UK Employment Tribunal Compensation Limits and Wage Increases; Neonatal Care Leave and Pay; and Ethnicity and Disability Pay Gap Reporting

At a Glance

• The annual increases to compensation limits in the UK Employment Tribunals took effect on 6 April 2025. The new rates apply where the event giving rise to compensation (such as the termination of employment) occurs on or after 6 April 2025. The annual UK wage increases came into effect on 1 April 2025.
• Neonatal care leave and pay rights came into force on 6 April 2025. They are intended to support employees whose babies are receiving neonatal care.
• The UK government launched a consultation seeking input on measures it proposes to include in the draft Equality (Race and Disability) Bill. The consultation is open until 10 June 2025.

1. Raising Rates: UK Employment Tribunal Compensation Limits, Statutory Payments and National Minimum Wage (2025)

The annual increases to compensation limits in the Employment Tribunals took effect on 6 April 2025. The new rates apply where the event giving rise to compensation (such as the termination of employment) occurs on or after 6 April 2025. The most notable changes are as follows:

• The limit on a week’s pay for the purposes of calculating statutory redundancy payments and the basic award for unfair dismissal increased from £700 to £719*.
• The maximum statutory redundancy payment and basic award for unfair dismissal increased from £21,000 to £21,570*.
• The maximum compensatory award for unfair dismissal increased from £115,115 to £118,223* (or 52 weeks’ gross pay, if lower).

*Figures are for Great Britain only. Different figures apply in Northern Ireland.

Statutory rates for family-related leave and statutory sick pay also rose with effect from 6 April 2025:

• Statutory maternity, paternity, adoption, shared parental and parental bereavement pay increased from £184.03 to £187.18 per week.
• A new statutory entitlement to neonatal care leave and pay came into effect for children born on or after 6 April 2025. Eligible employees will receive £187.18 per week.
• Statutory sick pay increased from £116.75 to £118.75 per week.

The minimum hourly wages also increased with effect from 1 April 2025 as follows:

• The National Living Wage for those aged 21 and over increased from £11.44 to £12.21 per hour.
• The National Minimum Wage:
  • For those aged 18 to 20 increased from £8.60 to £10.00 per hour.
  • For those aged under 18 increased from £6.40 to £7.55 per hour.
  • For apprentices increased from £6.40 to £7.55 per hour.

2. New Neonatal Care Leave and Pay Rights

Neonatal care leave and pay rights came into force on 6 April 2025. They are intended to support employees whose babies are receiving neonatal care.

Neonatal care leave is a ‘day 1’ right and available to eligible employees whose babies are born on or after 6 April 2025. Eligible employees whose babies are admitted into neonatal care within 28 days of birth and have an uninterrupted stay in hospital of at least seven days will be able to take one week’s leave for every week the baby spends in neonatal care, up to a maximum of 12 weeks. Neonatal care leave must be taken within 68 weeks of a baby’s birth.

The right to take neonatal care leave is additional to other types of statutory family leave entitlements and can be taken while the child is receiving neonatal care or after other statutory family leave has been taken. For example, an employee on maternity leave can add her neonatal leave entitlement on to the end of her maternity leave.

If neonatal care leave is taken while the baby is receiving neonatal care, the leave is categorised as a ‘tier 1’ period and can be taken in noncontinuous blocks of a minimum of one week each. In all other cases, the leave will be categorised as a ‘tier 2’ period and must be taken in one continuous block.

Neonatal care pay is available to employees eligible for neonatal care leave and who have 26 weeks’ continuous service. Neonatal care pay is payable at the lower of the applicable statutory rate (currently £187.18) or 90% of average weekly earnings.

3. UK Government Launches Consultation on Implementing Mandatory Ethnicity and Disability Pay Gap Reporting

On 18 March 2025, the UK government launched a consultation seeking input on measures it proposes to include in the draft Equality (Race and Disability) Bill. The consultation is open until 10 June 2025.

The Bill would require mandatory ethnicity and disability pay gap reporting for employers with 250 or more employees. The responses to the consultation are intended to help shape draft legislation. The King’s Speech in July 2024 announced the government’s intention to introduce this type of legislation.

The consultation seeks feedback from private sector employers on a number of matters, including action plans, pay gap collection and calculations, and enforcement.

Many of the proposed measures mirror the existing gender pay gap reporting regime but extend it to new protected characteristics. The government is exploring whether to require the publication of accompanying action plans to address identified gaps — something not currently mandatory in gender pay reporting. It also seeks views on the appropriate methodology for calculating gaps, including which employees and forms of pay should be included, and how to approach intersectional analysis (i.e., where employees belong to multiple protected groups).

The consultation additionally raises the possibility of new compliance mechanisms, potentially including penalties, as well as the implementation of a new regulatory enforcement body for equal pay.

Alongside the consultation, the government has launched a broader ‘call for evidence’ on wider reforms to equality law, including equal pay and pay transparency measures. While separate, both exercises form part of the legislative agenda behind the Equality (Race and Disability) Bill.

Employers likely to be in scope should consider reviewing the consultation and responding by 10 June 2025 to help shape the proposed framework.