Stay ahead of 2025: 8 Employment Law changes made simple

For employers of all shapes and sizes, 2025 will be a challenging and complex time. With National Insurance, minimum wage and employment rights changes on the horizon, there’s plenty to keep on top of.  

But for SMEs, it’s going to be even harder. Most small businesses will have just one person managing employment and compliance issues alongside a whole to-do list of other priorities.  

If this sounds like you, there’s a good chance you’re wondering where to start and how to prepare for the 2025 employment law changes. Here, we explain the 8 changes you must look out for in 2025.  

 

What's happening and when? 

“Clearly, this volume of employment law changes can’t be introduced at once. The talk at the moment is they’ll be gradually phased in over the next couple of years. Currently, the bill is at consultation stage, which means we can definitely say the changes are coming – we just don’t know when. 

Usually, new employment law is introduced in April and October, but we don’t know if the new Government will stick to these changes. If so, we might see some become law as early as April 2025.” 

- Juliet Price, Founder & Managing Director, Park City Consulting 

Before we explain the main employment law changes in more detail, it’s helpful to recap what timelines we currently have available.  

The points we discuss in this blog relate to two ‘sets’ of reforms: 

• Financial measures - The first two points in this list were announced in the 2024 Autumn Budget, and will apply from April 2025
• Employment rights - All other points on this list come under the Employment Rights Bill. Unless otherwise stated, all these policies are expected to be phased in over the next two years. 
  

 

1. National Minimum and Living Wage

In its pre-election manifesto, the new Government pledged to change the remit of the Low Pay Commission to account for changes to the cost of living. They also promised to eliminate age-related minimum wage bands, bringing the lower National Minimum Wage (for 18-21 year olds) into line with the higher National Living Wage (for over 21 year olds). 

From April, therefore, the following changes will take effect, which will amount to a significant pay rise for the lowest-paid workers: 

• The National Living Wage (NLW) will increase from £11.44 to £12.21 an hour 
• The National Minimum Wage (NMW) will increase from £8.60 to £10 an hour
  
  

The rise of the National Living Wage is down to the high levels of inflation we’ve seen in recent years. Since inflation has now peaked, this is likely to be the last significant hike for some time. 

The National Minimum Wage, however, will continue to rise over the next few years until it is brought into line with the higher band. 

 

📋 Minimum wage UK changes - how to stay compliant 

Prepare budgets and payroll process to uprate the pay of any employees on National Living Wage or Minimum Wage from April 2025. 

2. National insurance 

“Currently, employers pay 13.8% National Insurance contributions on everything over £9,100 per annum. The change will mean that you'll now be paying 15% over £5,000 per person, per year. 

But Rachel Reeves mentioned in the Budget speech a specific example of ‘if you employ four people at minimum wage, you will not pay employers’ NI’. That’s the level that we're talking about here.” 

- Rob Birley, Director at Cornerstone Resource Consultancy 

In the Autumn 2024 Budget, the Government announced significant National Insurance changes for employers: 

• Employer National Insurance contributions will rise from 13.8% to 15%
• The threshold at which payments apply will also reduce from £9,100 per annum to £5,000
• The Employment Allowance will be increased from £5,000 to £10,500
  
  

The first two of these changes amount to a significant National Insurance increase for employers. The Employment Allowance rise helps to mitigate some of this damage, particularly for the smallest businesses. 

📋 National insurance - how to stay compliant

Prepare budgets and tax processes to account for the changes to Class 1 National Insurance that will apply from April 2025.  

Read more here: The 2024 UK budget: 4 key takeaways for SMES and HR teams 

3. Day-one employment rights 

Currently, when employees start a new job, they have to wait up to two years before they’re entitled to full statutory employment rights. This includes sick pay, unpaid parental leave, paid paternity leave and paid bereavement leave. 

Under the new bill, all employees will be entitled to these rights from day one. This change will affect all employers. 

Since this is the biggest change in the Employment Rights Bill, the Government has announced that it won’t apply until Autumn 2026 at the earliest. This will give businesses time to prepare policies and budgets for new employment rights requirements.  

📋 Day-one rights - how to stay compliant 

Update contracts to specify that statutory sick pay, unpaid parental leave, paid paternity leave and paid bereavement leave will apply from the first day of employment. 

4. Unfair dismissal 

Protection from unfair dismissal is another statutory right that employees currently don’t get until up to two years of employment.  

Originally, the Government planned to include this within the raft of day-one rights we discussed in the last section. But after pressure from businesses, they’ve adjusted the policy. 

Now, the draft bill specifies that new employees will be subject to a statutory probation period, before unfair dismissal protections will apply. This will likely be between six and nine months.  

📋 Unfair dismissal rights - how to stay compliant 

When the probation period is confirmed, you’ll need to update contracts to reflect the new probation period.  

5. Zero-hours contracts 

The Employment Rights Bill has also announced significant zero-hours contract changes. In fact, they will be banned unless the employee chooses to stay on them.  

When the bill becomes law, employees will be legally entitled to request a fixed-hours contract, based on hours worked over a 12-week reference period. 

📋 Zero-hours contracts - how to stay compliant 

While no immediate changes are needed, you may choose to proactively update contracts or phase out zero-hours contracts. When the law comes into effect, you will legally have to grant any fixed-hours contract requests.  

6. Statutory sick pay 

Currently, employees are only eligible for statutory sick pay (SSP) from the fourth consecutive day of an ongoing illness. This will be extended to include all sick days, regardless of how long they go on for. This is in addition to SSP being a day-one working right.  

📋 Statutory sick pay - how to stay compliant 

Review your employment contracts and ensure any references to statutory sick pay apply from both the first day of employment and the first day of illness.  

Read more: What is Statutory Sick Pay (SSP) and how does it work? 

7. Fire and rehire

Fire and rehire practices will also be banned in most cases. Under new rules, it will only be permitted when there are no other options to protect the businesses from insolvency. In this case, the employer will have to demonstrate evidence of financial difficulties and prove the change is unavoidable.  

📋 Fire and rehire - how to stay compliant 

No contractual or compliance changes are required.  

8. Trade union rights 

Alongside several changes to trade union rights, the Government has also announced one policy that will affect all organisations, regardless of size. All employers will no be legally required to inform workers of their right to join a trade union. 

📋 Trade union rights - how to stay compliant 

The easiest way to comply is to update all employment contracts to specify an employee’s right to join a trade union.  

Get prepared for legal changes in 2025 and beyond

The eight changes we discussed in this blog are by far the most far-reaching reforms that employers have faced for a generation. But even then, they aren’t the only new legal requirements we can expect in the next few years.  

In fact, there are also several new compliance measures around Diversity, Equity and Inclusion and Flexible Working Rights.  

In our recent eBook, we discussed the full range of upcoming changes in full and published a timeline of all upcoming dates that we currently have available.