2025 Employment Law Changes (Updated)

This is an update to our previous article on the 2025 employment law changes, to factor in a number of recent developments.

2025 Employment Law Changes: Rate Changes

The 2025 employment law changes will include the usual set of rate changes. Most will take effect in April 2025, and include the following:-

• As we highlighted in a previous article, the new rates for the National Living Wage and the National Minimum Wage that will apply from the 1st April 2025 were announced on the eve of the 2024 Autumn Budget which was delivered on the 30th October 2024. The new rates that will apply from the 1st April 2025 will be as follows: (i) For workers aged 21 and over (i.e. the National Living Wage), the rate will increase by £0.77 per hour (6.7%) from £11.44 per hour to £12.21 per hour (ii) For workers aged 18-20 inclusive, the rate will increase by £1.40 per hour (16.3%) from £8.60 per hour to £10.00 per hour (iii) For workers aged 16-17 inclusive, the rate will increase by £1.15 per hour (18.0%) from £6.40 per hour to £7.55 per hour (iv) The apprentice rate will increase by £1.15 per hour (18.0%) from £6.40 per hour to £7.55 per hour (v) The daily rate for the accommodation offset will increase by £0.67 (6.7%) from £9.99 to £10.66.
• The new rates for statutory maternity pay, statutory paternity pay, shared parental pay, adoption pay, maternity allowance, and statutory parental bereavement pay were announced by the Government on the 21st November 2024, and these employment law changes will apply from the 6th April 2025. The new rates are as follows: (i) Statutory maternity pay – those who qualify are entitled to receive it for 39 weeks at a rate of 90% of their gross weekly pay per week, subject to a maximum of £187.18 per week (up from £184.03 per week) after the first 6 weeks (ii) Statutory Paternity Pay – the smaller of £187.18 per week (up from £184.03 per week) or 90 per cent of their average weekly earnings per week (iii) Statutory Shared Parental Pay – the smaller of £187.18 per week (up from £184.03 per week) or 90 per cent of their average weekly earnings per week (iv) Statutory Adoption Pay – those who qualify are entitled to receive it for 39 weeks at a rate of 90% of their gross weekly pay per week, subject to a maximum of £187.18 per week (up from £184.03 per week) after the first 6 weeks (v) Statutory Parental Bereavement Pay – the smaller of £187.18 per week (up from £184.03 per week) or 90 per cent of their average weekly earnings per week. The average gross weekly earnings required to qualify for Statutory Maternity Pay and these other family friendly payments will increase from £123.00 or more per week, to 125.00 or more per week. Where an employee earns less than £125.00 per week on average, but was employed for 26 of the 66 previous weeks earning at least £30 per week (averaged over any 13 week period during the said 66 weeks), then they will be entitled to Maternity Allowance for 39 weeks of the smaller of £187.18 or 90 per cent of their average gross weekly earnings per week.
• Statutory Sick Pay (SSP): The new rate was announced at the same time as the new rates for family friendly payments (i.e. the 21st November 2024), and will come into force on the 6th April 2025. SSP will increase from £116.75 per week to £118.75 per week. The average gross weekly earnings required to qualify for SSP will increase from £123.00 or more per week, to 125.00 or more per week, and therefore matches the earnings threshold for Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay, and Statutory Parental Bereavement Pay.
• The statutory cap on a weeks pay for the purposes of calculating the basic award and statutory redundancy pay: The new rate is likely to be announced in March 2025, and will come into effect on the 6th April 2025.
• The Vento Bands: The Presidents of the Employment Tribunals in England & Wales and Scotland are due to conduct the annual re-evaluation of the Vento bands in March 2025, with the changes coming into force on the 6th April 2025

Real Living Wage & London Living Wage

Those employers who are signed up to the Real Living Wage and the London Living Wage are expected to implement the changes to the respective rates that were announed back on the 23rd October 2024 by the 1st May 2025 at the latest.

In terms of the new rates, the Real Living Wage was increased by £0.60 per hour from £12.00 per hour to £12.60 per hour, an increase of 5%. The rate for the London Living Wage increased by £0.70 per hour from £13.15 per hour to £13.85 per hour, an increase of 5.3%.

Gender Pay Gap Reporting

At the same time as the 2025 employment law rate changes are taking effect, the usual gender pay gap reporting deadlines need to be met by those organisations with a headcount of 250 or more employees. Accordingly, the deadline for public sector employers to report their data will be the 30th March 2025, with a snapshot date of the 31st March 2024. And for private sector employers and voluntary organisations, the deadline will be the 4th April 2025, with a snapshot date of the 5th April 2024.

New Labour Government: Upcoming Employment Law Changes

It was the new Government’s stated intention that it would introduce an Employment Rights Bill containing a number of proposed employment law changes within 100 days of taking office. The proposed employment law changes had previously been outlined in the Labour Party’s manifesto and new deal.

The Employment Rights Bill was ultimately published on the 10th October 2024, 2 days ahead of the 12th October 2024 deadline.

Employment Rights Bill

The proposed employment law changes contained in the Employment Rights Bill are as follows:-

• Zero Hours Contracts: A ban on what the Government calls “exploitative” and “one sided” zero hours contracts, ensuring that workers have the right to a guaranteed-hours contract that reflects the number of hours regularly work based upon a twelve-week reference period, and reasonable notice re shift changes. Under the Employment Rights Bill, workers will also be entitled to be compensated should shifts be either cancelled or finish early. Nevertheless, employees will be able to have a zero-hours contract should they want one
• Fire & Rehire: A ban on ‘fire and rehire’ except where there is no other viable option to ensure the survival of the business and where a proper procedure has been followed. The statutory code introduced by the previous Government will also be replaced
• Unfair Dismissal: Currently, employees have to have 2 years of continuous service before acquiring the right to bring a claim for unfair / constructive dismissal. Workers will now have this right from day 1 of their employment. Nevertheless, employers will still be able to incorporate probabtionary periods into their workers contracts of employment (referred to as an ‘initial period of employment’), of up to what the Government proposes will be 9 months (to be consulted upon prior to a final decision being made). This proposed 9 months is longer than the 6 months that had been recently reported. This means that whilst the Government will still be making the right to bring a claim for unfair dismissal a day 1 right, the new legislation will include provisions that will apply to dismissals during probationary periods, including the fact that employers will only have to follow an abridged process (referred to by the Government as a ‘light touch’ process, and which could possibly be confined to just holding a meeting – to be consulted upon) compared to the full set of procedures that will otherwise apply. Moreover, lower compensation rates may apply to unfair dismissals that occur during a probation period (subject to consultation). Furthermore, dismissing women who are pregnant, on maternity leave, or who have returned to work within the last 6 months will be prohibited, except in certain circumstances
• Statutory Sick Pay (SSP): Entitlement to SSP will also become a day 1 right (as opposed to having to wait 3 consecutive days at present), and the right to SSP will be extended to all workers by removing the lower earnings eligibility threshold (currently £123.00 per week). Nevertheless, the rate of SSP that those earning below the lower earnings eligibility threshold will receive will be subject to consultation by the Government
• Day One Rights: As well as making the right to claim for unfair / constructive dismissal and to SSP day 1 rights, unpaid parental leave, paternity leave, and a new statutory right to paid bereavement leave (i.e. the current right to parental bereavement leave will be a extended to a general entitlement to bereavement leave) will also become a day 1 rights.
• Flexible Working: The day 1 right of employees to request flexible working will be enhanced, in that the grounds for refusal (which remain the same as at present) must be reasonable. Hence, the main change is the reasonableness test
• Single Enforcement Body: A new body called the ‘Fair Work Agency’ will consolidate the enforcement roles currently handled by the HMRC’s National Minimum Wage enforcement team, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate, with the remit of enforcing employment rights and compliance. It will also be responsible for enforcing holiday pay.
• Trade Unions: The Employment Rights Bill contains several provisions re trades unions. They include: (i) statutory recognition to be simplified (ii) a new entitlement for union representatives to engage with, advocate for, recruit, and manage member activities within the workplace (iii) a requirement for employers to supply their employees with written particulars setting out their trade union rights, alongside their contract of employment / employment particulars (iv) Strikes (Minimum Service Levels) Act 2023 to be rescinded (v) enhanced protections for members
• Gender Pay Gap Reporting / Menopause: Those currently required to report their gender pay gap data will also be required to compile action plans to address their pay gap and on how they will support those going through the menopause
• Enhanced Harassment Protection: A requirement upon employers to take ‘all reasonable steps’ to prevent sexual harassment, adding sexual harassment to the list of whistleblowing protected disclosures, and protections against third party harassment
• Other Measures Within The Employment Rights Bill: To create a framework for setting pay and conditions in the adult social care sector, and to reinstate the School Support Staff Negotiating Body (SSSNB) and the two-tier code for public sector contracts

Amendment Paper

The Employment Rights Bill has now reached the Committee stage with a number of amendments tabled, details of which were published on the 27th November 2024 in an amendment paper.

The main amendments that have been proposed to the Employment Rights Bill are as follows:-

• Extending the time limits for bringing an employment tribunal claim: The limitation period for most employment tribunal claim is currently 3 months. The proposed amendment would extend this to 6 months. This proposal had been included within the Labour Party’s “new deal” plan. Hence, it came as a surprise when it was not included within the Employment Rights Bill as originally published.
• The “initial period of employment” (i.e. the statutory probationary period): The amendments include proposals for the “initial period” to be between 3 – 9 months and for a cap on the compensatory award, at a rate likely to be lower than that awarded outside of the statutory probationary period
• Equality action plans: The Employment Rights Bill currently stipulates that large employers, those who employ more than 250 employers, will need to produce action plans in relation to their gender pay gaps and the support provided for those going through the menopause. An amendment however proposes that action plans include setting out the support to be provided for those with menstrual problems and menstrual disorders.

‘Next Steps’ Document

The following have not been included within the proposed employment law changes contained in the Employment Rights Bill, but the Government has confirmed with a ‘next steps’ document (published at the same time as the Employment Rights Bill) that they will be addressed at a future point:-

• A Legal Right To Switch Off / Disconnect: The right to disconnect from work communications and obligations outside of regular working hours to protect employees’ well-being and work-life balance, by setting boundaries between their personal and professional lives.
• Creating A Single Status Of Worker: Currently, there are 3 types of employment status – employees, workers, and the self-employed. Labour plan to amalgamate the categories of employee and worker so as to create one single status of ‘worker‘ who would have the same basic employment law rights. The only people outside of the new category of worker would be the genuinely self-employed.
• Equality (Race and Disability) Bill: To include the following: (i) extending the right to equal pay to ethnic minorities and the disabled (ii) Introducing ethnicity pay gap reporting and disability pay gap reporting for firms with 250 or more employees
• NMW Bands: The introduction of a “genuine living wage”. Hence, one rate will apply across the board, with the age bands removed. However, as we highlighted in a recent article, on the 30th July 2024 the Secretary of State for Business and Trade, Jonathan Reynolds, announced that the move towards having one rate across the board for the National Living Wage would be phased in gradually over a period of time. That is, the National Minimum Wage age bands will remain for some time yet. The remit of the Low Pay Commission has been expanded to factor in the cost of living.
• Reviews: Carers’ leave and parental leave to be reviewed

Timeframe

The Government has confirmed that there will be extensive consultation (to start in 2025) over the proposed employment law changes set out in the Employment Rights Bill. It has also confirmed that most of the proposed employment law changes will not be implemented until 2026 at the earliest.

National Insurance Contributions

It was announced in the Autumn Budget on the 30th October 2024 that from the 6th April 2025, employers secondary class 1 national insurance contributions (NICs), together with Class 1A and Class 1B rates, on an employee’s earnings above £5,000.00 per annum / £96 per week (down from £9,100.00 per annum / £175 per week) will increase from 13.8% to 15%. Nevertheless, in an attempt to offset the impact upon small businesses, the employment allowance will be increased from £5,000.00 to £10,500.00 per annum, with the £100,000 threshold now removed so that the allowance is no longer confined to just employers who have incurred an employer NICs liability of less than £100,000 in the previous tax year.

Skills England Bill

The Institute for Apprenticeships and Technical Education (Transfer of Functions etc) Bill was introduced in the House of Lords on the 9th October 2024, and has thus far reached the committe stage.

This bill will transfer the duties and responsibilities of the Institute for Apprenticeships and Technical Education (IfATE) to a new body called Skills England. Moreover, the name of the apprenticeship levy will be changed to the growth and skills levy.

The objectives behind Skills England and this part of the Government’s proposed employment law changes is to:-

• Develop a unified understanding of national and local skills needs through collaboration with industry, unions, and governmental bodies.
• Assess current and future skills requirements to inform the Department for Education’s policy priorities
• Determine what training the growth and skills levy can be used for, to ensure that it aligns with the skills needs within the economy, and to ensure that it provides value for money
• Ensure that national and regional skills systems are addressing skills requirements, and that they are doing so in a co-ordinated manner.

Pension Schemes Bill

The Government announced on the 13th November 2024, that it will be introducing a new Pension Schemes Bill in 2025. The objectives behind this part of the Government’s proposed employment law changes is to merge £80 billion in assets from 86 local government pension schemes and from defined contribution schemes into pension “megafunds” which can be used to invest in “businesses and critical infrastructure while boosting defined contribution savers’ pension pots….[and to] drive economic growth.“

Holiday Pay

Under the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, the following holiday pay changes applied for leave years that begun on or after the 1st April 2024:-

• Holiday pay for workers with irregular hours and those who only work part of the year will be revamped with the implementation of “rolled-up” holiday pay. This means that instead of being paid when taking annual leave, these workers will instead receive an enhancement to their regular pay in respect of annual leave.
• An accrual method of 12.07% of hours worked will be allowed for irregular hours and part-year workers for annual leave entitlement “in the first year of employment and beyond“.
• A new definition of what constitutes “normal remuneration” (i.e. to include payments directly connected to the work that an emplyee is obliged to perform in accordance with their contract of employment (including commission), payments related to seniority, qualifications and length of service, and any payments that the worker has regularly received over the previous year, including overtime). The new definition applied from the 1st January 2024.
• The Government has replicating certain retained EU case law regarding the carry over of holiday entitlement for: (i) those who are on sick leave or on statutory leave, and (ii) where the employer has failed to acknowledge an entitlement to and/or pay for annual leave, provide sufficient opportunities and/or encouragement for leave to be taken, and failed to provide sufficient warnings that leave could be lost if not taken. This took effect from the 1st January 2024

Whilst those operating April - March annual leave schemes will have already implemented these employment law changes, those operating calendar year schemes (i.e. beginning January 2025) will now need to implement them as well

Dismissal & Re-engagement

Currently, collective consultation is required where an employer is planning to dismiss 20 or more employees in a dismissal and re-engagement scenario (i.e. fire and rehire). From July 2024, employers engaging in dismissal and re-engagement must follow the Code of Practice on Dismissal and Re-engagement. Failure to do so, can result in an uplift in compensation of up to 25% in an unfair dismissal situation, but up until now that uplift had not applied to protective awards (i.e. which apply where there has been a failure to collectively consult, which can result in an award of up to 90 days pay). Nevertheless, from the 20th January 2025, the 25% uplift will now also apply to protective awards as well.

Neonatal Care (Leave and Pay) Act 2023

Under the Neonatal Care (Leave and Pay) Act 2023, where neonatal care is required in hospital for at least 7 days, parents will be entitled to take up to 12 weeks paid leave, in addition to other leave they are entitled to, such as maternity, paternity, and shared parental leave. This will be a day 1 right. The Act received Royal Assent on the 24th May 2023, and will now come into force in April 2025.

Employment Tribunal Procedure Rules 2024

The Employment Tribunal Procedure Rules 2024 came into effect on the 6th January 2025, and replace the rules that had been contained in Schedule 1 to the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2013.

The Tribunal Procedure Committee (TPC) had confirmed in its response to the consultation on changes to the employment tribunal rules of procedure that it would “re-make the rules of procedure contained in the 2013 Regulations in their existing form, in order to move them from the Schedules to the 2013 Regulations to become TPC Rules” with revisions to the existing rules confined to aligning them with current drafting protocols, updating citations, and clarifying ambiguities.

The need for the changes came about as a result of the transfer of responsibility for making the rules from the Department for Business and Trade (DBT) to the TPC back on the 25th April 2024.

The new Employment Tribunal Practice Directions which had been scheduled to come into force on the 6th January 2025 as well, have been put back until later in January 2025. The implementation of the new Practice Directions had originally been timed to come into force with the Employment Tribunal Procedure Rules 2024 simultaneously. The announcement of the delay stated that the changes would not be ready in time. The revised Practice Directions will, among other provisions, prevent Respondents from filing their ET3’s via email, barring exceptional circumstances.

Other Potential Employment Law Changes

The following are additional employment law changes that may potentially be enacted. Some of these employment law changes, however, may not be enacted in time to form part of the 2025 employment law changes, but instead of later changes beyond the 2025 employment law changes:-

• In response to its 2020 consultation on non-compete clauses, the Government announced plans on the 10th May 2023 to limit post-termination non-compete clauses to 3 months in terms of duration. The announcement by the Department for Business and Trade states that the aim behind the proposal is to promote “competition and productivity in the workplace.” It is unclear as to what the new Government’s intentions are in relation to this issue
• Save As You Earn (SAYE) & Share Incentive Plan (SIP) Consultation: The previous Government launched a consultation “to consider opportunities to improve and simplify the scheme[s].” Again, it is unclear as to what the new Government’s intentions are in relation to this issue
• Umbrella Companies: The Government announced in the 2024 Autumn Budget that it would “bring forward legislation to change who has responsibility to account for Pay As You Earn (PAYE) where an umbrella company is used in a labour supply chain to engage a worker. This will move the responsibility to account for PAYE from the umbrella company that employs the worker to the recruitment agency that supplies the worker to the end client. Where there is no agency in a labour supply chain, this responsibility will sit with the end client.” It is currently anticipated that the legislation will come into force in April 2026, and will not form part of the 2025 employment law changes.
• AI technology: New measure to “harness the power of artificial intelligence [and] strengthen safety frameworks”
• Back on the 30th July 2024, the Government announced that it would produce a white paper, using a new report called ‘Pathways to Work‘ as its blueprint, for tackling the problem of growing economic inactivity. In addressing the issue of economic inactivity, the Government is looking to increase the level of employment within the economy, and thereby in turn boost economic growth. On the 10th September 2024, the Government announced that it was launching a “Labour Market Advisory Board…to advise government on getting Britain working again.“
• The Paternity Leave (Bereavement) Act 2024: This received Royal Assent during the “wash up” period on the 24th May 2024 and will provide a day 1 right for fathers / partners to take up to 52 weeks leave from the date that the mother / primary adopter of the child has died (during the first year of the child’s life). The Act was originally expected to come into force in April 2025, but no date has yet been scheduled.

As stated, some of the above employment law changes may not be enacted in time to form part of the 2025 employment law changes, but instead of later changes beyond the 2025 employment law changes.

Further 2025 Employment Law Changes May Be Announced

Further employment law changes may yet be announced, and any further proposed employment law changes will be detailed in future updates to this article.