Starting April 2025, major changes in employment law will take effect across the UK, directly impacting millions of workers and employers. These changes include substantial wage increases, higher National Insurance contributions for businesses, expanded parental and sick leave benefits, and new rights for parents of premature or unwell babies. Chancellor Rachel Reeves introduced these reforms in her first budget, positioning them as part of a broader plan to boost support for working families and ensure fairer pay.
Wage Increases for Over 3 Million Workers
One of the most significant updates is the rise in the National Living Wage and National Minimum Wage, benefiting more than 3 million workers. From April:
- The National Living Wage will increase from £11.44 to £12.21 per hour, marking a 6.7% rise. This amounts to around £1,400 extra per year for a full-time worker.
- The National Minimum Wage for workers aged 18 to 20 will increase from £8.60 to £10.00 per hour, the largest recorded hike in this age group.
- Apprentice minimum pay will rise from £6.40 to £7.55 per hour.
The government also signaled its intent to eliminate age-based wage brackets in the future, moving towards a single hourly wage rate for all adults.
Chancellor Reeves emphasized that these increases deliver on the government’s pledge for a “genuine living wage.” She stated,
“This pay boost for millions of workers is a significant step towards delivering on that promise.”
Increases to Parental and Sick Pay
In line with the cost-of-living pressures, the government is also raising statutory pay rates for various types of family and health-related leave. From April:
- Statutory maternity, paternity, adoption, parental bereavement, and shared parental pay will increase from £184.03 to £187.18 per week.
- The earnings threshold to qualify for these benefits will also increase slightly from £123 to £125 per week.
- Statutory Sick Pay will rise from £116.75 to £118.75 per week.
These adjustments aim to provide better financial support for workers during life’s important moments, such as welcoming a child or recovering from illness.
Employers Face Higher National Insurance Costs
Employers will begin paying more in National Insurance contributions (NICs). The employer NIC rate will increase by 1.2 percentage points, rising from 13.8% to 15%.
Additionally, the secondary earnings threshold—the point at which employers start paying NICs—will fall from £9,100 to £5,000 per year. This change will result in higher NIC obligations for many businesses.
To support small businesses, the government has doubled the Employment Allowance from £5,000 to £10,500. This means that around 865,000 small employers won’t pay any National Insurance, and over one million businesses will pay the same or less than before.
New Right to Paid Neonatal Leave
From April 6, a new legal right to paid neonatal leave will be introduced. This policy allows parents of premature or seriously ill babies to take paid time off from work immediately after birth.
Eligible parents will receive one week of paid leave for each week their baby remains in neonatal care, up to a maximum of 12 weeks. This leave is available from day one of employment and is provided in addition to other entitlements like maternity and paternity leave.
The government designed this policy to support families during incredibly difficult and stressful times. It recognizes the emotional and financial challenges parents face when their newborns require extended hospital care.
What’s Coming Later in 2025 and Beyond?
While the April reforms are significant, more changes are expected later in the year and into 2026:
- Free childcare will expand in September 2025. Working parents of children aged nine months and older will receive up to 30 hours of free childcare per week until their child starts school. To qualify, each parent must earn between £9,518 and £100,000 annually.
- An update to the Employment Rights Bill is expected in 2026. It aims to remove the lower earnings limit for sick pay eligibility and eliminate waiting days, making sick pay more accessible to all workers.
These reforms mark a notable shift in how the UK government approaches wages, workplace rights, and family support. Workers can expect better pay and more support, while employers will need to prepare for increased financial responsibilities. As the new tax year approaches, businesses and employees alike should stay informed and adjust accordingly.
FAQs
1. Who qualifies for the new National Living Wage?
Anyone aged 21 and over will be entitled to the National Living Wage of £12.21 per hour from April 2025.
2. What is the new minimum wage for younger workers and apprentices?
- Ages 18–20: £10.00/hour
- Apprentices: £7.55/hour
3. How much will my pay increase if I’m earning the current National Living Wage?
A full-time worker on £11.44/hour will see an annual pay rise of about £1,400.
4. When will the new paid neonatal leave start?
April 6, 2025. Parents can take one week of leave for each week their baby is in neonatal care, up to 12 weeks.
5. Who pays for statutory sick pay and maternity/paternity pay?
Employers cover these payments, though small businesses may be able to claim part of it back.
6. How much will Statutory Sick Pay be from April?
It will increase to £118.75 per week.
7. What changes are employers facing with National Insurance?
The NI rate for employers will rise to 15%, and they’ll start paying NI on salaries from £5,000 (down from £9,100). However, the Employment Allowance for small businesses will double to £10,500.
8. Will sick pay rules change further in 2026?
Yes. The government plans to make Statutory Sick Pay available to all workers from day one, removing the earnings limit and waiting period.
9. Who is eligible for the expanded free childcare?
Each parent in the household must earn between £9,518 and £100,000 per year to qualify for 30 free hours per week.
10. Where can I learn more or get help with these changes?
Visit gov.uk, speak with your HR department, or contact your local Citizens Advice Bureau for more details.
