How Upcoming HR Changes Will Affect Your Small Business: What You Need to Know

As new laws and rules come into play this month, it's essential for small and medium-sized businesses (SMEs) to be prepared. Here’s a breakdown of the key changes, so you can stay on top of what’s required and avoid any surprises.

1. Wage Increases – How it Affects Your Business

Starting in April 2025, employees will see an increase in the national minimum wage. Here’s what you need to know:

The national living wage will increase to £12.21 per hour for workers aged 21 and older (previously it was for those 23 and over).
Workers aged 18-20 will see a rise to £10.00 per hour, and those aged 16-17 will earn £7.55 per hour.
Apprentices will also be entitled to at least £7.55 per hour.

This increase might put pressure on your payroll, especially if you employ staff at higher levels. You may need to consider raising pay for those earning above the new wage rates to maintain pay fairness across your team.

2. National Insurance Contributions (NICs) Are Going Up

From April 6, the cost of national insurance for employers will rise.

Employers will need to pay 15% of their employees’ earnings, up from 13.8%.
The point at which employers start paying NICs will drop from £9,100 to £5,000.

To help offset this cost, the employment allowance (which reduces your NIC bill) will increase from £5,000 to £10,500, and there will no longer be an income cap to qualify for this allowance. So, more businesses might be able to benefit from it.

3. Sick Pay Changes

Starting April, statutory sick pay (SSP) will also change. Here’s what’s important:

The weekly SSP rate will go up by £2 to £118.75.
The threshold for eligibility will rise slightly, so employees need to earn at least £125 per week to qualify.

There is a three-day waiting period before SSP starts.

4. New Leave for Parents with Babies in Neonatal Care

For parents whose babies need to stay in neonatal care, there is new support starting April 6:

Parents can take up to 12 weeks of leave from work.
This leave will be available from day one of employment.
Pay will be at a statutory flat rate of £187.18 per week or 90% of average weekly earnings (whichever is lower).

Employers need to update their leave policies and communicate these changes to ensure employees know how to access this support.

5. Parental Leave Pay Increases

Parental leave pay is also increasing, starting in April:

Maternity, paternity, adoption, and shared parental pay will go up from £184.03 to £187.18 per week.
The threshold for eligibility will also rise slightly from £123 to £125 per week.

While this is a helpful increase, it still may not fully cover the financial strain that many families experience during parental leave, so some employers may offer enhanced pay to attract and retain employees.

6. Redundancy and Tribunal Compensation Changes

If your business has to make redundancies, the amount of compensation employees can receive has gone up:

The maximum weekly pay used for redundancy calculations will increase to £719 (from £700).
The maximum payout for unfair dismissal cases will rise to £118,223 (from £115,115).

This means businesses need to be more careful when handling employee relations to avoid costly tribunal cases. Strengthening your communication and HR practices can help prevent disputes and potential legal issues.

7. How to Prepare for All These Changes

These changes might seem overwhelming, but there are steps you can take to stay compliant:

Review your payroll system to ensure it reflects the new minimum wages and NICs.
Check your sick leave policies to make sure you’re ready for the rise in SSP.
Update your employee handbook with the new parental leave policies, particularly neonatal care leave.
Train your HR team to understand these changes and communicate them to employees effectively.

It’s important to get ahead of these changes to ensure your business remains compliant and can handle any potential challenges with ease.

These new rules and changes might increase your operating costs, but they are designed to provide more support for employees, especially those with low wages or needing time off for family reasons. By staying informed and proactive, you can make these adjustments smoothly and avoid any surprises down the road.

If you’re feeling unsure about any of these changes, please get in touch with People Pulse HR to help guide you through the process and keep your business running smoothly.

Make sure to start preparing now so that your business stays on track and compliant with the new rules!