Changes for employers from April 2025

National Insurance Contributions (NICs)

Upcoming Changes:

• • From April 2025, employer NICs will increase by 1.2% to 15%
  • The secondary threshold decreasing from £9,100 to £5,000.
  • The Employment Allowance is increasing. Right now, businesses that paid £100,000 or less in employer National Insurance last year can reduce their bill by £5,000. This allowance will go up to £10,500, and the £100,000 limit will be removed, so more businesses can benefit.

Source: gov.uk

Considerations and planning:

With these changes taking effect in 2025, this is good time for small businesses to review their finances and plan accordingly. The increase in employer National Insurance Contributions (NICs) and the reduction of the secondary threshold may lead to higher payroll costs, making it essential to explore ways to manage the financial impact. Reviewing workforce costs and considering tax-efficient employment options could help businesses adapt effectively.

The rise in the Employment Allowance presents an opportunity for eligible employers to offset some of these costs, so it is advisable to ensure it is being fully utilised.

Additionally, businesses may benefit from assessing pricing structures and identifying operational efficiencies to maintain financial stability. Taking proactive measures now can help ensure continued resilience and smooth operations in the year ahead.

Changes in pay and wages

National living wage increases:

From 1 April 2025, the National Living Wage for workers:

• Aged 21 and over – £12.21 per hour (6.7% increase)
• Aged 18 to 20 – £10.00 per hour (16.3% increase)
• Under 18s – £7.55 per hour (17.9% increase)
• Apprentices – £7.55 per hour (17.9% increase)

Source: gov.uk

Considerations and planning:

Rising wages will lead to higher payroll costs, making it important for businesses to review their financial plans and ensure expenses remain manageable. Updating payroll systems to reflect the new rates will help maintain accuracy and compliance. If these changes place pressure on profit margins, businesses may need to consider adjustments such as revising pricing strategies or improving operational efficiency.

The increase in the Employment Allowance may provide some financial relief for eligible businesses, helping to offset additional costs. Proactive planning can support a smooth transition while maintaining business stability and continued support for employees.

Holiday entitlements

Key changes in holiday pay reforms:

Starting from 1 April 2024, there’s a new way to calculate holiday entitlement for irregular hour and part-year workers. Their holiday will now be based on 12.07% of the hours they actually work in each pay period, making it easier to track and manage time off. This applies both in the first year of employment and beyond.

 Considerations and planning:

The new accrual method introduces a simplified approach to managing holiday entitlement, which may streamline administrative processes over time. Clearly communicating these changes to employees will be advised to ensure they understand how their holiday entitlement is calculated and what it means for them.

Updating payroll systems and internal policies in advance can help prevent misunderstandings and facilitate a smooth transition. Proactive planning and clear communication will support efficiency while maintaining transparency and fairness in the workplace.

Flexible working arrangements

Key changes with policy shift:

• Employees can request flexible working from their first day on the job, instead of waiting 26 weeks.
• Employees are now allowed to make two flexible working requests in a year, increasing from 1 request per year.
• Employers can still refuse a request if they have a valid business reason.

Source: gov.uk

Considerations and planning:

Under the new UK flexible working laws, employees now have the right to request flexible work arrangements from their first day of employment, rather than after 26 weeks. While employers can decline requests for legitimate business reasons, small businesses may benefit from assessing how to incorporate flexibility without disrupting operations.

Reviewing work schedules, exploring remote or hybrid options, and updating internal policies can help establish a balanced and practical approach. A structured and transparent process will support compliance while contributing to employee satisfaction and retention.

Employment Rights Bill proposal

Brought to Parliament on 10 October 2024, the Employment Rights Bill includes 28 key employment law reforms designed to enhance and modernise worker protections.

 Highlights of proposed changes:

• Ban exploitative zero-hours contracts by ensuring guaranteed hours, fair shift notice, and compensation for last-minute cancellations.
• End ‘fire and rehire’ practices by making dismissals for refusing contract changes automatically unfair unless unavoidable.
• Provide day-one protection from unfair dismissal, with probationary periods allowing a simpler dismissal process.
• Make Paternity Leave and Unpaid Parental Leave available from day one of employment.
• Expand Statutory Sick Pay by removing earnings limits and waiting periods.

Source: gov.uk

Considerations and planning:

The proposed employment law reforms are expected to introduce significant changes for small business employers, impacting hiring practices, contractual agreements, and overall business operations. The ban on exploitative zero-hours contracts may lead to increased labour costs and reduced scheduling flexibility, while restrictions on ‘fire and rehire’ practices could make workforce adjustments more complex.

Day-one protection from unfair dismissal may require businesses to refine their hiring and probationary processes to ensure employees are a good fit before full protections apply. Additionally, expanding Statutory Sick Pay and granting immediate access to Paternity and Unpaid Parental Leave could introduce financial and operational pressures, particularly for businesses with small teams that rely on consistent staff availability.

To prepare for these changes, small businesses can take proactive steps to ensure compliance and minimise disruption:

• Review employment policies and contracts to align with the new requirements.
• Assess workforce planning and budgeting to anticipate potential increases in labour costs.
• Engage with employees and stakeholders to support a smooth transition and maintain positive workplace relations.
• Seek legal or professional guidance to understand the full implications of the reforms and implement best practices.

With significant employment law changes ahead, staying informed and adapting proactively will be essential for small businesses. Ensuring compliance across areas such as pay, contracts, leave entitlements, and flexible working arrangements will help businesses mitigate legal risks, maintain operational stability, and foster a positive work environment.

Regularly reviewing policies, updating contracts, and engaging employees in the transition process will support a smooth adaptation to the evolving regulatory landscape. Taking early action through financial planning, policy adjustments, and expert consultation can help businesses navigate these reforms effectively, strengthening both compliance and long-term resilience.

*Disclaimer – This blog has been created as general information and should not be taken as advice. Make sure you have the correct level of insurance for your requirements and always review policy documentation. Information is factually accurate at the time of publishing but may have become out of date.