As 2025 approaches, employers must prepare for a wave of significant employment law changes. From National Insurance increases to overhauls in employment rights, navigating the shifting legal landscape will be no small feat.
For SMEs, the challenge is particularly steep. That’s why in this blog we’re keeping it simple. We’ve broken down the eight most crucial employment law changes coming in 2025—and how you can prepare.
Two Key Reform Areas
The employment law updates fall into two categories:
- Financial Measures: Changes announced in the 2024 Autumn Budget will take effect from April 2025.
- Employment Rights: Policies introduced under the Employment Rights Bill will phase in over the next two years.
1. National Minimum and Living Wage Updates
To address the rising cost of living, the Government will eliminate age-related wage bands and increase minimum wages:
- National Living Wage (NLW) will rise from £11.44 to £12.21 per hour.
- National Minimum Wage (NMW) will increase from £8.60 to £10 per hour.
How to Prepare:
- Audit your payroll systems to ensure all employees are paid at least the new minimum rates.
- Adjust your budget to reflect increased labor costs starting April 2025.
2. National Insurance Changes
From April 2025, employers will face higher National Insurance contributions:
- Employer contributions will increase from 8% to 15%.
- The threshold for contributions will drop from £9,100 to £5,000 per annum.
- The Employment Allowance will rise from £5,000 to £10,500, offering relief to smaller businesses.
How to Prepare:
- Update payroll and tax processes to account for these changes.
- Leverage the increased Employment Allowance if applicable.
3. Day-One Employment Rights
The new Employment Rights Bill will entitle all employees to statutory rights—including sick pay, parental leave, paternity leave, and bereavement leave—from their first day of work.
This change will be introduced in Autumn 2026, giving businesses time to adapt.
4. Unfair Dismissal Protections
Protection from unfair dismissal will no longer require two years of employment. Instead, employees will be subject to a statutory probation period (likely 6–9 months) before gaining these rights.
How to Prepare:
- We recommend updating employment contracts to include the new probationary period once confirmed.
- Run a robust and effective probation process with objectives being set, regular informal reviews and a formal probation review before the end of the probation period
5. Zero-Hours Contracts Overhaul
Zero-hours contracts will be heavily restricted. Employees will have the right to request fixed-hour contracts based on their average hours over a 12-week period. Employers must honor these requests.
How to Prepare:
- Start phasing out zero-hours contracts or updating existing ones.
6. Statutory Sick Pay (SSP) Changes
SSP eligibility will extend to include all sick days, rather than starting after the fourth consecutive day. This will also become a day-one right for employees.
7. Fire-and-Rehire Practices Restricted
“Fire and rehire” will be banned in most cases. Employers will need to prove that such actions are unavoidable due to financial difficulties and provide supporting evidence.
8. Trade Union Rights
All employers will be required to inform employees of their right to join a trade union.
How to Prepare:
- Update all employment contracts to specify this right.
Looking Ahead: Prepare for Further Changes
These eight updates are among the most sweeping employment law changes seen in years—but they aren’t the only ones on the horizon. Employers should also prepare for upcoming reforms related to Diversity, Equity, and Inclusion (DEI) and Flexible Working Rights.
Start preparing now to ensure your business is ready to thrive in 2025 and beyond.
If you need help on any of the issues in this blog, please get in touch for further assistance.
