Employment Law Update: New Rates For Statutory Cap Announced

The Employment Rights (Increase of Limits) Order 2025 brings several key updates to statutory compensation limits and employment-related payments in the UK, effective from 6 April 2025. Here’s a summary of the main changes that will impact both employers and employees:

1. Statutory Cap on a Week’s Pay

• Increase in weekly pay cap: The statutory cap on a week’s pay (used for redundancy pay and the basic award in unfair dismissal cases) will rise from £700 to £719.

• Impact on awards:

• Maximum basic award for unfair dismissal: Increases to £21,570 (20 × £719 × 1.5).

• Maximum compensatory award for unfair dismissal: Rises from £115,115 to £118,223.

2. Statutory Redundancy Pay

• New maximum statutory redundancy payment: Based on the updated weekly pay cap, the maximum redundancy pay an employee can receive will be £21,570.

• Calculation basis: Redundancy pay is determined by age and length of service, with the maximum number of years considered set at 20.

3. April 2025: Other Key Rate Changes

• National Minimum Wage and National Living Wage (from 1 April 2025):

• Age 21 and over (National Living Wage): £12.21 (up from £11.44).

• Ages 18-20: £10.00 (up from £8.60).

• Ages 16-17: £7.55 (up from £6.40).

• Apprentices: £7.55 (up from £6.40).

• Accommodation Offset: £10.66 per day (up from £9.99).

• Statutory Sick Pay (SSP):

• Increase in SSP: From £116.75 to £118.75 per week.

• Minimum earnings threshold to qualify: Increases to £125.00 per week (up from £123.00).

• Family Friendly Payments (from 6 April 2025):

• The weekly maximum rate for the following statutory payments will increase from £184.03 to £187.18, or 90% of average weekly earnings if lower:

• Statutory Maternity Pay (after the first 6 weeks)

• Statutory Paternity Pay

• Statutory Shared Parental Pay

• Statutory Adoption Pay (after the first 6 weeks)

• Statutory Parental Bereavement Pay

• Earnings threshold for these payments will also rise to £125.00 per week.

• Maternity Allowance will also rise to £187.18 per week (subject to eligibility).

 

4. Pending Vento Band Updates

• Vento bands (used in discrimination claims for injury to feelings awards) will be updated. The new bands are expected to be announced by the end of March 2025 and will take effect from 6 April 2025.

5. Inflation Impact

• The £19.00 increase in the weekly pay cap is smaller than in previous years (compared to £72 in 2023 and £57 in 2024), reflecting the decline in inflation. Employers should review and adjust internal policies and redundancy packages in line with these new limits.

These updates are crucial for employers to ensure compliance with the new rates, and employees should be aware of these changes to understand their rights and potential benefits.

At Lawson West Solicitors we have a team of employment lawyers experienced committed to providing advice on all aspects of employment law.  If anything in this article affects you or if you need any help and support then please do not hesitate to get in touch, it would be our pleasure to help and support you.

If you believe you have a situation where you require legal advice, please contact us on telephone 0116 212 1000 or 01858 445 480, alternatively complete the free Contact Us form and we will get in touch as soon as possible.

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