Employment Law 2025 Update – Changes to legislation

Contents

1. National Insurance Contributions
2. Employment Benefits
3. National Insurance Contributions
4. Employment Rights Bill reforms
5. How can you prepare for these employment law 2025/26 changes?

Employment Law 2025 Update

With the new financial year approaching quickly, the next few months are going to be extra busy for Finance and HR teams up and down the UK.

Big changes are around the corner and all are coming into effect on 6 th April 2025. Some notable changes are listed below:

• Increase in the National Minimum Wage across all age brackets
• Increase to employment related benefits, including SSP, SMP and Paternity Pay
• Increase to employer National Insurance contributions

The weeks leading up to the new financial year can be some of the busiest within an organisation, but for reasons outlined below, they are seen to be more crucial than normal this year. This is particularly the case for small teams who are responsible for much of the company budgets and planning themselves.

Current and future minimum salary levels:

This year will be slightly more significant due to the increases in statutory pay and contributions. The National Living Wage (NLW) is now for employees aged 21 and over. Below are the increases which come into effect in April 2025:

Employer National Insurance increase

The contributions made by employers to the National Insurance will rise from 13.8% to 15% as well as the threshold at NIC payments apply will reduce from £9,100 per annum to £5,000.

Employment Rights Bill reforms

Aside for all of the above, HR teams will also be heavily involved in implementing the significant changes being brought about by the Employment Rights Bill which include the following key reforms for employees:

• Statutory sick pay to become payable from the first day of sickness.
• Zero-hour contracts that exploit employees are to be banned and guaranteed hours, reasonable notice of shifts and compensation for short-notice of cancelled shifts to be introduced.
• Right to protection from unfair dismissal from “day one” (unless within a probation period).
• Restrictions on “fire and rehire” practices.
• Enhanced sick pay rights and potential new rights regarding neonatal care leave.
• The “right to switch off” for work-life balance.
• Strengthen collective redundancy rights by ensuring employer obligations to consult on and notify 20+ redundancies applies across the workforce and not a single establishment.

These are just a few of the amendments being brought in and will all require HR teams to update policies, procedures and employee communications in ensure compliance.

Preparation for the 2025/26 changes

When planning for the forthcoming financial changes, accurate compilation of all your costs for the previous year is essential. This should include:

• Current salaries across the company, including any possible recruitment costs or pay increases.
• All expenses across each department
• Employment and turnover rates can be useful if there is a trend in teams or pay grades that has experienced a higher than usual turnover rate as this may affect future recruitment and training decisions.
• Annual leave, cost of payment in lieu or other related leave costs.
• Benefits, bonuses and other incentives, unfortunately if an organisation is struggling to meet the tax and wage rises in April, it is usually this area which is the obvious place to look to make savings.
• Training and L&D budgets are also a crucial spend which need to be included in all budgetary discussions and decisions. Development of your people is important but so is keeping a rein on the costs.

For the reforms to the Employment Right Bill, HR teams will also need to take the following actions to ensure compliance:

• Policy updates – reviewing and revising existing employment policies to reflect the new legislation, including changes to Contracts of employment, disciplinary procedures and flexible working guidelines.
• Performance management adjustments – ensuring performance management systems are adapted to reflect “day one” employment rights, including robust performance reviews and fair and transparent dismissal procedures.
• Recruitment practices – examine the processes to ensure compliance with new rules regarding zero-hour contracts and guaranteed hours for regular workers.
• Monitoring compliance – regular monitoring of the new employment laws and addressing any potential issues proactively.

If you put all of the above together, this equates to the largest package of cost rises and employment rights changes to affect UK businesses in several years. Therefore, now is the time HR and Finance teams need to collaborate and understand where the additional funds are going to come from, how the numbers are going to stack up and the work involved in ensuring their organisation remains compliant. If you would like to know more about how the Employment Law 2025 changes affect your business. Call us.