A new year means even more employment law updates are just around the corner. Employment law is a constantly evolving area that employers need to stay informed. This is crucial to ensure compliance and support their workforce effectively. As we step into a new year, several key updates are emerging that could impact businesses of all sizes.
In this blog, we will explore significant employment law changes coming in 2025. These include National Living Wage increases, changes to statutory payments, and adjustments to employer National Insurance contributions. Developments in pension schemes and the Neonatal Care (Leave and Pay) Act 2023 will also be discussed. We will examine the implications of the Draft Equality (Race and Disability) Bill for employers. Understanding these changes is crucial for business owners and managers to ensure compliance and navigate the months ahead confidently.
National Minimum Wage
From 1st April 2025, the National Minimum Wage for 18-20 year olds will increase from £8.60 to £10. The increase in the rate for 18 to 20-year-olds reduces the gap with the National Living Wage. Therefore, aligning with plans to extend the adult rate to include 18-year-olds in the future.
The National Living Wage (NLW) for employees aged 21 and over is set to increase by 6.7 per cent. From April 2025, this will raise the hourly rate for NLW workers from £11.44 to £12.21. For full-time employees, these employment law updates represent an annual pay increase of approximately £1,400.
Baroness Philippa Stroud, Chair of the LPC, said:
The Government have been clear about their ambitions for the National Minimum Wage and its importance in supporting living standards. At the same time, employers have had to deal with the adult rate rising over 20 per cent in two years. In addition, the challenges that has created alongside other pressures to their cost base.
Updated Statutory Payments
A range of statutory payments will also increase including statutory sick pay, and statutory parental pay.
Statutory Sick Pay
Other employment law updates include the SSP increase. Statutory Sick Pay is set to rise from £116.75 to £118.75 per week in the 2025/2026 financial year. Additionally, the Lower Earnings Limit, which is the minimum weekly earnings required for employees to qualify for payments like Statutory Sick Pay, will increase from £123.00 to £125.00.
Statutory Parental Pay
Statutory payments, including maternity pay, adoption pay, paternity pay, shared parental pay, and parental bereavement pay, will increase from £184.03 to £187.18 per week. Additionally, the Lower Earnings Limit—the weekly earnings threshold for eligibility for all these payments, except maternity allowance—will rise from £123 to £125.
Employer National Insurance Increase
We’re sure all businesses are aware of the employer national insurance increase becoming law from 6 April 2025. As part of the employment law updates, the employer NI rate will increase from 13.8% to 15%, adding additional costs for employers on earnings above the threshold. Furthermore, the annual earnings threshold for employer NI contributions will be lowered from £9,100 to £5,000, meaning employers will need to start paying NI contributions on a greater portion of their employees’ earnings.
To support smaller businesses in managing these increased costs, the employment allowance—a relief that reduces the amount of NI contributions smaller employers need to pay—will increase significantly, rising from £5,000 to £10,500. This measure aims to offset the financial burden on smaller organisations and help them remain sustainable while ensuring compliance with the updated requirements.
These employment law updates highlight the importance of reviewing payroll processes and budgeting for the additional costs to avoid unexpected financial challenges. Employers are encouraged to seek advice or review their financial planning to ensure they can effectively adapt to these adjustments.
Draft Equality (Race and Disability) Bill
The Government plans to consult on The Equality (Race and Disability) Bill, focusing on pay gap reporting improvements.The Bill will require organisations with over 250 employees to report ethnicity and disability pay gaps transparently.
This builds on gender pay gap reporting, aiming to highlight wage disparities and promote fairness in organisations. By increasing transparency, the updates aim to address systemic inequalities and encourage fair pay practices. Employers must ensure robust data collection and reporting processes to meet these new obligations effectively. These changes seek to foster a more inclusive and equitable workplace for all employees.
Another focus will be on equal pay and outsourcing. New measures will be introduced to strengthen equal pay rights for workers facing discrimination based on race or disability. These provisions aim to ensure that all employees receive fair and equal remuneration for work of equal value, regardless of their background or circumstances. To reinforce these protections, employers will be explicitly prohibited from using outsourcing or subcontracting arrangements to bypass their equal pay obligations.
The Bill will need to undergo parliamentary debate before it can become part of the list of employment law updates for this year. However, it’s expected to be introduced during this parliamentary session, likely by spring 2025.
Secretary of State for Education and Minister for Women and Equalities, Bridget Phillipson MP, said:
We know too many people across our country face unjust barriers, and that’s why we will ensure equality and opportunity are at the very heart of all our missions.
I am proud to stand alongside our strong Women and Equalities Ministerial team, working tirelessly to address the root causes of inequalities and socio-economic disadvantage.
Neonatal Care (Leave and Pay) Act 2023
The Neonatal Care Act is believed to come in to force as early as April this year and will grant employees up to 12 weeks of paid leave if their baby is admitted to hospital. This applies to babies admitted within their first 28 days of life who have a continuous hospital stay of seven days or more. The leave, which has a minimum entitlement of one week, will be in addition to existing maternity, paternity, and shared parental leave rights.
This new entitlement aims to provide vital support for parents during challenging circumstances, ensuring they can prioritise their baby’s care without financial or professional penalties.
Statutory code of practice for right to switch off
The legal right to switch off is one of many future employment law updates that is currently being widely discussed. This proposal will move forward this year through a statutory code of practice. However, the Government will have to consult on this before making its way through parliament. Key points for this act include:
- The proposed “right to switch off” law aims to protect employees’ work-life balance.
- Employers will be prohibited from contacting employees outside of designated working hours, except in exceptional circumstances.
- The legislation addresses concerns about workplace stress and burnout caused by blurred boundaries between work and personal life.
- It seeks to promote employee well-being, improve productivity, and foster a healthier workplace culture.
- Exceptional circumstances, such as emergencies or critical business needs, will be clearly defined and communicated by employers.
- If implemented, the law would represent a significant step forward in establishing clear boundaries in modern work environments.
Plan Ahead for Employment Law updates
If you would like any further advice on employment law updates, contact our HR experts today.
