New Compensation Limits and Statutory Rates Kicking in from April 2025

Significant changes are on the horizon for employers and employees alike as the new compensation limits and statutory payment rates take effect from April 2025 following The Employment Rights (Increase of Limits) Order 2025. Some of the key increases from 6th April 2025 will include:

• The limit on the compensatory award for unfair dismissal increasing from £115,115 to £118,223;

• The prescribed rate for statutory maternity pay, statutory paternity pay, statutory adoption pay, maternity allowance, shared parental pay, statutory parental bereavement pay and statutory neonatal care pay will be £187.18 per week; 

• The limit on a week’s pay for the purpose of calculating, among other things, statutory redundancy payments and the basic award for unfair dismissal, will increase from £700 to £719;

• The cap on statutory redundancy pay which is currently £21,000, will increase to £21,570;

• The limit on the compensatory award for failure to allocate and pay tips fairly, will increase from £5,000 to £5,135;

• Guarantee pay will increase from £38 to £39 per day; and

• The minimum basic award in cases where a dismissal is unfair by virtue of certain health and safety, working time, employee representative, trade union, or occupational pension trustee reasons, will increase from £8,533 to £8,763.

National Minimum Wage rates

Workers are entitled to the NMW rate which applies at the start of a particular pay reference period. With effect from the 1st April 2025, the following categories of workers will be entitled to the increases to the National Minimum Wage limits as follows:

 National Living Wage (NLW). This applies to workers aged 21 and over and has increased to £12.21 per hour.

18-20 year old rate. This applies to workers aged 18-20 inclusive and has increased to £10.00 per hour.

16-17 year old rate. This applies to workers aged under 18 but above compulsory school age who are not apprentices and has increased to £7.55 per hour.

Apprentice rate. This applies to apprentices under 19 years of age, and those aged19 and over who are in the first year of their apprenticeship which has increased to £7.55 per hour.

So, what does this mean for employers?

The roll-out of higher compensation limits and statutory payment rates are an added expense to employers, as the new limits could have a significant impact on businesses planning workforce costs.

 Notwithstanding, this may foster an improvement in employee relations, which could lead to higher morale and better engagement from employees – which certainly is the aim of the new Labour Government. The new compensation limits will mean that it will be imperative for employers to establish and maintain up to date workplace policies and internal processes, in order to avoid facing costly employment tribunal awards.

 The change in government highlights the balance between worker protection with employer responsibilities. It will be imperative for employers to stay informed and follow fair and compliant employment practices.