Changes for Employers in 2025

If you have employees, it is important to note the significant changes that have been made in the Autumn Budget to both the National Minimum Wage and Employers’ National Insurance Contributions.

These changes will mean increased costs for many employers from April 2025. In this Insight we take a look at the details of the changes.

Employers must pay their employees at least the NLW, for workers aged 21 and over, or the NMW otherwise. The minimum hourly rates change on 1 April each year and depend on the worker’s age and if they are an apprentice.

The percentage increases for the 18-20 year old rate (16.3%) and the 16-17 year old and apprentice rate (18.0%) are significant. This is a step towards Labour’s ambitions for all adults to receive the same minimum wage. While this is good news for workers, employers will need to carefully consider affordability when planning their headcount for the year ahead.

The Chancellor announced a package of changes to employers’ Class 1 NICs that will apply from 6 April 2025:

• An increase in the employers’ NICs rate, from 13.8% to 15%;
• A decrease to the threshold at which an employer starts to pay NICs on each employee’s salary (the ‘secondary threshold’) from £9,100 to £5,000*; and
• A widening of availability and an increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ Class 1 NICs liability, from£5,000 to £10,500. In particular, the employment allowance has only been available to businesses who have incurred an employers’ Class 1 NICs liability of less than £100,000 in the previous tax year but that restriction will be removed for 2025/26.

* A higher secondary threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

This increase in employers’ NICs is undoubtedly a blow to some businesses and, indirectly, employees. Combined with the increases in the NMW and potential costs associated with reforms in employment law, these measures will stretch employer wage budgets and potentially lead to slower growth in some employee wages or higher costs for consumers.