The coming year will usher in sweeping employment law reforms that will significantly transform workplace rights and employer obligations. While some of these measures will not come into effect for a couple of years, others such as wage increases and neonatal care leave, are slated for implementation this year.
For employers, 2025 will be a challenging year with numerous reforms requiring diligent preparation. This month, we examine the 6 key legislative reforms that employers must be ready to address in the months ahead.
1. Neonatal Care (Leave and Pay) Act 2023
Neonatal Care (Leave and Pay) Act 2023, expected to come into effect in April 2025, will give eligible parents up to 12 weeks of paid leave if they have babies who need specialist care in a neonatal care unit.
The legislation establishes neonatal care leave as a day-one right, applicable when a baby is admitted into hospital within 28 days of birth and has a continuous stay of seven days or more. The Act stipulates a minimum entitlement of one week and that this leave will be in addition to existing maternity, paternity and shared parental leave.
To qualify for neonatal care pay, an employee must be employed for a minimum of 26 weeks before the leave is requested and earn an average of at least £123 a week. The leave must also be taken in the first 68 weeks of the baby’s birth.
2. National Minimum Wage
On 1 April 2025, the National Minimum Wage will rise, with the following new hourly rates applying:
- National Living Wage – £12.21
- 18 to 20 years old – £10.00
- Under 18 years old – £7.55
- Apprentice – £7.55
For the first time, the government asked the Low Pay Commission to account for changes to the cost of living when recommending the NMW. The significant increase in the 18-20-year-old rate from £8.60 to £10 also reduces the gap between that rate and the national living wage, in anticipation of the adult rate being extended to 18-year-olds in the future.
The new rates represent noteworthy increases from the current rates - 6.7% for the National Living Wage, 16.3% for 18 to 20-year-olds and 18 % for under 18s and apprentices. As a result, employers should start budgeting for these increases and prepare payroll processes now to ensure that they are ready to implement the new minimum wage rates in April 2025.
3. Employer National Insurance Contributions
Effective 6 April 2025, the rate of employer National Insurance contributions will increase from 13.8% to 15%. Concurrently, the secondary threshold for when these contributions become payable will decrease from £9,100 to £5,000.
This change will pose significant upward pressure on employment costs, particularly for businesses operating on tight margins. However, the extension of the employment allowance from £5,000 to £10,5000 per year will provide some mitigation for small and medium enterprises (SMEs). See our article on Employer Tax Contributions for more details on the employment allowance.
Given the potential impact on your business, you should start exploring strategies to manage the added costs, especially if you anticipate the need for restructuring or redundancy.
4. Statutory Sick Pay
Also in April 2025, we will see changes to rates of statutory sick pay and statutory benefits.
In addition, the Employment Rights Bill 2024 proposes to change the entitlement to Statutory Sick Pay (SSP) to a ‘day one right’. This would allow employees to claim SSP on their first day of illness rather than their third, as is currently the case. The Bill also proposes to remove the earnings limit, enabling those who earn less than £123 per week to also be eligible for SSP.
We are not certain when this change will come into effect, however, it is possible that it will be introduced at some point in 2025.
5. Consultations on the Employment Rights Bill 2024
The Employment Rights Bill 2024, which was published in October 2024, includes a range of individual reforms set to reshape employment law. Key changes include:
- removing the two-year qualifying period for protection from unfair dismissal
- a ban on exploitative zero-hour contracts that take advantage of workers
- introducing day-one rights to paternity leave, parental leave and bereavement leave
- establishing flexible working as a ‘default’ right from day one for all workers, unless an employer can prove it is unreasonable
- giving workers the right to be offered a contract with guaranteed working hours if they work regular hours over a defined period.
While most of these reforms are not expected to take effect until 2026, with the unfair dismissal changes coming no sooner than Autumn 2026, extensive consultations on the measures are planned for 2025.
These consultations will likely focus on issues such as the removal of the unfair dismissal qualifying period, the detail of the approach to be taken on flexible working and new rights to reasonable notice of shifts that an employer requires a worker to work and payment for cancelled or moved shifts at short notice.
Employers are advised to start planning early to manage the workload associated with the upcoming changes. As details of the reforms emerge, organisations could review policies and identify training requirements for managers, especially around performance management, given the proposed unfair dismissal changes.
6. Right to Switch Off
The government’s ‘right to switch off’ policy, which was intended to prevent remote work from turning homes into ‘24/7 offices’, was notably absent from the Employment Rights Bill. However, the government intends to implement this policy through a statutory code of practice, which will prohibit contacting employees outside of working hours, barring exceptional circumstances.
The ‘right to switch off’ provision’s interaction with existing rights under the Working Time Regulations 1998 remains to be determined and it is unclear whether there will be an uplift in compensation for claims of non-compliance. Nevertheless, these non-legislative reforms could still be implemented later this year, potentially ahead of the measures in the Employment Rights Bill.
How We Can Help
2025 is poised to present many challenges and complexities for employers. However, by taking a proactive approach, you can turn these changes into opportunities to bolster your workplace culture and enhance employee satisfaction.
Rest assured, we will keep you informed of significant updates in employment law as they are announced over the course of the year. However, if you require specific guidance on the new protections coming into force or need assistance with drafting or amending existing employment documentation in preparation for these reforms, please contact our expert employment law team on 0300 303 2071 or by email.
