Key employee payments and limits increased for 2025/26

Employers should be aware of key employee payments and limits increased for 2025/26 that take effect in April 2025. Those increases are to National Living/Minimum Wage, plus statutory payments including maternity pay, paternity pay and statutory sick pay and increases to awards for unfair dismissal, discrimination and redundancy claims.

The risks of not making statutory payments correctly to your staff, such as the Minimum Wage, include claims from staff, paying arrears, significant penalties and damage to your reputation as an employer.

What are the key employee payments and limits increased for 2025/26 

National Living Wage and Minimum Wage

The following new rates were announced in the Budget on 30 October 2024, and will come into force on 1 April 2025:

The top rate of pay now represents just under £24,000 for an employee working a 37-hour week and as the minimum wage rates increase, it is likely that a higher proportion of your staff may be paid at that minimum rate. That could, in turn, increase the risk of non-compliance, as more of your staff are likely to be affected. The Government issues its ‘naming and shaming’ list each year, which last year featured over 500 employers including multinational businesses and high street names. As well as repaying those arrears, businesses additionally face significant penalties and interest.

Statutory Parental Payments

From 6 April 2025, the statutory weekly rate for maternity and adoption pay increases to £187.18 from £184.03. The first six weeks of leave are paid at 90% of an employee’s average weekly earnings, with the following 33 weeks paid at the lower of that rate or the statutory weekly rate.

Statutory Paternity Pay (up to two weeks), Statutory Shared Parental Pay (up to 37 weeks) and Statutory Parental Bereavement Pay (up to two weeks) all also increase from 6 April 2025 to the same increased weekly rate of £187.18 or 90% of average weekly earnings, whichever is lower.

Statutory Sick Pay

From 6 April 2025, the weekly rate for Statutory Sick Pay will increase from £116.75 to £118.75 (a 1.71% increase).

Employer’s National Insurance Contributions

6 April 2025 will also see a change in the rate of employer’s National Insurance Contributions (NICs). The rate is increasing from 13.8% to 15% (a 1.2% increase). The secondary threshold (the threshold after which employers start paying NICs on their employees’ earnings) will also decrease from £9,100 a year to £5,000 a year (£758 a month to £417 a month)

On the flip side, the maximum Employment Allowance, which can be used by employers to reduce their NIC liability, is increasing from £5,000 to £10,500 and  the £100,000 restriction (based on Class 1 NICs paid in the previous tax year) that currently applies to the Employment Allowance will be removed. This should therefore enable more small employers to take advantage of the Employment Allowance and offset their NIC liability.

Statutory redundancy and guarantee payments

The Government has laid out their plans for their changes to the statutory redundancy payments. The statutory cap on a week’s pay will increase from £700 to £719 on 6 April 2025 for the purposes of calculating statutory redundancy pay, and the maximum is now £21,570 (i.e. 20 x £719 x 1.5). 

Therefore, from 6 April 2025, the amount of statutory redundancy pay an employee is entitled to is the number of weeks which can be taken into account multiplied by the lower of either their average weekly wage or £719. The number of weeks which can be taken into consideration depends on how long the employee has been continuously employed by their employer and how their years of continuous service relate to certain age bands.

In terms of age bands, for each complete year of continuous service under the age of 22, they will receive half a week’s pay. For each complete year of continuous service between the ages of 22 and 40, they will receive one week’s pay. For each complete year of continuous service between the ages of 41 and above, they will receive 1½ weeks’ pay. The maximum number of years which can be taken into account is 20.

Furthermore, statutory guarantee payments will increase from £38 a day to £39 a day. A guarantee payment is the amount to be paid to an employee who isn’t given work on a day on which they normally would have worked under their contract of employment. See our article here for more information.

Employment Tribunal Awards, Compensation and Fines

The anticipated increases to tribunal compensation have also been announced for 6 April 2025. The maximum compensatory award for an unfair dismissal award will increase from £115,115 to £18,223. But still retains the upper limit as the lower of a year’s salary or the statutory maximum.

The minimum basic award in a case where the dismissal is unfair for health and safety, employee representative, trade union or occupational pension trustee reasons will increase from £8,533 to £ £8,763.

The government have also increased the fine on businesses who fail to have a written policy on allocating tips, or for a failure to allocate and ay tips fairly. This fine has increased from £5,000 to £5,135.

For these new fees and compensatory awards to be made the event complained of must have occurred on or after 6 April 2025.

We are experienced in advising employers on the National Living/Minimum Wage and other payments to staff and advising employees on their rights. If you would like to discuss any of these increases and how it might impact you, please get in touch with our Employment team on 0345 450 5558 or enquiries@stephens-scown.co.uk