Ending the Futile Quest for Welfare Cost Cuts

Embracing Sustainable Employment Strategies A New Era for UK Employers

As we step into 2025, the UK is on the cusp of significant employment law changes and innovative government initiatives aimed at fostering a more robust and inclusive job market. At Cutts & Co Accountancy, we understand the importance of staying abreast of these developments to ensure our clients are well prepared for the evolving landscape.

The Pitfalls of Short Term Cuts

Often, governments are tempted by the allure of short term cost savings, but these measures can be counterproductive in the long run. Instead of focusing on quick fixes, the current UK government is adopting a more holistic approach to employment, emphasising routes back into lasting and meaningful employment.

Key Employment Law Changes in 2025

Wage and Tax Adjustments

One of the most immediate changes employers will face is the increase in National Minimum Wage rates from April 1, 2025. The National Living Wage for those aged 21 and older will rise from £11.44 to £12.21 per hour, while the National Minimum Wage for 18 to 20 year olds will increase from £8.60 to £10.00 per hour. For those under 18 and apprentices, the rate will go up from £6.40 to £7.55 per hour. Additionally, the daily accommodation offset will rise from £9.99 to £10.66.

Statutory Payments and NICs

Statutory payments are also set to increase, and there will be significant changes to National Insurance Contributions. The employer NICs rate will increase by 1.2 percentage points, from 13.8 percent to 15 percent. The Secondary Threshold, which determines when employers become liable to pay NICs, will be reduced from £9,100 to £5,000 per year until April 6, 2028, and then adjusted by the Consumer Price Index thereafter. The Employment Allowance will be increased from £5,000 to £10,500 and extended to all eligible employers by removing the £100,000 eligibility threshold.

The Employment Rights Bill

The Employment Rights Bill, a cornerstone of the government’s Plan to Make Work Pay, is currently making its way through Parliament. This bill promises to be the most significant package of employment law reforms in recent decades. It will introduce fundamental changes in HR processes, such as recruitment and dismissal, and enhance employee relations, including a new era of partnership with unions. The bill is expected to pass into law by mid 2025, although most reforms will not take effect until 2026.

Consultations and Non Legislative Reforms

Throughout 2025, employers can expect extensive consultations on various aspects of the Employment Rights Bill. These consultations will cover topics such as removing the qualifying service requirement for unfair dismissal, extending the minimum collective consultation period, and introducing the right to reasonable notice of shifts and payment for cancelled or curtailed shifts. Non legislative reforms, including a code of practice on the right to switch off, will also be implemented via existing powers.

Government Initiatives to Boost Employment

The Get Britain Working White Paper

The UK government has unveiled the Get Britain Working White Paper, a comprehensive plan to achieve an ambitious 80 percent employment rate. This initiative includes transforming Jobcentres into a national jobs and careers service focused on skills and careers rather than just managing benefit claims. Every young person will have access to apprenticeships, quality training, and education opportunities. Additionally, mental health support will be expanded to reduce waiting lists in areas with high levels of inactivity.

Youth Guarantee and Growth and Skills Levy

A new Youth Guarantee ensures that every young person has access to education or training to help them find employment. The Apprenticeship Levy in England will be transformed into a more flexible Growth and Skills Levy, backed by £40 million to expand opportunities for young people to develop skills and enter the workforce. This change aims to deliver greater flexibility for employers and learners, aligning with the government’s Industrial Strategy.

Local Employment Plans and Supported Employment

Local mayors and councils will be empowered to develop their own Get Britain Working plans, tailored to the specific needs of their areas. Up to £15 million will be made available to support these local initiatives. The Connect to Work scheme, funded by £115 million, will provide voluntary employment offers to people with disabilities, health conditions, or complex barriers to work, supporting up to 100,000 people annually.

Supporting Long Term Unemployment

Addressing long term unemployment requires a multifaceted approach. Effective strategies include personalised action plans, skills training, work experience, and intermediate labour markets. Employers play a crucial role by understanding local economic needs and engaging with programmes that support the long term unemployed. Initiatives like the Solent Jobs Programme have shown success in transitioning individuals into open employment by combining temporary work with job search support.

Conclusion

As the UK embarks on this new era of employment law and policy, it is clear that the focus is shifting from short term fixes to sustainable, long term solutions. Employers must be prepared to adapt to these changes, which promise to enhance workers’ rights and foster a more inclusive and supportive job market. At Cutts & Co Accountancy, we are committed to helping our clients navigate these changes and ensure they are well positioned to thrive in this evolving employment landscape.