2025 EMPLOYMENT LAW CHANGES: WHAT EMPLOYERS NEED TO KNOW

2025 is set to bring significant changes to the landscape of employment law in the UK. While many reforms from the Employment Rights Bill are anticipated to take effect in 2026, employers still face change this year, and we deal below with some of the key considerations for employers.

MINIMUM WAGE REFORMS

From April 2025, the National Minimum Wage and National Living Wage rates will rise significantly following recommendations from the Low Pay Commission. These changes aim to align wages more closely across age groups, with the 18–20-year-old rate increasing by 16.3% to ￡10.00 per hour. The National Living Wage for those aged 21 and over will increase to ￡12.21 per hour.

Employers should ensure compliance to avoid penalties. Key considerations include:

• Reviewing pay structures to ensure no inadvertent breaches occur, especially where salary sacrifice schemes or deductions could reduce wages below the legal minimum.
• Monitoring for pay compression, where entry-level wages approach managerial salaries, potentially pressuring employers to adjust broader pay structures.

Non-compliance risks include fines, reputational damage through “naming and shaming,” and potential criminal liability.

NEONATAL LEAVE AND PAY

The Neonatal Care (Leave and Pay) Act 2023 will come into force in April 2025, granting parents up to 12 weeks’ leave and statutory pay when their baby requires neonatal care. This ?is in addition to existing parental leave rights.

Employers should ?update HR policies and payroll systems to accommodate these new entitlements.

PATERNITY LEAVE FOR BEREAVED PARTNERS

The Paternity Leave (Bereavement) Act 2024 introduces a legal right to leave for bereaved partners if the mother or adoptive parent passes away. Expected in April 2025, this reform removes the usual 26-week service requirement and may extend paternity leave entitlements to up to 52 weeks.

We recommend employers ?prepare for these changes by updating handbooks and ensuring managers are trained to handle sensitive cases.

EMPLOYMENT RIGHTS BILL: PREPARING FOR THE FUTURE

The Employment Rights Bill, published in 2024, includes 28 significant reforms that will shape employment law for years to come. Although most changes won’t be implemented until 2026, consultations on several measures will begin this year.

Key proposals include:

• A ‘day one’ right to not be unfairly dismissed (in effect abolishing the current 2 year rule)
• Reforms to collective consultation processes
• Restrictions on ‘fire and rehire’ practices
• A guaranteed hours offer for zero- and low-hours employees
• Enhanced protections against third-party harassment
• Stronger rights to request flexible working.

ANTICIPATED CASE LAW DECISIONS

Several high-profile employment cases could set new precedents in 2025, including:

1.????? For Women Scotland Ltd v The Scottish Ministers addressing whether an individual holding a Gender Recognition Certificate (GRC) can come within the definition of a “woman” for the purposes of the Equality Act 2010. This case has significant implications for employers, particularly in ensuring equal pay and non-discrimination in line with both protected characteristics. This precedent, while binding only in Scotland, has persuasive authority across the UK, and prudent employers should review policies to mitigate risks of non-compliance.

2.????? Augustine v Data Cars Ltd. This case addresses whether part-time status must be the sole cause of the less favourable treatment. In the first instance decision, the Employment Tribunal found that the Claimant, a part-time taxi driver who paid disproportionately higher fees than full-time comparators, could not succeed in his claim ultimately because his part-time status was not the sole cause of this “less favourable treatment”. This case illustrates ongoing tensions in interpreting causation tests and may pave the way for a Supreme Court appeal to resolve conflicting precedents.

3. Higgs v Farmor’s School: Addressing the balance between employees’ rights to express beliefs on social media and anti-discrimination protections for other groups

4. Thandi and Others v Next Retail Limited:? Examining equal pay claims for store-based and warehouse workers. As I have written in a previous article (link here), this decision could have significant financial implications for Next, with potential compensation exceeding ￡30 million. This ruling also sets a precedent that may influence similar claims across the retail sector, prompting other retailers to re-examine their pay structures to ensure compliance with equal pay legislation.

EMERGING TRENDS

2025 will also see ongoing challenges and opportunities in:

• Diversity, Equity, and Inclusion (DE&I): Supporting neurodiverse employees and managing potential tensions between UK and international equality laws. This will be important to those operating in the global market.

• AI in the Workplace: Employers must navigate a legal framework which in many ways is not yet equipped to address the complexities of AI-driven decision-making.

CONCLUSION

While significant employment law changes are planned for 2026, 2025 will still be a pivotal year for UK employers. Staying ahead of minimum wage increases, new family leave rights, and forthcoming consultations is crucial for legal compliance and maintaining positive workplace relations.

In the coming months, we will share more insights into these areas and provide practical advice on safeguarding your business while navigating the evolving landscape of employment law.

At Tees Law, our Employment Team is here to guide you through these changes and help your business prepare for what lies ahead. Please contact us to discuss how these developments may affect your organisation.

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