We know that the Labour Government plans to carry out a set of the most significant and wide-reaching changes to employment law for a generation. Much of this is set out as proposals in the Employment Rights Bill and are due to take effect in 2026. So what changes are actually going to take effect in 2025 and what preparatory steps should employers be taking now?
Here is our guidance to employers of key changes and concerns for the year ahead.
#1. Fire and rehire: higher protective awards – 20 January 2025
The Government has confirmed it wants to clamp down on this practice, which includes giving notice and rehiring staff on new contracts of employment with less favourable terms or dismissing existing workers and hiring a different workforce on new terms.
There is an existing Code of Practice on ‘fire and re-hire’, which was introduced under the Conservative Government on 18 July 2024 that Labour has described as ‘inadequate’ and has said will be replaced by a stronger version. This Code doesn’t make the practice of dismissal and re-engagement unlawful, instead it encourages employers to consult with staff (or their representatives) to consider options before unilaterally dismissing and rehiring on new terms of employment. See our article on Fire and Rehire for further guidance.
From 20 January 2025 – if an employer is found to have unreasonably failed to comply with the new Code and protective awards are made by an employment tribunal, these can be increased by up to 25%. So, instead of up to 90 days’ pay this would be up to 112.5 days of pay awarded per employee.
#2. Increases to National Minimum Wage – 1 April 2025
One of the big themes for employers this year will be increased financial pressures with National Insurance Contributions (NICs) rising plus the National Minimum Wage and National Living Wage (NMW) in April 2025.
1 April 2025 – the rates of the NMW will increase. The National Living Wage rate will increase to £12.21 which is an increase of 6.7% for adults over 21. The National Minimum Wage rate for adults between 18 to 20 will also increase to £10 from £8.60 (an increase of 16.3%), which is in line with the aim set out by the Labour Government to close the gap between the age bands for adults set out in NMW and their eventual elimination.
Changes in rates to NMW in 2025
| April 2024 (current rate) | April 2025 | |
| 21 and over | £11.44 | £12.21 |
| 18 to 20 | £8.60 | £10.00 |
| Under 18 | £6.40 | £7.55 |
| Apprentice | £6.40 | £7.55 |
Employers should be aware that from 1 April 2025 an employee who is paid the National Living Wage and works around a 37.5 hours per week would receive a salary of just below £24,000.
Getting pay right is very important. The latest naming and shaming list, published online by the Department for Business and Trade on 20 February 2024, revealed that 524 businesses failed to pay their employees the NMW. Non-compliance can lead to financial penalties and even criminal liability.
Action for Employers to take:
Employers should review which employees would be close to the national minimum wage rates when the increases come into effect on 1 April 2024.
Issues to be aware of include this may have a wider impact on your pay structure. Staff who were reasonably well above the NMW may now be much closer to it and this may mean potentially reviewing the whole pay structure if you wish to differentiate between job roles and experience of individuals. It could also be that employers who have previously not had to worry about staff dipping below the NMW may find they are inadvertently in breach. This could occur where there might be salary sacrifice, pay deductions, e.g. for uniform or additional hours are worked and not paid.
#3. Redundancies and restructuring
Due to increased financial pressures, some businesses will need to consider reducing costs including employee headcount during 2025, which could lead to a restructure and/or redundancies. See our article here for detailed guidance on how to do this correctly.
Action for Employers to take:
It is important to ensure redundancy and restructuring processes are carried out fairly and in a legal compliant manner otherwise this could lead to claims that could escalate cost pressures on an organisation. So, the best advice is to follow an ethical and fair procedure.
#4. Increases to sick pay, family leave pay, tribunal and redundancy payments – April 2025
Employers should be aware of key employee payments and limits increasing for 2025/26 that take effect in April 2025 – increases to statutory payments including maternity pay, paternity pay and statutory sick pay. Along with rises in awards for unfair dismissal, discrimination and redundancy claims.
7 April 2025 – statutory maternity pay, paternity pay, adoption pay, shared parental pay and parental bereavement pay will increase from £184.03 to £187.18 per week.
11 April 2025 – maternity allowance will also increase to £187.18.
Please note the lower earnings limit (the weekly earnings threshold for qualifying for the above payments, except maternity allowance) will be increasing to £125 (up from £123). For maternity allowance the threshold remains at £30 a week.
6 April 2025 – there are anticipated increases to tribunal compensation limits and statutory redundancy pay. The new limits for unfair dismissal awards, the new redundancy pay rate and Vento bands for discrimination awards are yet to be announced, but we will update when this information is available.
#5. Paid Neonatal Care Leave – 6 April 2025
The Government has recently confirmed in a press release that new legislation will come into effect (the Neonatal Care (Leave and Pay) Act on 6 April 2025. This will allow parents to take up to 12 weeks of leave, in addition to other parental leave entitlements such as maternity and paternity leave, so they can spend more time with their baby at what is a stressful time.
Once implemented in law neonatal care leave will be available to employees from day one of employment and will apply to parents of babies who are or have been admitted into hospital up to the age of 28 days, and who have a continuous stay in hospital of seven full days or more.
Parents who have 26 weeks’ continuous service and earn above the lower earnings limit will also be entitled to Statutory Neonatal Care Pay. This reflects the right to statutory maternity pay.
Action for employers to take:
Update your family leave policies and procedures to take these new rights into account, plus consider how you would operate these new rights in practice.
#6. Paternity Bereavement Act
The Paternity Leave (Bereavement) Act 2024 was granted Royal Assent on 24 May 2024 It will require commencement legislation to be brought fully into force but, when fully implemented, it will provide paternity leave to bereaved partners when the mother (or where there is adoption, the person with whom a child is placed or expected to be placed) dies. This is a day one right from the commencement of employment. It is anticipated that the amount of paternity leave would be increased to 52 weeks.
Although the Government is yet to confirm when this new right will come into effect, it is anticipated this will happen in April 2025.
Action for employers to take:
Be prepared to update your family leave policies and procedures to take these new rights into account, plus consider how you would operate these new rights in practice.
#7. Reforms to Statutory Sick Pay
We had anticipated that strengthening of statutory sick pay (SSP) rights may happen in April 2025 as the changes could be made without substantial new legislation. But, there have been no announcements to this effect and after the negative reaction to the Autumn Budget announced burdens on employers, it may well be the Government is holding back on implementing these reforms for the time being. The Employment Rights Bill proposes making SSP a day one right – currently there are three waiting days that are unpaid before statutory sick pay kicks in. There is also a proposal to remove the requirement to meet the lower earnings limit, which is currently set at £123 pounds a week and increasing to £125 on 11 April 2025. This will mean that upwards of an extra million people would be eligible for SSP.
#8. Employment Rights Bill and looking ahead
This year we are expecting a host of consultations during 2025 (following on from the consultations that have already taken place last year) on the radical employment law plans announced by the Labour Government under the Employment Rights Bill before implementation. The Government has confirmed that its key reforms will not take effect until 2026 and with reference to unfair dismissal (perhaps the most concerning for many employers) not before Autumn 2026.
In summary, the most transformative reforms are as follows and we have written about them in detail in our article here.
- Zero hours and low hours employees: new rights and guaranteed hours
- Day one unfair dismissal rights
- Changes to collective consultation
- Greater rights to request flexible working
- Employer liability for harassment by third parties
(i) Day one unfair dismissal rights:
The Employment Rights Bill is going to remove the qualifying period for unfair dismissal, so that these claims can be made from day one of employment. This will be a huge change for employers and is likely to increase the volume of employment tribunal claims.
A consultation is going to take place on a new statutory probationary period, referred to as the ‘initial period’ and dismissals during that time, along with compensation that might be awarded during probation. The Government’s preference is for a nine month probationary period. During this time an employer may be able to fairly dismiss an employee by way of a less onerous process, but there will be certain conditions attached to this, e.g. it is anticipated there will be a required meeting with the employee to explain concerns at which the employee could be accompanied. The lighter procedure would not apply to redundancy dismissals. .
Currently most claims of unfair dismissal require a qualifying period of two years. There are a few exceptions to this, for example, where there is a whistle-blowing dismissal or dismissal based on discriminatory reasons such as childbirth or maternity.
Action for employers to take:
In anticipation of it being harder to dismiss unsatisfactory staff, employers should be taking care to proactively monitor staff during probationary periods and not put off dealing with unsatisfactory hires until a later date.
(ii) End to ‘exploitative’ zero-hour contracts and right to average hours
The Employment Rights Bill aims to end what the Labour Government describes as ‘exploitative’ zero-hour contracts. Employers will be required to offer a guaranteed hours contract to zero-hours workers after the end of every reference period, if the worker’s hours exceed the minimum hours in their contract of employment. The offer of guaranteed hours would reflect the hours worked during the previous reference period. The reference period is yet to be defined in legislation, but the government anticipates this to be 12 weeks. This requirement will also extend to workers who are employed on guaranteed minimum hours contracts. This extension is designed to avoid employers seeking to circumvent the new rules by moving their zero-hours workers on to guaranteed hours contracts with very low guaranteed hours. Consultation is expected to take place in the upcoming months on issues such as the reference period and what might qualify a person to have rights to regular hours.
Attempting to give workers greater ability to plan their lives, the Government intends to ensure workers employed on a zero-hours or minimum hours contract (as well as workers who do not have a set working pattern) are given reasonable notice of a shift they are required to work. This will include the time and day of the shift and how many hours will need to be worked. Coupled with this right, those same workers will need to be given reasonable notice of any change to, or cancellation of, a shift. Any worker denied reasonable notice will be entitled to a proportionate level of compensation. Consultation will need to take place on the notice to be given, payments to made and how compensation would be calculated.
The reality is that zero-hours contracts can be beneficial to both parties, appears to be recognised by the fact that a worker will be able to decline an offer of guaranteed hours. It appears however that the offer must still be made, including (presumably) future offers. This seems an unnecessary administrative burden on many employers.
Action for employers to take:
Employers should be reviewing their workforce to identify what proportion of them would fall within the scope of these changes and how they would be affected by the proposed changes.
(iii) Protection against sexual harassment including third parties
A new anti-sexual harassment regime is now in place. The previous Conservative Government already instigated stricter protections against sexual harassment that took effect from 26 October 2024. This places a new proactive duty on employers to take ‘reasonable steps’ to protect staff against sexual harassment.
The Labour Government is intending to raise the bar on this so that employers won’t just have to take reasonable steps, they will have to take ‘all reasonable steps’ to prevent sexual harassment. In addition, this obligation will be extended to apply to customers and third parties. It’s not clear what consultation might take place before this extended obligation on employers comes into force.
Action for employers to take:
Pragmatic steps that employers can take now include reviewing and implementing technical guidance from the Equality and Human Rights Commission that was updated on 26 September 2024 to support the changes taking effect in October 2024. See here for the guidance that will be taken into account by employment tribunals. If an employer has not taken ‘reasonable steps’ then this failure can be added to a claim of sexual harassment and compensation awarded increased by up to 25%.
Other important steps for employers to take include having a robust and well-drafted anti-sexual harassment policy, which confirms such treatment is not tolerated in the workplace, make sure staff have regular training to have it recognised and prevented and ensure there is a ‘speak up culture’ against sexual harassment.
#9. Equality bill
Last, but not least, we anticipate the new Equality (Race and Disability) Bill will be published in draft for consultation during 2025. Employers should take note of this as it is expected to broaden equal pay laws currently confined to gender to also cover ethnicity and disability, along with introducing compulsory ethnicity and disability pay reporting for larger employers (with at least 250 employees).