A look back at employment law changes in 2025

Some people might quote the late Queen and describe 2025 as an “Annus Horribilis” for employers when it comes to HR and employment law. It certainly hasn’t been great.

Dominated by the incoming Labour government’s agenda, we have seen: inflation busting pay rises (including aspects of the minimum wage), the significant increase of the “jobs tax” – employer’s NI, and the spectre of the Employment Rights bill passing through parliament with more pain promised for 2026, albeit tempered a little by the House of Lords.

Here is a summary of the changes.

The national minimum wage

Following the Low Pay Commission’s advice, the living wage was increased by 6.7% to £12.21 per hour for those aged 21 and over from 1st April 2025. For younger workers, the rises were much higher in percentage terms – as much as an 18% increase.

Changes to statutory payments

As happens every year, the statutory payments (maternity, paternity, adoptions, shared parental, and bereavement pay) rose. This was to the lower of £187.18 (up from £184.03) and 90% of average weekly earnings.

Additionally, statutory sick pay rose to £118.75; the redundancy pay weekly cap rose to £719 increasing the maximum redundancy payout to £21,570; and the unfair dismissal cap rose to the lower of £118,223 and 52 weeks of gross actual pay.

Increases to employer’s national insurance (NI)

This was the most controversial change implemented in 2025, resting a heavy additional burden on employers and, it is suggested, applying the brakes to the economy and hiring more generally.

The employer NI rate rose from 13.8% to 15% on 1st April. At the same time, the secondary threshold dropped from £9,100 to £5,000 meaning NI is chargeable on more earnings. Providing some mitigation to smaller businesses, the Employment Allowance more than doubled from £5,000 to £10,500 and the £100,000 eligibility cap was removed.

Neonatal Care (Leave and Pay Act)

This new piece of legislation saw welcome support for families whose baby needs neonatal care. It became effective on 6th April 2025. It provides, as a day one right, that up to 12 weeks of leave can be taken where a baby undergoes at least seven consecutive days of neonatal care within 28 days of birth. 

Furthermore, where 26 weeks of service have been accumulated and the minimum earnings threshold is met, neonatal pay is available at £187.18 per week, on top of other relevant statutory pays.

The Employment Rights Bill

While this hasn’t been enacted in 2025, Labour’s flagship piece of legislation is grabbing headlines as it passes through parliament. We will explore the detail of it in our next blog where we will be looking ahead to 2026. 

But as you may already be familiar with, we are expecting troublesome changes for employers such as rolling back curbs on trade union activity, reducing the qualifying period of unfair dismissal claims from two years to six months (originally day one), and mandating guaranteed hours onto zero-hour contracts.

Time to reflect

Amidst taking some time to enjoy Christmas and a well-earned break, now is a good time to reflect on the past year and ensure all your policies and procedures are aligned with the changes that happened. If you want help doing this, or making changes yourself, please reach out to us. We have a local office to support you.