What's on the horizon for employers in 2025?

In 2024, with their landslide election victory, the Labour government introduced the Employment Rights Bill, which is set to make the biggest waves in employment law that we have seen for quite some time including changes in relation to unfair dismissal, fire and rehire, collective redundancies, zero hours and low hours contracts, trade unions and industrial action, sexual harassment and third-party harassment, statutory sick pay, flexible working and family leave.

However, most of these changes are not expected to take effect until 2026. 2025 will instead see a gentler introduction of limited new employee rights and protections, alongside many consultations on future changes.

This article summarises the key employment law developments we expect to see over the course of the year.

The Employment Rights Bill: consultations continue

Published in October 2024, the Employment Rights Bill 2024 sets out the new rights for employees and workers promised by the Labour government in its "New Deal for Working People" and in the Labour Manifesto. The biggest changes, such as the promise to make unfair dismissal a day one right, will not come into force until 2026. Most of the changes proposed are still at the consultation stage, which we expect to continue throughout the course of this year.

Four consultations were published by the government in October 2024, which each concluded in December 2024 covering the following topics:

• Strengthening statutory sick pay
• Creating a modern framework for industrial relations - including simplifying industrial action ballots
• Collective redundancy and fire and rehire – this included consulting on increasing the maximum protective award from 90 days' pay to 180 days' pay or to remove the cap altogether
• The application of zero hours contract measures to agency workers

We await the outcome of these consultations.

Additionally, the government has committed to consult on the following:

• Unfair dismissal – including on the length of the probationary period, how the “lighter-touch” dismissal process will operate during this period and how the compensation regime will apply in these circumstances
• Further strengthening the collective redundancy framework - including consulting on increasing the minimum collective consultation period when an employer is proposing to dismiss 100 or more employees from 45 to 90 days
• Flexible working – including the steps that employers must take in order to comply with the requirement to consult before rejecting a flexible working application
• Bereavement leave – the extension of the current rights to parental bereavement leave
• Equality action plans and menopause support – for employers with 250 or more employees

The Employment Rights Bill is currently at the committee stage which will conclude on 21 January 2025, after which we expect to see a number of changes to the current makeup of the bill.

Other consultations outside the Employment Rights Bill

Further consultations are expected on other changes, not included in the Employment Rights Bill, including the "right to switch off". This proposal has piqued particular interest as it aims to provide employees with the right to disconnect from work outside of working hours. The government have said that they will consult on a new code of practice in 2025.

The government has also said that it will conduct a review of the current parental leave system sometime this year.

A draft Equality (Race and Disability) Bill was announced in the King’s Speech in 2024. The Bill aims to introduce the following measures:

• Allowing employees to bring equal pay claims on the basis of ethnicity and disability
• Preventing employers from outsourcing services to avoid paying equal pay
• Introducing mandatory ethnicity and disability pay gap reporting for employers with more than 250 employees
• Implementing a regulatory enforcement unit to deal with equal pay issues

The draft bill itself has not been published yet and it is expected that it will undergo significant consultation this year.

Family friendly rights

The Neonatal Care (Leave and Pay) Act 2023 is expected to come into force in April 2025, although as yet we have not seen the relevant statutory instruments which are needed to achieve this.

The bare bones of the right to neonatal leave and pay are set out in the act, we expect to see further details in regulations. The act will give parents an entitlement to up to 12 weeks’ leave and pay if their baby requires neonatal care. To be eligible, neonatal care must commence within the first 28 days after birth and must last at least seven days. The leave must be taken within 68 weeks of birth. This entitlement will be granted in addition to other maternity, paternity and shared parental leave entitlements. 

The Paternity Leave (Bereavement) Act 2024 received Royal Assent in May 2024. This may come into force this year, although regulations are required to fully implement it. This act will give fathers and partners the right to take paternity leave immediately, waiving the usual 26-week minimum service requirement, in cases where a mother, or a person with whom a child is placed or expected to be placed for adoption, dies.

The cost of employment is increasing

Employers National Insurance Contributions to increase

In addition to the usual increase to minimum wage rates which employers have come to expect year to year (see below), the new government has increased the rate of employer’s National Insurance Contributions. From April 2025, secondary Class 1 employer National Insurance contributions rate (NICs) will increase from 13.8% to 15%. The per-employee threshold at which employers become liable to pay secondary Class 1 NICs on employees’ earnings will be reduced from £9,100 to £5,000.

National Living/Minimum Wage

Rates will increase from the 1 April 2025. A summery of the rates are in the table below.

Statutory rates increase in April 2025

• The statutory rate of pay for sick pay (SSP) will increase from £116.75 to £118.75 per week.
• The statutory rate of maternity pay, maternity allowance, paternity pay, shared parental pay, adoption pay and parental bereavement pay will increase from £184.03 to £187.18 per week.
• The employee lower earnings limit which allows employees to qualify for certain benefits and the above statutory rates (except maternity allowance) will increase from £123 to £125 per week. The threshold for maternity allowance will remain at £30 per week.