Horizon Scanning: UK Employment Law Developments 2025

With 2025 underway, employers need to keep in mind the significant upcoming employment law developments that will affect the UK workforce this year and beyond. These include many of the Labour Government’s ‘worker friendly’ reforms, which are due to be implemented in 2025 (and 2026). We scan the employment law horizon to help employers anticipate and adapt to the changing business landscape.

Duty for Prevention of Sexual Harassment

In October 2024, the Worker Protection Act 2023 (Amendment of Equality Act 2010) came into force, creating a new duty on employers to take reasonable steps to prevent the sexual harassment of their employees (as covered in our previous article). This proactive duty was supplemented by the Equality and Human Rights Commission publishing updated technical guidance on how employers can discharge their obligations to their workforce. To the extent not already addressed, businesses should review as a matter of priority whether their current approach to sexual harassment in the workplace and protocols remain fit for purpose. For example, employers should consider undertaking appropriate risk assessments to identify where workers may be exposed to sexual harassment, clarifying or implementing reporting channels for workers wishing to report harassment and updating their employee policies or handbook to reflect current law and best practices.

Collective Consultation Protective Award Increases

Businesses contemplating using ‘fire and rehire’ tactics (i.e., the practice of firing and rehiring employees on new terms as a means of imposing contractual changes, which triggers a requirement to consult with employees) in 2025 should take into account their obligations under the Code of Practice on Dismissal and Re-engagement that was published in July 2024. In particular, from 20 January 2025, employment tribunals will have the power to uplift or reduce protective awards against employers by up to 25% for any unreasonable failure to comply with their collective consultation requirements, including failure to comply with this new code of practice. While tribunals can already increase or reduce compensation in certain instances in which an employer fails to comply with the relevant ACAS code of practice, the inclusion of protective awards will likely result in significant additional liability for employers who dismiss and reengage employees in breach of the new code of practice (and without proper consultation).

Statutory Payment Increases

With so much focus on the upcoming increase in employers National Insurance from 13.8% to 15.0%, it could be easy to forget the other increases in statutory payment that will apply in 2025. As a reminder, from April 2025, these include:

• An increase in National Minimum Wage from £11.44 to £12.21 for employees aged 21 and older (and proportionately bigger increases for younger employees and apprentices)
• An increase in statutory sick pay from £116.75 to £118.75
• An increase in statutory maternity pay, maternity allowance, statutory adoption pay, statutory paternity pay, statutory shared parental pay, and statutory parental bereavement pay from £184.30 to £187.18

The annual increase in the cap on a week’s pay for the purposes of calculating statutory redundancy or the ‘basic award’ for unfair-dismissal compensation (currently £700) is expected to be announced in March 2025.

Employers should ensure their systems and processes for implementing these changes and tracking compliance are ready ahead of the new tax year and should consider how ongoing checks can help to avoid inadvertent breaches over the coming months (particularly important for National Minimum Wage).

Neonatal-Care Leave and Pay

Consultation on the statutory right to neonatal care is now complete, and implementation is expected in April 2025. While the precise details are yet to be published, employers should anticipate the following:

• From the first day of their employment, parents will have a new right to take time off for children in neonatal care.
• While not yet confirmed, the duration of neonatal-care leave is expected to be at least one week and up to 12 weeks.
• Generally, employees taking neonatal-care leave will be entitled to return to the job they previously held and are expected to have protections similar to those for employees on statutory maternity leave.
• Eligible employees on neonatal-care leave will also be entitled to neonatal-care pay. The rate of pay and eligibility requirements are expected to mirror those for statutory maternity pay (e.g., 26 weeks of continuous service, salary above the lower earnings limit, etc.).

Employers need to bear in mind these new statutory rights, which will apply automatically and cannot be contracted out of. We recommend taking a proactive approach to updating policies and employee handbooks to anticipate the practical effect of these changes and their interplay with existing policies such as enhanced rates of family leave pay.

Employment Rights Bill Consultation

Last year, the government published the Employment Rights Bill, which proposed sweeping reforms to employment legislation that are stated to better protect UK workers. One of the most significant changes the government proposed was the removal of the two-year qualifying period for employees to bring an ordinary unfair dismissal claim (i.e., effectively granting employees a ‘day one’ right to claim unfair dismissal). While the majority of the changes are not expected to come into force until 2026, the government has already commenced consultation on a number of its proposed reforms. The first wave of consultations on the Employment Rights Bill concluded in December 2024 and addressed the following matters: the practice of ‘fire and rehire’ (see above), zero-hours contracts, protective awards, statutory sick pay, and trade union matters (including access to workplaces, union recognition, industrial action ballots, provision of information, industrial action and repudiation, and prior call).

While it is too soon to tell precisely what the final Employment Rights Act will contain, these consultations provide a helpful insight into the options the government is considering, including:

• Increasing the award for an employer’s failure to consult in circumstances requiring collective consultation (e.g., changes to employment terms and collective redundancies).
• Introducing interim relief payments for those who are claiming unfair dismissal in a ‘fire and rehire’ scenario but waiting for an employment tribunal hearing.
• Whether employment agencies or their hiring clients should be responsible for offering guaranteed hours to agency staff and ensuring reasonable notice of shifts.
• Whether the percentage of average weekly earnings for the purposes of calculating statutory sick pay for low-income families should be updated.

The government has indicated that further consultations will commence this year, including in relation to flexible working rights, the collective-redundancy framework, the qualifying period for unfair dismissal protection (probation), and reasonable notice for shifts (including compensation for shift cancellation or curtailment at short notice). It is anticipated that consultation on the ‘day one’ unfair-dismissal right will only commence in 2026. Employers should consider whether any subjects for consultation are particularly relevant or pose specific risks to their business and decide whether they should contribute to the consultation response and/or seek proactive advice on how to mitigate or manage the impact of the proposed changes.

Flexible Working

Businesses are increasingly revising their hybrid and remote working arrangements, with a large number of employers either shifting toward a full return to office work or otherwise limiting remote working. For such businesses, how these changes to working arrangements will be implemented or maintained will need to be considered in light of the government’s pledge to strengthen workers’ flexible working rights and its proposal that workers will have a ‘right to switch off.

While changes to flexible working rights are expected to be addressed as part of the Employment Rights Bill, it is now expected that the right to switch off will be delivered through a separate statutory Code of Practice sometime this year. The nature of this right is yet to be determined, but it is likely that any new right will require employers to engage with staff on the boundaries between work and leisure time and when it may be legitimate to contact employees outside of their usual working hours. While the strength of this new right will hinge on the sanctions attached to an employer breaching a worker’s right to switch off, it is clear that discussions related to workplace attendance and culture will need to be handled carefully (and workers will have an increasing number of legal avenues in which to challenge their employer’s ability to mandate a full return to office or contact them after their usual working hours).

Next Steps

The legislative developments summarised above are only some of the changes businesses are expected to navigate in the coming year. As companies continue to engage with their workforce on their practices, the above areas will likely raise new issues with workers that will need to be managed carefully.

Please contact any member of Goodwin’s Employment team in the UK if you would like support with employment matters.

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.