7 key employment law changes in 2025

As we continue through 2025, both businesses and employees are gearing up for significant changes in employment law. 

While there are a number of changes taking effect this year, the most impactful reforms will arrive in 2026 with the Employment Rights Bill. This landmark legislation is set to overhaul various aspects of workplace rights with the intention to protect UK workers. As a result, there will be significant periods of consultation in 2025. As employers navigate the evolving legal landscape, staying informed and preparing for these upcoming changes will be essential to ensure compliance and fair workplace practices.

Here, Kate Venables, Christine Hart and Daisy Dickenson outline seven key changes taking place in 2025 that you should be aware of.

1. Up to 25% increase to protective award for 'fire and rehire'

The practice of 'fire and rehire’— where employees are dismissed and re-engaged under less favourable terms — has been widely criticised and identified as needing significant reform. The first step to reform was the introduction of the Statutory Code of Practice on dismissal and re-engagement (the Code) which came into force on 18 July 2024. The Code provides guidance to employers altering contracts of employment where there is a possibility of dismissal and re-engagement. It's admissible in legal proceedings where it must be taken into account by the court, tribunal or committee.

Crucially, since 20 January 2025, an employment tribunal has had the power to increase a protective award by up to 25% if an employer is found to have unreasonably failed to comply with the Code. Conversely, the Code also provides employment tribunals with the power to decrease a protective award by up to 25% where an employee is found to have unreasonably failed to comply. 

The Code illustrates that fire and rehire should be a last resort and echoes the Government’s commitment to ensuring fair treatment of employees.

The Employment Rights Bill proposes to go further than the Code by making it automatically unfair to dismiss an employee either for refusing to accept changes to their contract or to enable their reemployment under altered terms. However, an exception applies when an employer faces financial difficulties that jeopardise the viability of their business if it can demonstrate contractual changes were unavoidable and that they acted fairly.

In dismissal and re-engagement situations, an employment tribunal may make a protective award where an employer has failed to comply with its duty to collectively consult with employee representatives where they are proposing to dismiss and re-engage over 20 employees at one establishment within a 90 day period. Currently, a protective award is a maximum of up to 90 days’ pay but under a recent amendment to the Employment Rights Bill that could increase to up to 180 days. 

The potential 25% uplift in the protective award should serve as a strong incentive to employers to follow the Code and ensure that all those dealing with cases of dismissal and re-engagement are aware of the Code’s requirements.

2. National Minimum Wage

Effective from 1 April 2025, the National Minimum Wage will increase for all relevant worker categories:

• National Living Wage: £12.21 per hour
• 18–20 year old rate: £10.00 per hour
• 16–17 year old rate: £7.55 per hour
• Apprentice rate: £7.55 per hour.

The above rates are set until 31 March 2026. However, the Low Pay Commission anticipates consulting in 2025 to achieve reducing the National Living Wage age threshold from 21 to 18. Employers should be prepared for these increases to prevent unintentional breaches, particularly those arising from deductions such as salary sacrifice.

3. Statutory Sick Pay (SSP)

From 6 April 2025, SSP will increase by £2.00 from £116.75 to £118.75 per week. 

Currently, only those earning above the weekly Lower Earnings Limit (which from 6 April will be £125) are eligible to receive SSP. The recently amended Employment Rights Bill proposes to remove that condition albeit limiting the amount of SSP received by those earning below the Lower Earnings Level to 80% of the SSP flat rate. 

4. Statutory Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement Pay and Statutory Neonatal Care Pay

Statutory Maternity, Paternity, Adoption, Shared Parental and Parental Bereavement Pay will increase from 6 April 2025 to £187.18 per week (up from £184.03). Additionally, this year Neonatal Care Pay will be introduced with effect from 6 April and will be £187.18 per week. 

For all of these payments the employee will be entitled to the lesser of 90% of their average weekly earnings and the £187.18 figure. That is with the exception of Statutory Maternity and Adoption Pay, where the 90% figure is guaranteed (where higher than the £187.18 figure) for the first six weeks.

The minimum average weekly earnings required to qualify for these family-related payments is £125 (the Lower Earnings Limit).

5. National Insurance Contributions

Employers will face increased National Insurance Contributions (NICs) this year. NICs are payable to HMRC by employees, their employers and by self-employed workers. 

From April 2025, the employer NICs will increase from 13.8% to 15% and the threshold at which employers start paying NICs will decrease from £9,100 to £5,000 per annum.

Such an increase to the cost of employing workers will undoubtedly place employers under increased financial pressure which may potentially cause businesses to take cost-saving measures such as reducing their workforce, particularly in lower paid sectors.

6. Increases to Employment Tribunal awards 

The maximum compensatory award for unfair dismissal cases will increase from £115,115 to £118,223 on 6 April 2025. The minimum basic award for certain unfair dismissals, such as health and safety dismissals, will also rise from £8,533 to £8,763. For these new figures to apply, the effective date of termination must fall on or after 6 April 2025. 

Additionally, for the purposes of calculating the basic award for unfair dismissal claims and statutory redundancy pay, the statutory limit on a week’s pay will increase from £700 to £719. This will take the maximum basic award for unfair dismissal and the maximum statutory redundancy pay up to £21,570. 

Employment Tribunals can make awards for injury to feelings in discrimination and whistleblowing cases. The awards fall within three bands — low, middle and upper — (often known as the Vento bands after the case in which the three bands were first set out) depending upon how serious the Tribunal considers the injury to feelings to be.

For cases brought on or after 6 April 2025 the bands have increased to:

• Lower — £1,200 to £12,100.
• Middle — £12,100 to £36,400.
• Upper — £36,400 to £60,700.

In the most exceptional cases, awards can be made in excess of £60,700.

7. Neonatal Care Leave and Pay 

Statutory neonatal care leave and pay is set to take effect on 6 April 2025. This will provide a day one right (meaning employees are entitled to the leave from the first day of their employment) for up to 12 weeks’ leave. Parents whose babies require specialist care after birth will be entitled to statutory neonatal care pay provided that they have 26 weeks’ continuous employment and their average earnings are not less than the Lower Earnings Limit. 

The Neonatal Care Leave and Miscellaneous Amendments Regulations 2025 set out the details of eligibility, notification requirements and entitlement for statutory neonatal leave. To qualify, the baby must be born on or after 6 April 2025, receive neonatal care within 28 days of birth and have a continuous stay of at least seven full days. These regulations will also protect employees from detriment and unfair dismissal related to neonatal care. The Statutory Neonatal Care Pay (General) Regulations 2025 set out details of and eligibility requirements for statutory neonatal care pay.

Employers should amend existing policies or introduce new policies if required. Such policies should outline the process for requesting such leave, the eligibility requirements and the amount of leave the employee is entitled to. Employers should inform employees of this new right and provide training to HR colleagues and line managers.

Talk to us

2025 will bring significant changes to the employment landscape. Employers must stay proactive by updating policies, ensuring compliance and fostering safer, fairer working environments in line with new legislation.

Our experienced employment lawyers are on hand to help. Give us a call on 0333 004 4488, email us at hello@brabners.com or complete our contact form below.