Labour costs are rising – A quick recap of the New National Minimum Wage and Employer National Insurance contribution rates

Businesses will face an increase in their staffing costs from April 2025.

Failure to comply with the new National Minimum Wage (NMW) and employer National Insurance Contributions (NICs) rates could result in serious legal consequences – so swift preparation is essential.

With that in mind, here’s a quick recap of the new NMW and employer NIC rates, and how your business can prepare.

Increases to NMW and employer NICs

Effective from 1 April 2025, the National Minimum Wage (NMW) rates will increase as follows:

· National Living Wage (age 21 and over) – Rising from £11.44 to £12.21 per hour, marking a 6.7 per cent increase.

· Ages 18 to 20 – An increase from £8.60 to £10.00 per hour, representing a 16.3 per cent rise.

· Under 18 and apprentices – Rates will go up from £6.40 to £7.55 per hour, an 18 per cent increase.

These adjustments aim to reflect the cost of living and ensure fair compensation for workers across all age groups.

However, businesses will have to budget for the additional costs that higher wages will incur.

From 6 April 2025, there will also be changes to employer National Insurance Contributions (NICs):

· Rate increase – The standard rate for employer NICs will rise to 15 per cent.

· Secondary threshold adjustment – the threshold at which employers start paying NICs will decrease from £9,100 to £5,000 per annum.

Businesses should make sure that payroll software and processes are updated to accommodate the new rates and thresholds.

You should also account for the increased employment costs in financial planning and budgeting.

Changes to statutory pay rates

As of April 2025, the UK Government has confirmed the updates to statutory pay rates.

The weekly rate will increase from £184.03 to £187.18 for:

· Statutory Maternity Pay (SMP)

· Statutory Paternity Pay (SPP)

· Statutory Adoption Pay (SAP)

· Statutory Shared Parental Pay (ShPP)

· Statutory Parental Bereavement Pay (SPBP).

Statutory Sick Pay (SSP) will increase from £116.74 to £118.75.

Make sure that you know when you need to make these payments and the rate that you need to be providing.

Small Employers’ Relief increased

Employers who paid less than £45,000 in Class 1 National Insurance in the last tax year qualify to claim 100 per cent of applicable statutory payments plus an additional 8.5 per cent (up from the previous 3 per cent).

The enhanced recovery rate applies to all statutory parental payments including Statutory Maternity, Paternity, Adoption, Shared Parental, Bereavement, and Neonatal Care Pay.

Preparing for the changes

Employers should take the following steps to prepare for these upcoming changes:

· Ensure that payroll software and processes are updated to accommodate the new rates and thresholds.

· Account for the increased employment costs in financial planning and budgeting.

· Inform employees about the forthcoming changes to pay rates and statutory entitlements.

Our team of payroll specialists can help businesses optimise their payroll processes, stay compliant, and manage costs effectively. Need help managing your payroll as we enter the new tax year? Contact us today for tailored advice and guidance.