Article 3 employment law changes to prepare for in 2025

2025 is set to be a significant year for workplaces as several new employment laws come into place all at once (just like buses, as they say).

As an employer, it’s important that you’re ready for these changes so you can provide your employees with the right information and support.

In this article I’ll explain three new employment law changes you should be getting ready for this year:

• Increase in Employer National Insurance (NI) contributions
• Increase in the National Living Wage (NLW)
• The Neonatal Care (Leave and Pay) Act 2023

1. Increase in Employer National Insurance contributions

From 6 April 2025, the employer rate of secondary Class 1 NI contributions increased from 13.8% to 15% and the secondary threshold, from which employers’ NI becomes payable, fell from £9,100 to £5,000 a year. The threshold is frozen until 5 April 2028.¹

The Government has looked to limit the impact on smaller businesses by increasing the Employment Allowance from £5,000 to £10,500, and by removing the current £100,000 eligibility threshold.¹ According to Government calculations, this will mean 865,000 businesses will pay no NI in the year 2025/26², and more than half of employers with NICs will either see no change or will gain overall by seeing a drop in their NI bill.

The NI hike has some implications for pension salary sacrifice or exchange arrangements – where employees exchange part of their salary in return for a higher employer pension contribution. Employee NI rates are unchanged, so by using pension salary sacrifice, employees could still benefit from the same income tax and NI saving as before.

Key takeaways:

• Employer NI contributions rates rise from 13.8% to 15%.
• The threshold from when NI become payable falls from £9,100 to £5,000 a year.
• The Employment Allowance for smaller businesses increases from £5,000 to £10,000 a year.

It’s important that employers, whatever their size, understand what this means to them and their employees.   

2. National Living Wage increase

Each year, the Low Pay Commission (an independent public body) advises the Government on the rates of the National Living Wage (NLW). It increases annually from each 1 April. This year, the Government accepted the Commission’s recommendation to increase the NLW by 6.7% to £12.21 an hour for all those aged 21 and over.²

The Chancellor also announced in her Autumn Budget 2024 that the Government intended to gradually phase to a single rate for all adults. As such, again in line with the Commission’s recommendations, those aged 18 to 20 will benefit from a 16.3% hourly increase to the National Minimum Wage (NMW) of £10 an hour.²

Key takeaways:

• The NLW rises to £12.21 an hour for those aged 21 and over.
• The NMW rises to £10 an hour for those aged 18 – 20.   
• The intention is to phase to a single adult rate over time.

This is good news for employees on low incomes, but for those employers paying the NLW it will mean increased costs, which they will need to budget for.

3. The Neonatal Care (Leave and Pay) Act 2023

This Act allows employed parents of babies, aged 28 days or less, who are admitted to neonatal care the right to paid leave, if the baby is in hospital for a continuous period of seven days or more.³

This right became effective from 6 April 2025, meaning employees are now able to take off additional time as a ‘day one right’. The Government expects it will benefit around 60,000 new parents that meet eligibility criteria.³

Key takeaways:

• The new right to take leave only applies in respect of babies born on or after 6 April 2025.
• The leave will be available from day one of employment. 
• Employed parents can take up 12 weeks of paid leave in addition to other leave and pay entitlements such as maternity and paternity leave. 
• New parents will still need to meet the eligibility criteria to receive statutory pay.

Employers will need to be on top of these changes to ensure they comply.

What to expect in 2026

The Employment Rights Bill is expected to come into effect in April 2026. This will introduce employment reforms that improve workers’ rights and tackle poor working conditions.

This is expected to include measures to improve employees’ protections from the first day of employment, make flexible working the default, and end zero hours contracts.⁴

There will also be several measures to support women in the workplace, such as requirements for large employers to put action plans in place to close the gender pay gap, and provide help for women going through the menopause.⁴

Next steps

Overall, this year’s new employment laws will bring significant changes and costs to employers – with further changes expected to come next year.

Employers should pay attention to these changes because they could significantly impact costs, employee benefits, and workplace policies. By staying informed and proactive, employers can ensure compliance, maintain employee satisfaction, and demonstrate care for their workforce's wellbeing.

Adapting to these laws could support a positive employer-employee relationship, promoting a stable and supportive workplace environment.