As we move into 2025, several significant changes in employment law are set to impact UK businesses, especially small businesses. From wage increases to new rights for employees, these changes will require your attention and planning to ensure compliance. Here’s what you need to know to navigate the year ahead:
1. Employment Rights Bill – Key Reforms (Consultations Begin in 2025)
The government is set to introduce wide-ranging reforms to employment rights, including:
- Unfair Dismissal Protection: The qualifying period for unfair dismissal protection will be reduced from two years to zero.
- Day-One Rights: Employees will gain immediate access to paternity leave, parental leave, and bereavement leave.
- Flexible Working: Flexibility will become the default right for all workers, starting from day one, unless proven unreasonable by the employer.
- Guaranteed Working Hours: Employees working regular hours over a set period will have the right to a contract with guaranteed hours.
- Ban on ‘Fire and Rehire’: The controversial practice will only be allowed in exceptional cases.
What this means for you: Start preparing by reviewing your workplace policies, training managers on new performance management standards, and updating recruitment strategies.
2. Neonatal Care Leave and Pay (Effective April 2025)
From April, parents of babies requiring neonatal care will be entitled to 12 weeks of paid leave. This leave is available if the baby is admitted to hospital within 28 days of birth for a stay of at least 7 days. The leave is in addition to existing maternity, paternity, and shared parental leave entitlements.
Action Step: Update leave policies to reflect this new entitlement and ensure payroll systems are set up accordingly.
3. National Minimum Wage Increase (Effective April 2025)
Significant increases to the National Minimum Wage will come into effect:
- National Living Wage: Up by £0.77 to £12.21 per hour.
- 18-20 Year-Olds: Up by £1.40 to £10.00 per hour.
- 16-17 Year-Olds: Up by £1.15 to £7.55 per hour.
What this means for you: Review payroll structure and prepare for the wage increases, especially if you employ younger workers or rely on minimum wage staff.
4. Statutory Payments Increase (Effective April 2025)
Several statutory payment rates will increase:
- Statutory Sick Pay: Increased to £118.75 per week.
- Parental Leave Payments: Increased to £187.18 per week for statutory maternity, paternity, and adoption leave.
Action Step: Plan for these changes in your budgeting, as higher statutory payments may affect cash flow, particularly for small businesses with tight margins.
5. National Insurance Contributions (Effective April 2025)
Changes to National Insurance Contributions will affect your business:
- Employer NICs: Secondary Class 1 NICs rise from 13.8% to 15%, and the threshold for paying NICs lowers from £9,100 to £5,000.
- Employment Allowance: This will increase from £5,000 to £10,500, helping smaller businesses offset higher NIC costs.
What this means for you: Ensure your payroll system accounts for the increased NIC rates and consider the impact on your overall business finances.
6. Right to Switch Off – Statutory Code of Practice (Expected 2025)
A new Right to Switch Off will prevent employees from being contacted outside working hours, except in exceptional cases. This aims to protect work-life balance, particularly for those working remotely.
What this means for you: Prepare to adjust your remote working policies to ensure compliance, and consider how this may impact your communication practices with staff.
7. Equality (Race and Disability) Bill – Reporting Obligations (Draft 2025)
Employers with over 250 employees will be required to report on ethnicity and disability pay gaps, expanding the existing gender pay gap reporting framework. This will help promote pay equity and offer employees more transparency.
Action Step: Review your reporting systems and consider implementing strategies to address any pay disparities in your organisation.
8. Pensions Scheme Bill (2025)
The government will introduce reforms to improve pension security, including:
- Pension Pot Consolidation: Small deferred pension pots will be automatically consolidated.
- Pension Dashboards: A platform for individuals to view all their pension savings will launch in 2025.
What this means for you: Stay informed about changes to pension regulations and prepare to support employees with the transition to pension dashboards.
Key Takeaways for Small Businesses
- Prepare for Higher Costs: Budget for wage increases, higher statutory payments, and increased NIC contributions.
- Update Your Policies: Review leave policies, including for neonatal care, and ensure remote working practices comply with the new “right to switch off.”
- Stay Proactive: Start preparing for the Employment Rights Bill and other changes in 2025. Early preparation will help you stay compliant and avoid penalties.
We can help you stay up to date with these changes and ensure your business is ready to meet the evolving regulatory landscape in 2025.
