UK quarterly employment update - Spring 2025 | Employment Law

Welcome to the Spring 2025 edition of our quarterly UK employment update.

In this edition we look back at notable events from the first quarter of the year, as well as provide short and longer-term forecasts for what lies ahead.

January to March 2025 – a backward glance
Development	Impact on employers
Three key changes to the Sponsor Guidance have been made, including prohibiting employers from reclaiming certain sponsorship fees from employees; banning personal sponsorship of employees by individuals; and updating requirements for key personnel involved in sponsorship. Read our January Immigration round up.	Employers must familiarise themselves with the new regulations and ensure compliance to avoid penalties.
From 6 January 2025, a new set of ET rules (Employment Tribunal Procedure Rules 2024) applies to all cases in the ETs in England and Wales and in Scotland.	HR practitioners and in-house counsel who are engaged in, or anticipate, ET litigation should note the changes. Although many of the rules remain unchanged, there are a number of amendments and new rule numbers to note, helpfully summarised in the following table.
For most unlawful deductions claims brought since 1 July 2015 there has been a two-year "backstop" limiting the amounts that can be recovered in Great Britain, but not Northern Ireland. It applies to all wages claims (with some limited exclusions) and was the government’s response to EU-derived holiday pay litigation at that time. In Afshar and others v Addison Lee Limited, an ET decision held that the two-year backstop is ultra vires and of no effect (meaning that, in that case, the claimants could claim for sums going back further than two years).	It is important to note that this was a first instance ET decision only and is not binding on other ETs – the two-year backstop is still law and can be relied upon. Employers will however want to stay abreast of developments, particularly if the judgment is appealed as any decision from a higher appeal tribunal/court would be binding. In the meantime, employers should be aware of an increased risk that this line of argument may be raised by claimants in unlawful deductions from wages claims.
From 20 January 2025, legislation adds protective awards (for non-compliance with collective consultation requirements) to the list of claims an ET can apply a compensation uplift to for non-compliance with the Statutory Code of Practice on dismissal and re-engagement. The Code applies where an employer is seeking to change terms and conditions and one of the options, if agreement is not reached, is to terminate and offer new terms. Read our briefing for more information.	The government proposes further reform under the Employment Rights Bill (“ERB”) to “fire and rehire” and collective redundancy consultation, including doubling the maximum protective award from 90 to 180 days’ pay – read our tracker and briefing. Employers should therefore anticipate increasing financial penalties for non-compliance.
In Higgs v Farmor’s School the CA considered the dismissal of an employee for reposting gender critical views on social media, finding that the employee’s dismissal was disproportionate in the circumstances and amounted to direct religion and belief discrimination.	Handling conflicts of belief in the workplace remains a difficult area for employers to navigate and the law is complex; however the CA’s decision provides important guidance for employers to note in this area. Each case will turn on its own facts and employers should take careful advice, noting that it will only be lawful to dismiss employees for manifesting protected beliefs in limited circumstances.
On 5 March 2025, the government announced significant amendments to the ERB, in part to respond to consultations it undertook late last year. The amendments include changes to: statutory sick pay; collective redundancy consultation; rights for zero-hour and low-hour contract workers; trade union legislation; and more. Read our briefing and tracker for further details.	The ERB includes over 28 employment reforms and, cumulatively, the scale, breadth and complexity of the changes are significant for employers. It is expected to be finalised this summer, with a staged implementation during 2025 and 2026 (and potentially beyond). A draft Equality (Race and Disability) Bill is also anticipated (see below). Employers should risk assess the impact on their workplaces and any changes to 2025/2026 workforce plans. With some measures, further details are awaited before employers can prepare a detailed response, but initial planning can take place (see our tracker for steps employers can take now to prepare).
On 18 March 2025, the government launched its consultation on mandatory ethnicity and disability pay gap reporting - read our briefing. The consultation will, alongside an anticipated call for evidence, inform the Draft Equality (Race and Disability) Bill which will establish the legal framework for the new pay gap reporting requirements and the extended equal pay protections. For further information on the Equality (Race and Disability) Bill and ERB, as well as a round-up of key case law and other employment and immigration developments, sign up to our Current developments in employment law course on 30 April 2025 from 930-1130am (virtual).	Employers with 250 or more employees should prepare to invest time and resources in assessing and understanding the new ethnicity and disability pay reporting duties. Advance work on data collection and understanding of pay gaps will be required to ensure compliance. In addition and regardless of workforce numbers, all employers should be taking steps to properly understand pay practices and identify any pay differentials, including establishing the causes of any significant pay differences, assessing justification and establishing a plan to address any differences that cannot be justified on non-discriminatory grounds.

April to June 2025 – short-range forecast
Development	Impact on employers
New NMW rates will apply from 1 April 2025, including the NLW for those aged 21 or over rising from £11.44 to £12.21 per hour and the NMW for 18-20 year olds up 16.3% from £8.60 to £10 per hour.	The latest increases reflect the recent change to the way NMW rates are set, with the Low Pay Commission (LPC) now factoring in the cost of living when confirming new rates each year. In addition, the LPC is required to narrow the gap with the NLW, taking steps year by year in order to achieve a single adult rate. As rates increase, so does the risk of NMW breaches - see our webinar and common pitfalls briefing. Employers should also note reforms proposed under the ERB, which give a new enforcement body (the Fair Work Agency) powers to enforce NMW underpayments, including bringing ET proceedings in place of workers and to provide legal assistance.
Statutory neonatal care leave and pay is expected to come into force on 6 April 2025. This will provide up to twelve weeks' leave and pay for eligible employees with a child receiving seven or more continuous days' neonatal care, starting within 28 days of birth. For further details, see our briefing.	Employers should amend existing, or introduce new, neonatal or family leave policies and procedures. They should also review whether to amend the statement of terms of employment in relation to paid leave. Additional changes to statutory family leave rights are also included in the ERB, including a new right to unpaid bereavement leave, leave for pre-24 week pregnancy loss, extending dismissal protections for new parents and more (Read our briefing).
An appeal is due to be heard by the CA on 10 April 2025, to consider whether a worker’s part-time status must be the “sole reason” for any less favourable treatment (Augustine v Data Cars Limited). The case concerns a part-time private hire driver who was charged the same weekly circuit fee as a full-time comparator. The EAT determined that, although the part-time driver was treated less favourably than his full-time comparator under pro-rata principles, applying existing case law, there was no breach under the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 as his treatment was not “solely” on the ground he worked part-time.	Although the EAT was not able to depart from existing case law on this point, the CA is able to do so as a higher appeal court. If it does, employers should anticipate the potential for new guidance on the treatment of part-time workers.
Upcoming immigration developments include an extension of time for the use of expired Biometric Residence Permits (BRPs) and Biometric Residence Cards (BRCs) from the previous end date of 31 March to 1 June 2025; the mandatory implementation of the Electronic Travel Authorisation (ETA) scheme from 2 April 2025; and changes to the Immigration Rules. In addition, Home Office fees for most types of applications are increasing on 9 April 2025. For more details see our March edition of our Immigration round -up.	Employers must ensure they are using the latest version of the employer’s guide to right to work checks related to the expiry of BRPs and BRCs and transitioning to eVisas. Both the transition to eVisas and the introduction of the new ETA system will require employers to update their administrative processes, verify immigration status digitally, and ensure employees are aware of the new requirements. Employers should also check the updates to the Immigration Rules to ensure for continuing compliance and ensure that they are aware of the increases in fees.

July to December 2025 – long-range forecast
Development	Impact on employers
The government will continue to implement its wide-ranging employment law changes under the ERB. Changes which will commence immediately upon Royal Assent (anticipated on or before July 2025, but not confirmed), or two months later, include some industrial action reforms. The other changes are expected to be implemented later in 2025 and throughout 2026. The unfair dismissal reforms will not take effect before autumn 2026. In addition, the Equality (Race and Disability) Bill is expected to come into force in 2026 and there is likely to be a transition period to allow employers to get ready for the change.	Although employers will be keen to understand timescales for implementation to plan accordingly, exact timings over 2025 and 2026 are largely uncertain and dependent on a number of factors including further consultations, government capacity, how quickly existing guidance/Codes of Practice can be updated, ET readiness (and more). Employers should check our tracker for updates and implementation timescales.
The Economic Crime and Corporate Transparency Act 2023 will, in broad terms, introduce a new offence from 1 September 2025 under which large employers may be criminally liable where an employee, among others, commits a fraud intending to benefit the employer (or, in some circumstances, to benefit a client) and the employer did not have reasonable fraud prevention procedures in place. Read our update.	The aim of the offence is to encourage more organisations to implement, or improve, fraud prevention procedures. Employers should refer to the Home Office’s statutory guidance when developing or updating their fraud prevention policies as the courts will ultimately take adherence to this guidance into account when considering cases.
Sustainability standards (including ESG - Environmental, social and governance) assess an employer’s impact on the environment and people, including on workers. This is an evolving landscape and key themes include regulatory challenges, supply chain due diligence, reporting requirements, worker protection, and more. They include new obligations on employers to report publicly on workforce metrics and action plans, and to be pro-active in identifying and addressing human rights risks in supply chains.	Other jurisdictions have acted to regulate and UK employers need to be aware that they may fall directly within scope (some have extra-territorial application), or indirectly through supply chains. This includes the EU’s ban on the sale, import and export of goods made using forced labour and a Sustainability Omnibus proposal which is aimed at amending recently agreed reporting and due diligence legislation. Read our update.
An increasing number of employers are piloting, or have introduced, AI technology in the workplace. At the same time, a growing number of job applicants and workers are using AI to support their personal performance. The legal landscape is also changing: provisions in the EU’s AI Act have already started to apply, and will continue to be applied over 2025 and 2026, and it is anticipated that the UK government will consult on how AI technologies are implemented in the workplace. UK regulators, including the ICO are expanding their compliance activities, such as the ICO’s recent audit of AI tools in recruitment.	AI can bring real benefits but may also introduce legal, employee relation and reputational risks if it is not used lawfully and fairly. Employment law risks areas include: discrimination; data protection and privacy; unfair dismissal; consultation; and industrial action. Actions for employers rolling out new AI systems include carrying out risk assessments, updating HR policies, considering workforce messaging (including any potential consultation obligations), upskilling and reskilling workers, risk training and more. See our global legal guide to navigating artificial intelligence All AI-Aboard for bite-sized, Board-level insights and links to further resources.

NB. Employment law is a devolved matter in Northern Ireland (NI) and the issues set out above may not all apply in NI. For NI specific advice contact our Belfast office.

Key to abbreviations:

CA - Court of Appeal
ET - Employment Tribunal
EAT - Employment Appeal Tribunal
ICO - Information Commissioner’s Office
NLW - the National Living Wage
NMW - the National Minimum Wage

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