The new financial year is upon us, which means that employers are having to grapple with the business impact of various legal changes that are set to arrive in the wake of the Labour Government’s extensive tax overhaul, and in particular the increase to employer’s National Insurance contributions that take effect from 6 April.
This article identifies those changes, and provides practical guidance on next steps.
While no major changes are being made to employment law in April, they are very much on the horizon as the Employment Rights Bill weaves its way through parliament and is undergoing some significant criticism. The changes to unfair dismissal law the bill envisages are unlikely to take effect before late 2026 in any event.
Neonatal Care (Leave and Pay) Act 2023
Under the Neonatal Care (Leave and Pay) Act 2023, employees will be entitled to statutory neonatal care leave and pay starting 6 April 2025, in addition to their maternity and paternity leave rights. This new right is designed to support parents whose babies require specialist neonatal care for at least 7 days following birth.
Eligible employees will be entitled to 12 weeks of statutory neonatal care leave, with a maximum pay of £187.18 per week. This will be paid in addition to existing maternity, paternity, adoption, and shared parental leave entitlements. Notably, this is a “day-one right”, meaning employees will not need to complete a minimum period of service to qualify.
In addition, from 6 April 2025, the rate for Statutory Maternity Leave (SML), Statutory Paternity Leave (SPL), Statutory Adoption Leave (SAL), Statutory Shared Parental Pay and Statutory Parental Bereavement Pay will also all increase from £184.03 to £187.18 per week.
National Minimum Wage Increases
Effective from April 1, 2025, the following national minimum wage increases will be implemented:
- The National Living Wage (NLW) for workers aged 21 and over will rise from £11.44 to £12.21 per hour.
- The National Minimum Wage (NMW) for 18 to 20-year-olds will increase from £8.60 to £10.00 per hour.
- The NMW for 16 to 17-year-olds will rise from £6.40 to £7.55 per hour.
- The NMW for apprentices will also increase from £6.40 to £7.55 per hour.
5 years ago, the NLW rate was confined to workers aged 25 or over, and was set at £8.72. The NLW has since then expanded to workers aged 21 or over, and will now increase to £12.21, being a 40% increase since April 2020, which represents a significant growth in wage bills for employers of workers on minimum wage rates.
Statutory Sick Pay
From 6 April 2025, Statutory Sick Pay (SSP) will increase from £116.75 to £118.75 per week. Similarly, the lower earnings threshold to qualify for SSP will rise to £125.00 per week, aligning with the increases for other statutory family-related payments. SSP currently requires an absence of at least 3 days (known as waiting days) before it becomes payable, and is payable for a maximum of 28 weeks, however the Government is currently planning to remove the requirement for the waiting day period, and increase SSP to be 80% of a worker’s pay for those earning below the lower earnings limit.
Statutory Awards and Payments
The Employment Rights (Increase of Limits) Order 2025 outlines increases to statutory limits and awards for employment tribunals. These changes will come into effect for terminations of employment taking effect from 6 April 2025:
- Statutory redundancy pay: the cap on a week’s pay used for calculating statutory redundancy payments will rise from £700 to £719.
- Compensatory awards for unfair dismissal: the maximum limit on compensatory awards for unfair dismissal will increase from £115,115 to £118,223. If the employee’s annual salary is lower, their annual salary level is the cap.
- Statutory guarantee pay: the daily rate for statutory guarantee pay will increase from £38 to £39 per day.
Employers already planning reorganisation and restructuring projects therefore need to bear in mind these increased rates in calculating redundancy costs and potential exposures for unfair dismissal claims.
Government Consultation on Ethnicity and Disability Pay Reporting
A Government consultation has been launched on ethnicity and disability pay reporting as part of a broader effort to improve workplace equality. Following the King’s Speech in July 2024, the Government plans to introduce the Equality (Race and Disability) Bill, requiring large employers (those with 250 or more employees) to report on ethnicity and disability pay gaps, mirroring the existing gender pay gap reporting obligations.
An ongoing consultation will gather views on how to implement the new requirements.
Next Steps for Employers
Employers should be proactive in preparing for these changes.
To stay ahead, employers should:
- Review payroll and benefits systems: ensure your payroll system can accommodate the new wage rates and statutory pay updates, and ensure all workers continue to receive pay in accordance with the NLW and NMW.
- Update employment contracts and policies: revisit employment contracts, especially regarding redundancy terms and dismissal procedures, and ensure family leave policies reflect the new entitlements to neonatal care leave.
- Communicate changes to employees: make sure employees are informed of their new entitlements and the changes to their pay.
The proposed new pay gap reporting obligations mean that large employers need to plan for how they will report pay gaps based on ethnicity and disability, in addition to gender. This is likely to include making sure their payroll systems and data collection processes can capture and report relevant information correctly.
Employers will also need to collect and share data about the ethnicity and disability makeup of their workforce. This will help highlight how well different groups are represented in the workplace. This move is part of a wider effort to push businesses towards greater accountability in improving diversity, equity, and inclusion.
If you require any further guidance, or specific advice then the employment team at Girlings will be on hand to assist.
Discrimination: Annual update to awards for injury to feelings
In addition to the statutory awards identified above, the latest annual update for awards for injury to feelings in discrimination and detriment cases has been published.
In respect of claims presented to the employment tribunal on or after 6 April 2025, the Vento bands (as they are known) are as follows:
- a lower band of £1,200 to £12,100 (less serious cases);
- a middle band of £12,100 to £36,400 (cases that do not merit an award in the upper band); and,
- an upper band of £36,400 to £60,700 (the most serious cases) with the most exceptional cases capable of exceeding £60,700.
Employment Rights Bill: Watch this space
The Employment Rights Bill is currently being reviewed by the House of Lords. It is arguably the most significant reform to workers’ rights in decades. If the Bill achieves Royal Assent before Parliament breaks in July, then some parts of it may come into force as early as October 2025. These are likely to include banning the ability of employers to dismiss and re-engage staff (otherwise known as “fire and rehire”), making employers liable for third party discriminatory harassment (not just sexual harassment) and the increase in employment tribunal time limits from 3 to 6 months.
You can follow the bill’s progress on the UK Parliament Website - Employment Rights Bill - Parliamentary Bills - UK Parliament.
Our employment team will keep you updated on developments.
