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There are some important changes to statutory rates of pay that the Government have already announced, to take effect in 2025.
National Minimum/Living Wage Rate Increases & Accommodation Rate
The National Living Wage is to rise by 6.7%. This will also now apply to all workers aged 21 and over for the first time (previously applying only to those aged 23 and over). It will go from £11.44 to £12.21 per hour.
At the same time, the National Minimum Wage (NMW) rates will be increased as follows:
· from £8.60 to £10.00 per hour for 18 to 20-year olds (a 16.3% increase);
· from £6.40 to £7.55 per hour for 16 & 17-year olds (a 18% increase); and
· from £6.40 to £7.55 per hour for apprentices (a 18% increase);
Accommodation Rate
If you provide some form of staff housing as part of the contractual arrangements, then the daily accommodation offset will apply. This will change from the current rate of £9.99 per day to £10.66 (a 6.7% increase).
The effect of accommodation rates on the National Minimum Wage or National Living Wage depends on how much an employer actually charges for accommodation. It’s calculated by ‘pay period’, the frequency interval that someone is being paid. If the accommodation is free, it still affects the minimum wage. It does not matter if the cost of the accommodation is taken from the worker’s wages beforehand, or if the worker pays the cost after they get their wages.
Increased Statutory Rates
The rate for 2025/26 for Statutory Maternity (SMP), Paternity (SPP), Adoption (SAP), Parental Bereavement (SPBP) and Shared Parental (SShPP) Pay are set to increase from £184.03 to £187.18 per week.
Additionally, the rate of Statutory Sick Pay (SSP) is also set to increase from £116.75 to £118.75 per week.
The rates for Statutory Redundancy Pay, Statutory Guarantee Pay, and Tribunal Awards are not yet announced. We will send an update as soon as the new rates are published. They are usually expected in March.
Implementation
It is worth noting that not all increases happen on the same date. SSP, SMP, SPP etc. will increase on 6th April 2025, with the NLW and NMW rates going up from 1st April 2025.
National Insurance Contributions
It was announced in the Autumn 2024 Budget that from the 6th April 2025, employers secondary class 1 National Insurance Contributions (NICs), together with Class 1A and Class 1B rates, on an employee’s earnings above £5,000.00 per annum / £96 per week (down from £9,100.00 per annum / £175 per week) will increase from 13.8% to 15%.
In an attempt to offset the impact upon small businesses, the employment allowance will be increased from £5,000.00 to £10,500.00 per annum, with the £100,000 threshold now removed so that the allowance is no longer confined to just employers who have incurred an employer NICs liability of less than £100,000 in the previous tax year.
Statutory Sick Pay (SSP)
It is proposed that from April 2025 the entitlement to SSP will also become a day 1 right (as opposed to having to wait 3 consecutive days at present), and the right to SSP will be extended to all workers by removing the lower earnings eligibility threshold (which will be £125.00 per week from April 2025). Nevertheless, the rate of SSP that those earning below the lower earnings eligibility threshold will receive is still subject to consultation by the Government.
Future Legal Rights
Neonatal Care (Leave and Pay) Act, 2023
These provisions are still being progressed through Parliament. It started under the previous Government, and it is expected to provide parents with a statutory day 1 right to up to 12 weeks' leave when their baby requires neonatal care, in addition to existing parental leave entitlement. However, the right to statutory neonatal care pay will require 26 weeks’ of continuous service and earnings on average of £125.00 a week from 6th April 2025.
Early indications are that the statutory right will apply when the child is placed in neonatal care for a week or more, in the first 28 days and up to the first 68 weeks of the child’s life.
Issues such as what happens when weeks of neonatal care are separated, the type of care that falls under the Act, and the terms when more than one child is in neonatal care, are still to be addressed. It is expected that the right will be in place from April 2025.
The Employment Rights Bill
Announced in October 2024, this is now working its way through Parliament, with amendments being proposed along the way. The Government describes this as phase one of delivering its plans for reform, and is expected to pass into law mid-2025. Actual implementation for this raft of reforms will not be straight away, as further consultation and regulations are required on much of the detail, so regulations will be drip-fed throughout 2025 and into early 2026.
The Government is also amending the Employment Rights Bill to extend time limits for bringing Tribunal Claims from 3 to 6 months.
There is likely to be further Guidance and Codes of Practice to follow, advising employers of the practical steps that the new law will require. The Government anticipates that most reforms in the Employment Rights Bill will take effect no earlier than 2026, with reforms to unfair dismissal no sooner than Autumn 2026. Although, some provisions may come into force as soon as the Employment Rights Bill is passed in 2025.
Non-legislative Reforms
These are being delivered alongside the Employment Rights Bill, via existing powers and non-legislative routes, e.g. a Code of Practice on the right to switch off, which our client handbooks have had in place for many years already. The details and implementation dates for these reforms are unknown, but certainly some are likely to come in during 2025.
So, 2025 and 2026 are likely to be significantly busy years as the new Government progresses many of its employment law changes. We will be continuing to roll out and keep updating client Handbooks, as we develop a clear understanding of what all of these changes will mean in practice. We will send out Newsletters and hold free Webinars to keep our clients up to date with all of these employment reforms.
Clients are welcome to raise any concerns with our Consultant Team, who would be pleased to advise you on any element of the issues arising from this newsletter.