Employment Law Update 2025: What Employers Need to Know

With the Labour government having been in power for nearly a year and their manifesto promising a wide range of changes to employment law, specifically around of upgrading employee rights, a slew of new employment law bills has been expected in 2025. Some of these bills have already come into fruition, whilst others are yet to arrive.

To help you navigate all these changes, gunnercooke’s lawyers and advisors have put together a handy list of the biggest updates coming your way and what employers need to put in place.

Neonatal Leave

The Neonatal Care (Leave and Pay) Act 2023 grants up to 12 weeks’ paid leave for parents whose babies require neonatal care. This leave is in addition to existing maternity or paternity entitlements. Although passed, the right is dependent on further regulations expected later in the year.

Chloe Leyland, Employment Partner, commented:

“Employers are well advised to create a comprehensive policy to reflect these rights, providing clear instructions on how staff can request this leave. Employers may wish to consider offering an enhanced version of this benefit to be more competitive within the market.”

Employment Rights Bill (ERB)

The Employment Rights Bill introduced in October 2024 proposes a wide range of changes to workplace rights. These include day-one protection from unfair dismissal, restrictions on fire-and-rehire, mandatory guaranteed hours offers, and third-party harassment liability for employers. While most changes won’t take effect until 2026, some, like revised collective consultation thresholds, may arrive sooner.

Jo Tindall, Employment Law Partner, and Kate Smith, Senior Associate, explained:

“Although the ERB proposals are not expected to come into full effect until 2026, we recommend conducting a comprehensive review of employment contracts and relevant policies, especially those related to flexible working, unfair dismissal, and family leave. Aligning contracts and policies to the proposed changes will help ensure employers are well-prepared to deal with the potential impact of the ERB ahead of time. We also consider that effective training of HR and line managers is a crucial part of ensuring that new legislation is implemented effectively.”

Holiday pay overhaul

New rules will affect workers with irregular or part-year hours, commonly those on zero-hour contracts. These employees will now accrue holiday at 12.07% of hours worked rather than receiving the standard 5.6 weeks’ leave. Employers are also permitted to “roll up” holiday pay, adding 12.07% on top of wages, so long as it’s itemised on payslips. This will especially impact businesses whose holiday year starts in January.

Paul Boardman, Operating Partner, said:

“The ability to lawfully roll-up holiday pay brings welcome clarity for employers managing flexible workforces, but correct implementation is key and it’s vital that a comprehensive policy is in place, so both the employees and employers understand what they are entitled to.”

eVisa Rollout: Digital-Only Proof of Right to Work
From January 2025, physical visa documents will be replaced by eVisas. All employees must register for a UKVI account, and employers must use the “View and Prove” online service for right-to-work checks. This digital transition includes replacing biometric residence cards and vignette stickers.

Anivaldo Esquelino, Global Mobility Partner, said:

“The eVisa system will streamline immigration checks, but only if employers update internal processes and monitor updates from UKVI throughout the year.”

Statutory Sick Pay (SSP) Reforms

The Lower Earnings Limit (LEL) for Statutory Sick Pay (SSP) will be removed, allowing employees earning under £123/week to qualify. SSP will also be payable from the first day of sickness. Employers should expect increased costs and ensure payroll systems are updated accordingly.

Joan Pettingill, Employment Partner, added:

“It’s important that employers are aware of the additional costs (estimated £400m) as more employees will be eligible for SSP.”

Equality Bill: Race and Disability Pay Gap

A Draft Equality (Race and Disability) Bill is being developed to mandate pay gap reporting for ethnicity and disability; an extension of current gender pay rules. It aims to promote transparency and tackle workplace inequality. The bill is expected to enter consultation soon.

Stephanie Cooper, Senior Associate added:

“This bill signals a shift toward greater workplace accountability. Employers should start analysing internal data now to stay ahead of future reporting obligations.”

If you need expert advice in any of the above areas, you can contact our Employment team support here.