Key items for your agenda in 2025
Our standout items
UK diversity reporting
What’s happening?
Employers with 250 or more employees will be required to report annually on the disability and ethnicity pay gaps in their workforce from 2026. There will also be a new requirement to publish a gender pay gap action plan as part of their gender pay gap report.
What does this mean for me?
Although the requirement will not come into force before 2026, employers will need to put in place processes to gather ethnicity and diversity data and ensure these comply with data protection rules.
EU diversity requirements
What’s happening?
A new EU directive on improving gender balance among directors of listed companies will require listed companies in the EU to have at least 40% female non-executive directors, or at least 33% female executive and non-executive directors, by 30 June 2026.
The EU Directive on equal pay and pay transparency will require employers with 100 or more employees to publish gender pay gap information and, if the pay gap is greater than 5%, to carry out a pay audit.
So what?
Listed EU companies with boards which do not already meet the gender balance requirements will need to ensure they have processes and pipelines in place to appoint female directors in sufficient time to meet the June 2026 deadline.
The pay transparency directive must be implemented by June 2026. EU employers should use 2025 to prepare for the new requirements by ensuring they have the necessary information, and run reports to assess what their pay gap is likely to be and how it might be reduced.
Ever increasing requirements to report diversity metrics, combined with positive duties to prevent harassment, mean your workforce will be holding you to account like never before and it is important to plan accordingly.
Adam Wyman
Partner
Other things to keep a close eye on
UK unfair dismissal and changing employment contracts (“fire and rehire”)
What’s happening?
Unfair dismissal will become a day one right in the UK, as the current two-year qualifying service requirement will be abolished. There will be a statutory probationary period (length yet to be confirmed, but nine months is suggested) during which an employee could be dismissed with a “lighter touch” process. The unfair dismissal qualifying period is expected to be removed in autumn 2026, with a government consultation on the probationary period proposals scheduled for 2025.
There will be new restrictions on using “fire and rehire” to change terms of employment. This will only be available where the employer is facing serious financial difficulties. In all other cases, any change to terms would need to be made with the employee’s agreement.
So what?
UK employers should use this time to prepare for the unfair dismissal changes; for example, by ensuring all new starter contracts include a probation period and having a process to review performance during probation.
The “fire and rehire” restrictions will make it difficult for employers to make changes to any employment terms, including pay, hours and role, unless the employee agrees. Employers should ensure that their employment contracts are drafted with as much in-built flexibility as possible.
Also, UK employers who are planning changes to terms or redundancies or other exits, may wish to consider completing the process before 2026.
The proposed abolishment of the two-year qualifying period to bring an unfair dismissal claim and other changes are significant for employers. These changes are going to make it harder to restructure workforces and are very likely going to lead to an increase in litigation. Employers need to be on the front foot by getting their performance management processes in place and upskilling managers to handle issues from the outset.
Ailie Murray
Partner
UK flexible working/right to switch off
What’s happening?
Employers in the UK will have to prove that any refusal of a flexible working request is reasonable, which is a higher burden than currently applies when refusing a flexible working request.
Employees will be given the “right to switch off” – meaning that they will not be expected to respond to calls or emails in non-working time. This is likely to be introduced in a Code of Practice (similar to the position in Ireland).
So what?
There will be consultation in 2025 on the proposals, with the new rules expected to come into force in 2026.
UK employers will need to review their flexible working policies and practices in the light of the changes, and ensure managers receive training in how to handle flexible working requests, and how to manage employees in line with the “right to switch off”.
UK anti-harassment laws
What’s happening?
Since October 2024, UK employers have a duty to take reasonable steps to prevent sexual harassment at work. The new government intends to strengthen this duty and apply it to all types of harassment.
Employers will become liable for harassment of employees by third parties (such as clients or suppliers) unless they take reasonable steps to prevent it.
So what?
Although these changes will not come into force until 2026, they will build on the requirements already in place. Employers in the UK should ensure they are already taking reasonable steps to prevent harassment at work, including harassment by third parties. These steps would include carrying out a risk assessment, putting in place a sexual harassment policy, and training managers and staff on harassment.
Family rights in the UK
What’s happening?
A new right to neonatal leave and pay will be introduced in the UK on 6 April 2025. This will give parents of premature babies up to 12 weeks of leave, in addition to maternity leave.
In 2026, paternity leave and unpaid parental leave will become day one rights for UK employees. It will also be unlawful to dismiss an employee during pregnancy or family leave or within six months of return to work (subject to some exceptions, although it is not known what these will be). There will also be a new right to up to two weeks’ bereavement leave on the death of a family member.
What does this mean for me?
Employers will need to update policies to reflect the new rights and ensure they have appropriate processes and training in place to ensure that they do not unlawfully dismiss employees who are on, or have recently returned from, family leave.
New EU European Travel Information and Authorisation System (ETIAS) and UK Electronic Travel Authorisation (ETA)
What’s happening?
Both these developments take their cue from, and are similar to, the US ESTA regime.
The ETIAS will require non-EEA visitors to participating European countries to apply for electronic authorisation before they travel unless they hold a relevant visa.
Similarly, in the UK, a new universal ‘permission to travel’ requirement (ETA) is gradually being introduced and will generally require non-UK or non-Irish nationals wishing to travel to the UK to seek permission in advance unless they hold a UK visa or residence status.
So what?
The ETIAS is due to be rolled out across thirty European countries by mid-2025, at which time all visitors travelling to those countries will need a valid ETIAS if they do not hold an EU or EEA passport or a relevant visa for the country they are visiting.
The ETA is being introduced in phases. It became mandatory for non-European travellers on 8 January and will extend to non-Irish European travellers on 2 April. Crucially, as the regime requires an affected individual coming to the UK for any purpose to have either an ETA or a visa, business trips to the UK will require additional advance planning, allowing time for applications to be processed.
New rules on Diversity and Inclusion
What’s happening?
The FCA consulted on new diversity and inclusion (D&I) rules in 2023 which included the incorporation of non-financial misconduct in certain FCA rules, annual reporting on employee numbers and, for larger firms, governance rules including a D&I strategy and targets. The FCA has now announced that it will publish final rules on non-financial misconduct in early 2025. Further work on the remaining diversity and inclusion proposals should follow later in 2025.
So what?
Firms should consider the impact of the new rules on non-financial misconduct once published and consider what changes are needed to their policies and procedures, including those relating to fitness and propriety assessments and regulatory references, to ensure compliance with these new rules. Later in 2025, once rules to reflect the remaining diversity and inclusion proposals are published, firms should consider whether they are in scope and, if so, what action is needed to comply. For some firms, this may require significant work.
