As we kick off the year, there’s plenty to look forward to in UK employment law. Although we anticipate a slower year than previous and what’s to come in 2026, this year is still going to see plenty of changes in the workplace - from expanded rights for workers to new regulations addressing modern workplace challenges.  In this blog, we’ll break down the key legislative changes that are landing this year, and explore what these changes mean for the future of work. Let’s dive in!

What’s first?

Do you employ irregular-hour or part-year workers? If so, keep reading. If your holiday year resets in January 2025, you’ll now need to recognise and regulate rolled-up holiday pay. This allows you to include holiday pay within workers' regular pay instead of paying it out separately during time off.  

Workers are still entitled to take paid time off, and rolled-up holiday pay must not be used to discourage them from doing so. This change has been implemented with the aim to improve transparency, reduce disputes, and ensure fair treatment of workers.

Employment tribunal powers

From 20 January 2025, Employment Tribunals will have the power to increase compensation awards up to 25% where employers fail to properly consult in collective redundancy situations involving 20 or more employees.  

The new penalty mechanism could significantly increase costs for employers, adding a potential 25% uplift to the existing maximum of 90 days' gross pay per affected employee, where compensation payments are awarded.  Businesses must ensure that they comply with the statutory Code of Practice of dismissal and re-engagement exercises.  

Statutory rate increases

April presents us with many increases to statutory rates. Rates affected include the national living wage, national minimum wage (including apprentice rates), statutory sick pay, lower earnings limit and statutory family-related leave pay. The increases set by the Government aim to align minimum wages with inflation and achieve their target of two-thirds of median earnings. Employers will need to adjust payroll systems and budgets to reflect this April’s increases. It’s important to consider that the increase for employees 20 years of age and under is increasing by a minimum of 15%, which could lead to pay compression between junior and senior roles, so prior thought may be required to pre-empt any challenges this may present.  

The rate of national insurance (NI) paid by employers is also increasing in April. This means businesses will now pay a rate of 15%. In addition to this, the earnings threshold at which employers begin paying NICs will be reduced from £9,100 to £5,000 per year, meaning a larger portion of wages will be subject to NICs.

Employee NI remains unaffected.  

Neonatal Care Leave and Pay

We don’t yet have a specific date but we’re still expecting this to come into force at some point in April. The Neonatal Care (Leave and Pay) Act 2023 gives employees a new right to time off work when a baby they have responsibility for is in hospital receiving neonatal care (including outreach and palliative care).

Neonatal Care Leave will be a day-one employment right and will apply to parents of babies who are admitted into hospital up to the age of 28 days, and who have a continuous stay in hospital of 7 full days or more. Leave doesn’t have to be taken at the point of birth, instead, it can be taken at any time in the first 68 weeks of the baby’s birth.

Parents will be able to take up to 12 weeks of paid leave and a minimum entitlement of one week, in addition to other leave entitlements such as maternity, paternity and shared parental leave. In order to qualify for pay, an employee will be required to be employed for a minimum of 26 weeks prior to the leave being requested and meet a minimum earnings average of at least £123 a week.  

Employment Rights Bill

The Labour government proposes to overhaul employment rights through no less than 28 individual employment reforms.  This includes the removal of the two-year qualifying period for unfair dismissal protection, “day one” rights for paternity, parental and bereavement leave, ending zero-hours contracts and extending the time limit for bringing Employment Tribunal claims from three to six months.  

We’re unlikely to see any of these reforms introduced until 2026, but we are expecting to hear much more about them this year as consultations begin. There are already other pieces of legislation that are due to be introduced sooner but similarly require finalisation such as the statutory code of practice for right to switch off, the draft Equality (Race & Disability) Bill and The Paternity Leave (Bereavement) Act 2024. We’ll keep you posted when we know more how they’ll work in practice – and when!

If you need help preparing or navigating any employment law changes, you can reach out to us here.  

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