimum Wage Increases

Effective from 1 April 2025, the National Minimum Wage rates will be elevated to address the ongoing cost of living crisis and projected inflation trends. The updated rates are:

• Workers aged 21 and over: £12.21 per hour (previously £11.44)
• Ages 18 to 20: £10.00 per hour (up from £8.60)
• Under 18 and apprentices: £7.55 per hour (increased from £6.40)

Employers must ensure that payroll systems are updated to reflect these changes and that all staff are compensated accordingly to avoid potential wage disputes and penalties.

2. Changes to National Insurance (NI) Contributions

From 6 April 2025, significant changes to National Insurance contributions (NICs) will take effect.  This will raise the rate of national insurance paid by employers in 2025 by 1.2% and means businesses will now pay a rate of 15%.

In addition, the threshold at which businesses are required to pay national insurance on workers earnings has dropped from £9,100 to £5,000.

Employers should ensure payroll systems are updated and employees are informed of the changes, which could impact net pay calculations and payroll reporting obligations.

3. Statutory Sick Pay and Family-Related Benefits

From 6 April 2025, Statutory Sick Pay (SSP) will increase to £118.75 per week, up from £116.75. Additionally, statutory rates for maternity, paternity, adoption, and shared parental pay will increase to £187.18 per week from 6 April 2025.

Employers should adjust their policies and payroll processes to align with these new rates, ensuring that employees receive their entitlements during periods of leave.

4. Neonatal Care Leave and Pay

The Neonatal Care (Leave and Pay) Act 2023 will come into effect on 6 April 2025. This legislation introduces a "day one" right for parents whose babies require neonatal care. Eligible employees are entitled to up to 12 weeks of neonatal care leave, in addition to existing parental leave rights.

To qualify for statutory neonatal care pay, employees must have at least 26 weeks of continuous service and meet the lower earnings limit.

Employers should update their leave policies and inform staff about this new entitlement to ensure compliance and support affected employees.

5. "Fire and Rehire" Practices

As of 20 January 2025, a new Statutory Code of Practice on Dismissal and Re-engagement became legally enforceable. This code addresses the controversial "fire and rehire" tactic, where employers dismiss employees and offer re-engagement on new terms. While not outright banning the practice, the code emphasises the importance of meaningful consultation with employees and exploring all alternatives before considering dismissal.

Employment tribunals now have the authority to adjust compensation awards by up to 25% for unreasonable non-compliance with the code.

Employers should review their procedures for changing employment terms to ensure they align with the new guidelines, thereby mitigating the risk of increased compensation awards.

6. Employment Rights Bill Consultations

The Employment Rights Bill (ERB), introduced in October 2024, proposes extensive reforms across 28 areas, including unfair dismissal, flexible working, and trade union regulations.

Throughout 2025, the government is conducting consultations to refine these proposals, with many changes expected to be enacted in 2026.

Employers should actively monitor these developments, participate in consultations where possible, and begin preparing for the forthcoming changes to ensure a smooth transition and ongoing compliance.

The Imperative of Compliance

Remaining compliant with evolving employment laws is crucial for several reasons:

• Legal Protection: Adherence to the latest regulations minimises the risk of legal disputes and financial penalties.
• Employee Relations: Demonstrating a commitment to fair practices fosters trust and loyalty among employees.
• Reputation Management: Compliance enhances your organisation's reputation as a responsible and ethical employer.

Employers are encouraged to conduct regular audits of their HR policies, provide training to management on new legal requirements, and seek advice and guidance when necessary to navigate the complexities of employment law effectively.

By proactively engaging with these changes, employers can not only avoid legal pitfalls but also create a more supportive and equitable workplace, ultimately contributing to the organisation's long-term success.

For our wonderful HR Pulse clients, we offer a suite of easy-to-use tools and HR documents, which includes policies, letters and forms, to help people managers navigate these challenges while staying compliant and efficient. Our solutions streamline HR processes, ensuring your organisation remains ahead of regulatory changes while freeing up your time to focus on growing your business.

If you’re not yet one of our clients and want to learn more about how we can help you design a tailored people management solution, click the "GET IN TOUCH" button above for more information!

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