2025 is expected to bring significant developments in UK employment law. With landmark reforms, increased statutory protections and evolving workplace expectations on the agenda, employers will need to be attune to these changes and be agile to adapt and comply.
In general, the main trends and developments are being driven by the Labour government to address fairness, work-life balance and pay equity. But in doing so, this will impose new responsibilities on employers who are already dealing with a more challenging operating environment, with pressures including a difficult financial climate, rising labour costs and shortages, and wider geopolitical uncertainty.
Employers will need to understand the implications of these changes, reviewing workplace policies, procedures and workforce strategies to maintain operational efficiency and mitigate legal risk exposure.
The key developments to be prepared for include:
Employment Rights Bill (ERB)
The Employment Rights Bill (ERB) is set to redefine the employment landscape, introducing 28 reforms designed to enhance workplace protections, productivity and pay equity. The ERB is expected to receive Royal Assent in mid-2025, although many provisions will not take effect until 2026.
Key measures include:
- Day-One Employment Rights: Employees will gain protection from unfair dismissal from their first day of employment. This change eliminates the current two-year qualifying period, requiring employers to ensure robust performance management and dismissal processes.
- Flexible Working as a Default Right: Employers must accommodate flexible working requests from day one, unless they can demonstrate legitimate business reasons for refusal.
- Guaranteed Hours for Zero-Hours Workers: Workers consistently working regular hours over a specified period (proposed as 12 weeks) will be entitled to a contract with guaranteed hours.
- Restrictions on Fire-and-Rehire Practices: Employers will face stricter limitations on terminating contracts and offering re-employment under less favourable terms, except in exceptional circumstances.
- Enhanced Sick Pay Rights: Statutory Sick Pay (SSP) will be payable from the first day of illness, removing the current four-day waiting period.
Employers should begin preparing for these reforms by reviewing policies, updating contracts and training managers on the changes. Early adoption of best practices, particularly around performance management and flexible working, can reduce the risk of disputes and support implementation once the reforms come into force.
Flexible Working
From April 2024, flexible working became a day-one right, with further reforms anticipated in 2025 requiring employers to provide a “reasonable” explanation for rejecting requests. However, many organisations – across the private and public sectors – are also seeking to increase in-office attendance, citing concerns around productivity, collaboration and employee development. This divergence between statutory rights and organisational preferences creates potential conflicts.
This raises several practical and legal considerations:
- Contractual Implications: Existing hybrid working policies may have been implicitly or explicitly incorporated into employment contracts. Employers wishing to mandate greater office attendance must carefully assess whether such changes require employee consent.
- Discrimination Risks: Rejecting flexible working requests could inadvertently disadvantage employees with caring responsibilities, disabilities, or health conditions, exposing businesses to discrimination claims.
- Employee Engagement and Retention: Flexibility remains a top priority for many workers. Overly restrictive policies could impact recruitment, morale and retention, particularly in competitive talent markets.
To balance these factors, employers should engage in open dialogue with employees, explore tailored arrangements that align with business needs and implement compliant and consistent procedures for handling flexible working requests.
Minimum Wage, Statutory Rates & NI Changes in April 2025
Significant changes to statutory pay rates and employer National Insurance contributions will take effect in April 2025, increasing labour costs for businesses.
The National Living Wage (NLW) for employees aged 21 and over will rise to £12.21 per hour, a 6.7% increase from the current rate. The minimum wage for 18-20-year-olds will increase to £10.00 per hour, and the rate for 16-17-year-olds and apprentices will rise to £7.55 per hour. These changes aim to support workers but may compress pay differentials, creating pressure to adjust pay structures across organisations.
Statutory payments, including sick pay, maternity pay, and adoption pay, will also increase. Statutory Sick Pay (SSP) will rise to £118.75 per week, with similar adjustments to other benefits. While employers can reclaim some statutory pay costs, small businesses operating on thin margins may struggle to absorb these increases.
To mitigate risks, employers should review pay structures to ensure compliance with minimum wage legislation, conduct payroll audits to avoid inadvertent breaches and plan for cost increases, exploring efficiency improvements to offset additional expenses.
Redundancy and Restructuring in Challenging Economic Times
Economic pressures, including rising employer National Insurance contributions and inflationary wage increases, are forcing many businesses to reassess their workforce strategies. Restructuring and redundancies may become necessary to maintain financial viability.
Redundancy processes must comply with legal requirements, including collective consultation obligations where 20 or more redundancies are proposed within 90 days. Notable reforms on the horizon include removing the “establishment” requirement, triggering consultation based on total redundancies across all sites. The protective award cap for non-compliance may also be increased or removed altogether.
Employers facing redundancy decisions should:
- Conduct thorough cost analyses to explore alternatives such as redeployment or reduced hours.
- Ensure compliance with consultation requirements, documenting all steps taken.
- Communicate transparently with affected employees to mitigate reputational damage and preserve morale.
Draft Equality (Race and Disability) Bill
The draft Equality (Race and Disability) Bill, expected in 2025, aims to strengthen pay equity and workplace inclusivity. Key provisions include extending equal pay protections to cover ethnicity and disability, mandatory pay gap reporting for employers with 250+ employees, and enhanced enforcement mechanisms.
These measures will build on existing gender pay gap reporting requirements, increasing transparency and accountability. While the draft and detail are yet to be published, employers may look to prepare by conducting internal pay audits to identify and address existing disparities.
Need assistance?
Proactive planning and careful execution will be essential to dealing with upcoming changes, while minimising legal and reputational risks. If you’re concerned about changes in employment law affecting your organisation, our specialists can provide guidance to understand the potential risks and opportunities across your workforce management, development and legal compliance programmes. Contact us for advice.
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
