Businesses Urged to Prepare for Wage and Statutory Payment Increases in 2025

As the new year begins, businesses are being advised to review their finances and plan for the changes set to take effect in April 2025. With statutory increases to the National Living Wage (NLW), National Minimum Wage (NMW), and other statutory payments, companies need to prepare in advance for the additional costs.

Wage Increases: National Living and Minimum Wage

From 1 April 2025, both the National Living Wage (NLW) and National Minimum Wage (NMW) will see significant increases. The NLW for workers aged 21 and over will rise from £11.44 to £12.21 per hour. The NMW for those aged 18-20 will increase by 16.3%, from £8.60 to £10.00 an hour, the largest rise ever for this age group. Meanwhile, the NMW for workers aged 16-17 and apprentices will increase from £6.40 to £7.55.

This 16.3% rise for the 18-20 age group is intended to narrow the gap between the two wage categories, with the possibility of extending the NLW to this group in the future. The Low Pay Commission is expected to consult on how to achieve this change in 2025.

Employers are advised to audit their workforce and ensure that payroll systems are updated to reflect these new rates, particularly for employees who will benefit from the increases.

Statutory Payment Increases

Alongside wage changes, statutory payments will also rise starting 6 April 2025. The weekly rate for statutory maternity, adoption, paternity, shared parental, and parental bereavement leave pay will increase from £184.03 to £187.18. If an employee’s average weekly earnings are lower than the statutory rate, they will receive 90% of their average earnings.

Statutory sick pay (SSP) will rise from £116.75 to £118.75 per week. However, a more substantial change could be on the horizon. A consultation on strengthening SSP, which ended in December 2024, suggested that eligibility could be extended to low-paid workers and that the three-day waiting period for SSP might be eliminated.

National Insurance Contributions

In another change, employers’ National Insurance contributions (NICs) will rise from 13.8% to 15% from 6 April 2025. Additionally, the threshold for NICs will be lowered, meaning employers will start paying contributions on employee earnings from £5,000, instead of the current £9,100.

The increase in employers’ NICs, along with higher wage rates, has raised concerns about potential job losses or slower recruitment. There are also worries that businesses may pass on these increased costs to consumers, contributing to higher inflation. According to the Deputy Governor of the Bank of England, this rise in NICs could slow long-term wage growth.

Strategies for Businesses

To manage these changes effectively, employers are encouraged to review their budgets and explore ways to improve productivity. Proactive measures, such as identifying efficiencies and maintaining open communication with employees about upcoming changes, will be crucial. Businesses may also benefit from consulting legal or financial experts to ensure compliance with the new regulations and navigate the financial challenges ahead.