In October 2024, the Employment Rights Bill was introduced in Parliament, ending weeks of speculation about the scale of employment law reform planned by the Government. While the most significant changes in the Bill are not expected to take effect until 2026, employers should not assume that 2025 will be a quiet year for workplace legislation. In fact, several important employment law updates are already in motion and require organisations to review policies, pay practices and employment contracts.
Here are the key developments employers should be preparing for in 2025.
Rolled-Up Holiday Pay for Irregular or Part-Year Workers
Employers with part-year workers or irregular hours workers need to ensure their approach to annual leave is compliant with the latest guidance.
Rolled-up holiday pay is now permitted in certain circumstances, but it must be applied correctly.
Employers should review:
- whether they employ zero-hours or part-year workers
- how statutory holiday entitlement of 5.6 weeks is calculated
- how holiday pay is communicated and recorded
- what is written in employment contracts or worker agreements
If these arrangements are not clearly documented, organisations could face compliance risks.
Changes to Dismissal and Re-Engagement Rules
The statutory Code of Practice on Dismissal and Re-Engagement places stronger expectations on employers seeking to change employee terms and conditions through dismissal and re-engagement (sometimes referred to as “fire and rehire”).
From 20 January 2025, employers must collectively consult with employees when proposing contractual changes through dismissal and re-engagement.
Failure to consult could lead to a protective award of up to 90 days’ pay per affected employee.
If the employer has also failed to follow the statutory code, an Employment Tribunal may increase the award by up to 25%.
What employers should do
Employers should ensure that any proposed contractual changes are supported by:
- meaningful consultation
- clear communication with employees
- documented decision-making processes
New Statutory Pay Rates From April 2025
Each year, the Government reviews statutory employment rates, and April 2025 will bring several increases.
Employers will need to ensure payroll systems are updated to reflect:
- new National Minimum Wage and National Living Wage rates
- revised Statutory Sick Pay (SSP) rates
- updated family-related leave payments, including maternity and paternity pay
Employers should check that all eligible employees receive the correct pay increases from April.
Real Living Wage Increase – May 2025
For organisations accredited by the Living Wage Foundation, May 2025 marks the deadline for implementing the latest Real Living Wage increase.
To maintain accreditation, employers must ensure employees receive:
- £12.60 per hour across the UK
- £13.85 per hour in London
Employers who do not implement these rates by 1 May 2025 risk losing their accreditation.
Paternity Leave (Bereavement) Act Expected in 2025
The Paternity Leave (Bereavement) Act 2024 received Royal Assent in May 2024 and is expected to come into force during 2025.
The legislation will allow fathers or partners who lose the mother of a child to access paternity leave and pay entitlements, helping provide additional support during extremely difficult circumstances.
Employers should begin preparing by reviewing family leave policies and employee support procedures.
Practical Steps Employers Should Take Now
With several changes arriving in 2025, employers should take proactive steps to ensure compliance.
Recommended actions include:
- Reviewing contracts for part-year and irregular hours workers
- Checking annual leave calculations and pay arrangements
- Updating policies on dismissal and re-engagement
- Preparing payroll systems for new statutory rates
- Confirming Real Living Wage compliance if accredited
- Reviewing family leave policies ahead of upcoming legislative changes
Taking action early helps organisations avoid legal risk and ensures a smooth transition as employment law continues to evolve.
Supporting Employers Through Employment Law Change
Navigating employment law developments can be complex, particularly when multiple reforms occur within a short timeframe.
At Nectar HR, we support organisations by:
- reviewing HR policies and employment contracts
- advising on compliance with new legislation
- providing manager training and HR guidance
- helping businesses prepare for future employment law reforms
If you would like help ensuring your organisation is ready for the latest employment law updates, contact our team today.