What do you need to know for your business?

As we enter a brand new year it also comes as something of a shock that we’re also halfway through the decade. 

But before we start looking back, it’s more important to look forward, specifically at what changes to employment law and specific taxes will be coming into law by April 1st that business owners and directors need to be aware of.

National Insurance Contributions

A new employee on minimum wage will cost employers 60% more in National Insurance in the 2025/26 tax year beginning in April. 

Employer’s National Insurance Contributions (NICs) will rise from £1,617 for each full time employee to £2,583. 

Additionally, a full-time minimum wage worker in 2024 earned a salary of £20,821 while paying £1,650 in income tax over the year. From April 1st the same worker will see a raise of £1,401 taking their earnings to £22,222. 

The amount of income tax paid on this will also increase by 17% to £1,930. 

Overall, the worker will be £1,401 a year better off with a total net salary of £20,292 in 2025, up from £19,171 in 2024.

This means that each employee at this level will cost firms a minimum of £24,806 – according to analysis from the Centre for Policy Studies (CPS). 

Chancellor Rachel Reeves told MPs sitting on the Treasury Committee that after the changes were announced in the Autumn Budget that: “This was a once-in-a-parliament reset. We will never have to do a Budget like this again. 

“I won’t write five years’ worth of Budgets now, but we have drawn a line and put the public finances on a clear trajectory.”

When asked specifically about the rise in employer NIC rates Reeves told MPs “Businesses are creative and show ingenuity, and businesses will improve productivity. 

“Small businesses struggle most with employer National Insurance so we increased the employment allowance to £10,000 for a million small businesses so they will be paying no more or no less than they were before.”

Other Employment Changes coming into effect this year

The Employment Rights Bill first tabled in October 2024 will bring several significant changes to UK law. While the majority of these won’t take effect until 2026, there are some that come in this year that you and your business need to be aware of. 

Beginning in January, employers operating a January-March annual leave year will be able to introduce rolled-up holiday pay for their part-year and/or irregular hours workers should they want to.

Another reform taking effect is the extension of the 25% uplift for failing to comply with the relatively new statutory Code of Practice on Dismissal and Re-engagement to include protective awards for the first time. 

This applies from January 20th to situations where an employer proposes changing employee terms via dismissal and re-engagement which affects 20 or more employees, triggering the need to collectively consult. 

If a business fully or partially fails to do this then there could be a protective award for all affected workers of up to 90 days’ pay. Where an employer fails to comply, then the award could be uplifted by up to 25% by the employment tribunal.

Statutory wage rates

From April 1st 2025, the following new statutory rates will come into effect:

  • National Living Wage for over 21s rises 6.7% to £12.21 per hour
  • National Minimum Wage for 18-20 year olds rises to £10 per hour
  • National Minimum Wage for 16-17 year olds and Apprentice Rate rises to £7.55 per hour
  • Statutory Sick Pay rises to £118.75 per week
  • Statutory Maternity Pay and other family related leave pay rises to £187.18 per week
  • The Lower Earnings Limit rises to £125 per week

Additionally neonatal care leave and pay are expected to come into force in April although technically the regulations needed for this still need to be put before Parliament. 

The Neonatal Care (Leave and Pay) Act 2023 gives employees a new right to time off work when a baby they have responsibility for is in hospital receiving neonatal care. The previous government that introduced the measure said they expected neonatal care leave to be available to eligible employees at some point between 2024 and April 2025. This is because HMRC and commercial payroll generally require around 18 months’ notice for changes involving the administration of statutory payments.

Following the introduction to parliament of regulations related to Statutory Neonatal Care Pay, due to come into force from April 1st 2025, it’s expected that regulations introducing the rights will be released soon for employees to access.

Living Wage

Not a legal change but employers signed up to pay the “Real Living Wage” must increase hourly pay to £12.60 per hour (£13.85 in London) if they wish to retain their accreditation from the Living Wage Foundation.

Further changes coming in 2025

Several other changes to laws will be implemented this year that will give staff new rights and employers need to be aware of. 

The Paternity Leave (Bereavement) Act 2024 became law on May 24th 2024 and the government has confirmed its intention to pass regulations to bring this into force in time for the new financial year starting on April 1st 2025. 

This law gives fathers (or non-birthing partners) access to paternity leave in cases where a mother, or a person with whom a child is placed or expected to be placed for adoption, dies. This leave is expected to mirror maternity leave and may last up to 52 weeks and be available from the first day of employment.

The Children’s Wellbeing and Schools Bill was introduced to Parliament late in December 2024. 

It includes proposed changes to the provisions of the Children and Young Persons Act 1933 in terms of the employment of children. These proposals will affect children in England who are under the compulsory school age as defined in the Education Act 1996. A child remains of compulsory school age until the last Friday in June in the school year that they turn 16.

The proposals include requiring all children employed to work in England to have a permit, issued by a local authority, to take up suitable employment. Currently most, but not all, local authorities have byelaws in place requiring children to have work permits.

Sunday employment restrictions for children in England will also be amended allowing children to work for the same number of hours as currently in place for Saturdays. Children are only allowed to work for two hours on a Sunday and five hours on a Saturday for 14-year-olds – this is eight hours for 15/16 year olds. 

Children will also be able to work for up to one hour before school and until 8pm afterwards (currently 7pm). The Bill has currently only had its first reading in Parliament so there are no immediate actions required.

Future changes

The Employment Rights Bill has set out ambitious and expensive plans to overhaul employment law but as draft legislation continues to be debated in both Houses, there is no timetable set out for implementation at this stage.

28 commitments remain to be taken forward from the government’s “Plan to Make Work Pay” plan which sets out five distinct areas which aim to grow the economy and raise living standards. 

These areas are:

  • Enhancing existing rights including sick pay entitlement
  • Pay
  • Time Off
  • Contracts including zero hours
  • Equality and harassment

It’s unlikely that additional changes to these areas will be implemented until 2026 at the earliest but employers should remain engaged and informed about any that are going to become law before they do.

Although we’re only in the first days of 2025, this could be a pivotal year for your business. 

We offer a free initial consultation to any business owner or director who’d like to discuss their company’s situation with a professional advisor. 

Once they get a better understanding of your unique circumstances then they will be able to work with you to tailor a range of possible solutions and changes that could make this truly a year to remember.